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.

The practice of the Supreme Court is apparently now to require a sign on the land for most applications to modify or remove a restrictive covenant pursuant to s84 of the Property Law Act 1958, along with a letter giving direct notice of the application to nearby beneficiaries (see example of advertising orders, attached).

A sign on the land giving notice of use and development proposals has long been used in the planning jurisdiction by reason of s52(2)(d) in the Planning and Environment Act 1987 expressly contemplating this form of notice.

Historically, orders for the advertising of s84 applications were made by requiring the publication of a notice in The Age and a newspaper circulating generally in the area. However, with fewer people buying print newspapers and fewer still reading the public notice sections of those papers, there has long been a question as to this requirement’s effectiveness.

It remains to be seen what this exposure to foot traffic will mean to the number and quality of objections by beneficiaries.

However, applications to modify or remove a covenant pursuant to the Planning and Environment Act 1987 will still require both a sign on the land and a notice in the newspaper by reason of section 52(1AA):

(1AA)  If an application is made for a permit to remove or vary a registered restrictive covenant or for a permit which would authorise anything which would result in a breach of a registered restrictive covenant, then unless the responsible authority requires the applicant to give notice, the responsible authority must give notice of the application in a prescribed form—

                         (a)  by placing a sign on the land which is the subject of the application; and

                         (b)  by publishing a notice in a newspaper generally circulating in the area in which that land is situated. [Emphasis added]

Normally, the costs of proceedings under section 84 of the Property Law Act 1958 are paid for by the Plaintiff even where the Plaintiff succeeds in having a covenant modified or extinguished.

In Victoria, the leading case on this principle is arguably Re Withers [1970] VR 319-320 at 320 that held:

… unless the objections taken are frivolous, an objector in a proper case should not have to bear the bitter burden of his own costs when all he has been doing is seeking to maintain the continuance of a privilege which by law is his.

Re Withers applied the principle in Re Rose Bay Bowling and Recreation Club Ltd (1935) 52 WN (NSW) 77, where Long Innes C.J. in Eq. held:

This case is a case in which the applicant has succeeded and objectors have failed. The legal right, however, of the objectors is clear and admitted, unlike the case of In re Edwards where the objector in fact was held to have no rights at all. Having a clear right which was attacked by the applicant I think they were entitled to put their views before the Court. That they have put their views before the Court in a proper manner cannot be disputed, and I do not think that any costs have been unnecessarily or unreasonably incurred by their presence. The applicant in this class of cases, where the objectors have a clear legal right which is being attacked and which is sought to be cut down, is in fact undertaking the task of satisfying the Court that the proposed modification of the restriction will not cause substantial injury to the persons entitled to the restriction, and it is difficult to see how the Court can be satisfied of that fact except after argument or without considering all the material evidence. The applicant cannot be expected to adduce evidence to cut down his own case, nor to argue contrary to his own interests, and consequently in such a case the reasonable and proper costs incurred by the objectors must, I think, be regarded as necessarily incident to such an application, and where those circumstances are present I think it is only right and proper that the applicant should pay all costs reasonable or necessarily incurred by reason of the application, including the proper costs of the objectors. I am of the opinion, therefore, that in this case the applicant should bear the costs as between party and party of the objectors.

Re Withers was subsequently applied by Justice Morris in Stanhill v Jackson [2005] VSC 355 who noted:

The principle set out in Re Withers is consistent with other decisions of the Court, such as that by Gillard J in Re Markin^[3], Lush J in Re Shelford Church of England Girls’ Grammar School^[4] andMcGarvie J in Re Ulman.^[5] In my opinion, it is a sound principle.

Particular care should be taken in the event that one’s status as a beneficiary is in doubt or if declaration proceedings have been commenced, for it may be argued that Re Withers should not apply, in whole or in part.

Also, the Court will ordinarily only allow one set of costs, so it is important for objectors to coordinate their representation and have a pre-agreed arrangement for the distribution of costs in the event that an order for costs is made. Understanding, of course, that an award of standard costs will usually cover most, but not all, costs incurred.

For a more detailed discussions about costs in restrictive covenant applications, see the section on costs at page 79 to 85 in the following notes: