Restrictive Covenants FAQs (Frequently Asked Questions)

What is a restrictive covenant?

A restrictive covenant is a contract that runs with the land, that is negative in nature. More particularly, a restrictive covenant is an agreement creating an obligation which is negative or restrictive, forbidding the commission of some act. In its most common form it is a contract between neighbouring land owners by which the covenantee determined to maintain the value of a parcel of land or to preserve its enjoyment, acquires a right to restrain the other party, namely the covenantor, from using the land in a certain way: Fitt v Luxury Developments Pty Ltd (2000) VSC 258. The land subject to a restrictive covenant is known as the burdened land and the land with the corresponding ability to enforce the covenant is known as the benefited land.

How do I know if land is burdened by a restrictive covenant?

If a restrictive covenant burdens or runs with a parcel of land, it should be noted under the heading “Encumbrances, Caveats and Notices” on a certificate of title available from Landata. You can then search Landata again for the relevant covenant that is often contained within a Transfer of Land, or ask a title searching firm to do this for you. One such title searching firm is Feigl & Newell on (03) 9620 7022.

How do I know if land has the benefit of a restrictive covenant?

Typically, the extent of beneficiaries can be discerned from a careful reading of the words of the covenant itself, but this may require further title searches and a careful examination of the Parent Title. Some covenants purport to convey the benefit of a covenant to all land in a subdivision, which may not be legally effective, see Re Mack and the Conveyancing Act [1975] NSWLR 623. Before you become a party to proceedings concerning the modification or enforcement of a covenant, seek advice from a lawyer with experience in this area. Many people assume that because their land is located within an estate burdened by a network of similar covenants, they are necessarily a beneficiary to other comparable covenants, which may not be the case. See too, the section on Building Schemes, below.

How do I vary or modify a restrictive covenant?

There are several ways in which restrictive covenants can be varied or modified, but the two most common means are via a planning permit application to the local council or by application to the Supreme Court.

There is an initial appeal to applying for a permit to modify a covenant via the planning permit or Planning and Environment Act 1987 process, because it is seen to be cheaper and easier, but this appeal diminishes when one understands that all beneficiaries need to be notified (unless a pre-existing breach is being regularised) and for covenants created before 25 June 1991, only one genuine objection from a beneficiary is sufficient to bring the process to an abrupt halt.

For this reason, applications that might be seen as even slightly controversial, such as increasing the number of dwellings on a lot, routinely go straight to the Supreme Court. Most applications to the Supreme Court are successful as they proceed through the process without sustained objection, but the challenge here is to pitch your application at something a judge will be comfortable with, for the Courts have traditionally acted with caution when it comes to modifying restrictive covenants.

For more information about the various options for modifying or removing a restrictive covenant in Victoria see here.

How do I modify a covenant through the Supreme Court?

To modify a covenant through the Property Law Act 1958, or Supreme Court, process, an applicant will typically need a planning report prepared by a planner with experience in this area of law and an Originating Motion drafted by a solicitor. There are numerous other procedural requirements that invariably require the involvement of an experienced and competent lawyer.

Once the application is lodged with the Court, a hearing is convened at which directions for advertising is given by an Associate Judge. Typically the notification process will take eight to ten weeks before a further hearing is convened at which objections may be considered by the Court.

If no objectors appear to be heard, which is routinely the case, the Court will consider granting the relief sought, but a judge may still want to be convinced about the appropriateness of the application. If it is positively received, relief may be granted at that time. However, if the matter is contested, directions may be given for the exchange of evidence and submissions and the hearing may be listed some six months or so later for determination.

A detailed description of the process of modifying or removing a restrictive covenant in the Supreme Court is set out here along with a comprehensive collection of precedents.

How do I object to an application to vary a restrictive covenant?

An objection to vary a restrictive covenant does not need to take any particular form. However, it is useful to understand what the Court deems to be a relevant or persuasive reason to object against what is typically seen as being irrelevant or difficult to establish. A useful indication was given by Justice Cavanough in Prowse v Johnston who gave weight to objections that complained of loss of character, loss of privacy, the bulk of the proposed building, additional noise, traffic, parking and access issues and most importantly, that of precedent, that is, is this proposal the thin edge of the wedge?

An article setting out the process of objecting to a restrictive covenant in Victoria is set out here.

What is a building scheme?

Where a building scheme, or scheme of development is established, all purchasers and their assigns are bound by, and entitled to the benefit of, the restrictive covenant. However, notwithstanding the frequency with which they are discussed, in Victoria, they are something of a unicorn–often talked about, but never actually seen. The real difficulty in attempting to uphold a building scheme in this state is establishing that a purchaser of land was or should have been aware that a building scheme was in place prior to purchase and therefore ought to be bound by its terms. An authority that helpfully sets the relevant principles is Vrakas v Mills [2006] VSC 463.

How to interpret a restrictive covenant

An article setting out some principles for the construction or interpretation of a restrictive covenant in Victoria is set out here.

Should I buy land subject to a restrictive covenant?

If the land is of no use to you unless the covenant is modified, it is probably wise to buy it. The process of modifying a covenant is often too uncertain, too time consuming and too expensive to justify taking the risk. Covenants can cost as little as a few thousand dollars to modify if things go well. On the other hand, parties have spent close to half a million dollars to modify covenants without success. Equally, some modifications may be completed within weeks. Others may take years. Most applications to modify covenants receive little or no sustained opposition, others ignite well orchestrated and well resourced community campaigns. Any estimate as to prospects is just a well informed guess. If you’re not dissuaded, get a beneficiary report from Feigl and Newell and then find a lawyer with experience in the modification of restrictive covenants to give you an estimate of the likely opposition to change. You may be lucky and find there only a few beneficiaries who live some distance away.

How can I find a restrictive covenant lawyer?

The modification or removal of restrictive covenants is a specialised area of law and regularly done by only a handful of lawyers in Victoria. An article setting out a reliable means of finding a lawyer with experience in the jurisdiction is set out here.

Costs in an application to modify a restrictive covenant

An article summarising the principles in relation to orders of costs in s84/Supreme Court proceedings is set out here.

Representing yourself in an application to modify a restrictive covenant

Judges make every effort to accommodate self-represented litigants. The Supreme Court even has a self-represented litigant coordinator who may be able to provide you with some guidance.

Traditionally, the practice has been to set the matter down for a contested hearing in the normal manner, with the exchange of evidence and submissions. This can involve much time and a large amount of preparation. But more recently, the Supreme Court has facilitated self-represented litigants in covenant cases, by giving people an opportunity to present a short submission at the second return of the application, that is, immediately after advertising. In this way, litigants in person can put a short summary of their views to the judge, without becoming a party to the proceedings; without the need to prepare evidence or cross examine witnesses; and without the potential costs consequences of running a contested case to its conclusion. It must be remembered though, that this will occur in the course of a busy Court list and the judge’s capacity or preparedness to entertain detailed submissions will be limited. The Plaintiff also may elect to not press its case at this second return, and may ask the Court to set the case down on a future occasion, at which time the application can be heard and determined in a more considered manner.

Further, although there are cases in which the court has refused applications to modify covenants, even where there are no parties in opposition such as in Re: Jensen and in Re: Morihovitis, in practice, it is probably fair to say that a defendant has far lower prospects of success if they are not represented, and the plaintiff’s case is not thoroughly tested.

As mentioned above, the matters you wish to put before the Court are set out here.

Mediation and applications to modify restrictive covenants

An article explaining the role and utility of mediating covenant disputes in the Supreme Court is set out here.

How do I deal with a restrictive covenant that gives a discretion to a deregistered company?

An article setting out the process for dealing with a restrictive covenant that confers a discretion on a deregistered company is set out here.

Matthew Townsend
townsend@vicbar.com.au
(04) 1122 0277

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.

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.

 

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

Court approves ambitious modification

The Supreme Court of Victoria has just approved one of the most ambitious modifications to date in a contested case, approving a four unit development on a parcel of land of 978sqm.

The decision of MacLurkin v Searle focused on the precedential effect of a modification application largely by reason of the fact that the closest beneficiaries did not object to it.

The Court held that the modification to the single dwelling and building materials covenant would not occasion substantial injury to beneficiaries in the terms meant by s84(1)(c) of the Property Law Act 1958 by reason of the subject land’s relative disconnection to the hinterland of the residential estate.

This is good news for applicants for modification, however, it seems the applicant will be limited to building a design generally in accordance with the plans tendered at the hearing:

82 It is true that in the First Easton Report the plans were just a sketch. But in the Second Easton Report the plans are much more detailed and, although plainly reduced from a larger size to an A4 size to fit the report, there did appear to be measurements and the like that would enable there to be some precision so that one could provide for the development to be substantially in accordance with those plans. The fact that they may not have been through the planning approvals process of the Responsible Authority may have the result that the plaintiff is not permitted to build substantially in accordance with those plans, but that is the plaintiff’s problem.

Once again, this highlights the importance of putting forward a design in a modification application that one can be confident will be approved by the Council or VCAT in the subsequent planning approval process.

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

Building materials covenants still have work to do in Victoria

In Gardencity Altona v Grech [2015] VSC 538 Associate Justice Lansdowne refused an application to remove a covenant requiring the main walls of any dwelling or shop on the land to be of brick and/or stone, on the basis that it could not be said that the covenant was obsolete, or that it’s removal would not occasion substantial injury to those with the benefit of the covenant.

No single dwelling covenant attached to the land, and so arguably, only the building materials covenant prevented the applicant from realising his development plans for the land.

Instrumental to her Honour’s reasoning was that the defendants had a genuine preference for the use of brick as a building material.

Her Honour also left open the possibility that if it were shown that removal of the brick or stone restriction would make a taller building less likely that may be a further benefit conferred by the restriction and so further reason why the restriction is not obsolete.

Significantly, the application was made in a neighbourhood found to be predominantly constructed with brick or stone:

142 I find on the whole of the evidence that the buildings in the neighbourhood predominantly have their main walls constructed in brick or stone. As indicated, I refer in this finding to the actual incidence of the use of brick or stone, rendered or exposed, not the visual incidence of exposed brick. By ‘predominantly’ I mean well more than half, and on a broad estimate at least two thirds.

This feature of the case will require close scrutiny for parties wishing to rely on the decision as a precedent.

Of particular interest is that the Court declined to apply the 1956 decision of Jacobs v Greig [1956] VLR 597, often cited as authority for the proposition that a requirement to build out of brick requires ‘double brick’ construction rather than brick veneer:

134 Having regard to Mr McLaughlin’s expert evidence that brick veneer is now an acceptable use of brick in construction, I consider the particular outcome in Jacobs v Greig to be limited to its particular facts and time. On the principle identified in that case, I find that an ordinary resident of Victoria would consider the covenants here in question do not now exclude brick veneer. Accordingly, I find that for this case at least, brick veneer is ‘brick’ for the purposes of the covenants, and like covenants in the area.

This is a welcome development given that double brick is now rarely used in Victoria for reasons of cost and energy efficiency.

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

The importance of choosing the right planner in a covenant modification application

Once again, we’ve seen the importance of choosing an appropriately experienced town planner when applying to the Supreme Court for the modification of a restrictive covenant.

In Re: Morrison, the Plaintiff selected a town planner that hadn’t been involved in a contested covenant case before and the report in support of the application read like a report for a permit application under the Planning and Environment Act 1987.

In handing down his judgement, Associate Justice Derham dismissed this approach: “Looking at the expert reports, it is clear that Mr Chapman had a primary focus on planning considerations, considering his emphasis on restrictive covenants generally being an out-moded form of controlling development that had been largely rendered redundant by the introduction of planning schemes.”

In other words, the planner was downplaying or dismissing the need for restrictive covenants on the basis that any amenity impacts could be adequately protected by the planning scheme.

Unsurprisingly, this wasn’t accepted by the Court: “Ultimately, the planning process is a separate process with different objectives and considerations to be taken into account. As pointed out by the defendants, restrictive covenants are given explicit priority over the planning process in s 61(4) of the Planning and Environment Act 1987 (Vic). On the basis of these authorities, I do not consider that the amenity concerns of the defendants can be appropriately met through application of the planning scheme.”

Plaintiffs sometimes succeed in using town planners with little or no covenant experience in non-contested cases, but this strategy is soon exposed once put to their proof by a well-advised defendant. The better strategy for applicants is to chose the correct town planner from the start of the process and to craft the application with suitable precision.

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 keeps “substantial injury” applications alive

While Justice Bell in Freilich v Wharton [2013] VSC 533 appeared to close the door firmly shut on applications to modify covenants in reliance on section 84(1)(c) of the Property Law Act 1958, the so-called “substantial injury” test; Associate Justice Derham has pushed it back slightly ajar in Wong v McConville and Others [2014] VSC 148, albeit on a basis not expressly considered by Justice Bell.

Wong concerned an application to modify a single dwelling covenant on Pascoe Vale Road, in Strathmore, to allow the construction of two dwellings.

Relying on the precedent created in Hermez v Karahan [2012] VSC 443, the Plaintiff in Wong tabled concept plans that showed the sort of development contemplated should the court agree to allow the modification.

Associate Justice Derham placed weight on the near equivalent amenity impacts that a single dwelling would create, should the present application fail:

67 In relation to the concerns that Mr Zhang has regarding potential overlooking and overshadowing of his backyard, I observe that they are minor matters having regard to the surrounds and other aspects that I have pointed to above, and:
(a) These are matters that will and should be addressed in the planning process; and
(b) It is as likely as not that, given the nature and pattern of residential development in the neighbourhood, these concerns will arise with the construction of a single dwelling on the Land, especially if it were a double-storey dwelling with a substantial footprint.

On this basis, he allowed the modification to the covenant.

Although this decision should give hope to landowners keen to subdivide their land, but presently constrained by a single dwelling covenant, there were locational factors present in Wong, that might not be present in other cases. In particular, the land was at the periphery of the subdivision subject to the covenant; had direct access to an arterial road; and was in close proximity to a freeway overpass.

What the case does highlight, however, is the continuing relevance of planning controls in cases to modify covenants purusuant to the Property Law Act 1958–not so much for reasons of public policy, but for predicting what form a development may ultimately take.