Paper presented to Law Institute of Victoria’s Accredited Property Law Specialists can be found here.
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/
One of the first questions often asked of aspiring applicants for covenant modification is whether there have been any longstanding breaches of the covenant.
The answer to this question can have significant implications, for where land has been used or developed for at least two years in breach of a restriction, in a manner that would be lawful under the PE Act but for the restriction, an application to vary the restriction may be made pursuant to section 47(2) of the Planning and Environment Act 1987. Such an application may be made without:
- notice of the application under section 52 of the PE Act (including beneficiaries of the Covenant); and
- the application being referred under section 55 to any relevant referral authorities:
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.
Gibson DP explained the operation of section 47(2) in Hill v Campaspe SC:
9… Section 47(2) of the Act exempts applications for the removal of covenants from the need to give notice under sections 52 and 55 of the Act in certain circumstances.
10 The section 52 notice requirements for an application to remove or vary a covenant include notice to the owners and occupiers of all land benefited by the covenant (section 52(1)(cb)). Section 55 of the Act relates to notice to referral authorities. …
26 … [I]f part of a covenant is breached, and the breach continues for 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.
DP Gibson’s analysis is consistent with the Explanatory Memorandum of the Subdivision (Miscellaneous Amendments) Bill that introduced section 47(2) into the Act:
Clause 61 amends section 47, 68, 69, 81 and 85 of the Planning and Environment Act 1987 in relation to easements or restrictions. This is consequential on amendments outlined elsewhere in these notes.
It also provides that the notification procedures under the Planning and Environment Act 1987 do not apply to the removal of covenants from land where an otherwise lawful building has breached the covenant for more than 2 years.
In some respects, this is an awkward provision because:
- the provision contemplates an application to remove a covenant, whereas the effect of the decision in Hill v Campaspe SC is to essentially permit its modification;
- it is not clear how the responsible authority’s discretion is to be exercised in the absence of notification. For instance:
- some council officers will endeavour to apply section 60 of the Planning and Environment Act 1987 against an application made under section 47(2) with its reference to the tests of “detriment” and “loss of amenity”, despite the fact that any reference to “perceived detriment” is at odds with a beneficiary not knowing about an application being made under the provision;
- most commonly, however, council officers seem content to apply 47(2) without reference to any tests in section 60; and
- it is not clear whether the provision can be used in circumstances where the breach has since been rectified through demolition or the removal of non-complying materials.
This divergent approach to the application of section 47(2) is partly because there have been so few cases that have considered the provision. If the advantage offered by section 47(2) is to avoid having to bring an application to vary a covenant to the attention of beneficiaries, it makes less sense to appeal a Council’s refusal to exercise its powers under the provision.
Consistent with this, applications under section 47(2) should be pursued a separate planning application before the substantive use or development application is made.
 As that term is defined in section 3(1) of the Subdivision Act 1988 (Vic).
  VCAT 1456.
Explanatory Memorandum, Subdivision (Miscellaneous Amendments) Bill 1991 No. 48, section 61(1)(c).