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.

 

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.

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

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 or this. More complex examples that incorporate applications for declarations can be found 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 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 entirely 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 following examples, such a schedule is ordinarily not added until after the first return of the application, for the identity of the Defendants is not yet likely to be known.

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 has been updated by the Court in December 2016, but to be prudent, download the latest version from the Supreme Court website.

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

The Originating Motion should be accompanied by an affidavit in support by either a solicitor or the plaintiff. An additional example of a plaintiff’s affidavit can be found here. A comprehensive draft in Word by a solicitor can be found here. A potentially significant tactical question arises here, given that authors of affidavits ordinarily need to be made available for cross examination, and there may be reasons why you might not want to call your client to give evidence.

Substantively, the critical task is to provide the Court with reliable information about the covenant, its purpose, who enjoys the benefit and the burden of it and the essential circumstances of 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 the name or names are not the same, provide an explanation with any authorities to act on affidavit. If the applicant is a conditional purchaser of land, exhibit the contract of sale.

If a particular form of development is sought to be achieved, this should be included in this affidavit or in the report of the planner, discussed below. If relying on a map showing the location of beneficiaries, ensure the map is 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.

A planning report is ordinarily sufficient substantive evidence in support of an application to modify or remove a covenant provided it covers the key issues raised in the application, for instance, addressing any injury that might be said to be substantial under s84(1)(c) of the Property Law Act 1958.

Resist the temptation to run a case under the three or four different limbs in s84(1). Ordinarily, s84(1)(c) provides the broadest scope for discretion and is the only ground required. Adopting a shot-gun approach to your application just generates unnecessary work for everyone and in many cases grounds relating to s84(1)(a) (obsolescence and reasonable user) are abandoned at trial when the applicant belatedly realises how difficult they are to establish.

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

A good planning report will 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.

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. Certainly, the 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 further 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.

In recent times, the Court has directed 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. A further example is 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 advertising 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. 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. Once again, the schedules of parties may have been removed.

Given the multiplicity of parties and their often divergent views, cases such as this are ordinarily not set down for mediation, although negotiation often occurs at the first return of the application and further negotiations can always happen informally.

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 well 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.

VCAT confirms 60(5) of the Planning and Environment Act 1987 is only useful for removing “deadwood” restrictive covenants

In the Red Dot decision of Giosis v Darebin CC [2013] VCAT 825, the Victorian Civil and Administrative Tribunal comprised of Senior Member H. McM Wright QC confirmed that 60(5) of the Planning and Environment Act 1987 (Act) is useful for little more than removing “deadwood” or non-contentious restrictive covenants.

The case concerned an applicant seeking to review the decision of the Darebin City Council to refuse a permit to vary a restrictive covenant burdening land at 26 Maclagan Crescent, Reservoir (refer detail from Land Victoria, plan below).

The part of the covenant sought to be varied vary provides as follows.

(c)           no shops, laundries, factories or works shall be erected on this Lot and not more than one dwelling house shall be erected on any one Lot and the cost of constructing each house shall not be less than Four Hundred Pounds (inclusive of all architect’s fees and the cost of erecting any outbuildings and fences). [emphasis added]

The variation sought to replace the words “one dwelling house” with the words “three dwellings” thereby enabling the application to be made to redevelop the land for three units or dwellings.

There were five objectors, three of which were beneficiaries, all of whom lived 100m away from the burdened land.

The Council had refused the application on the grounds that:

The proposed variation to the Covenant … to allow not more than three dwellings to be constructed on the lot will result in detriment to beneficiaries and is therefore contrary to Section 60(5) of the Planning and Environment Act 1987.

60(5) of the Act provides:

(5)          The responsible authority must not grant a permit which allows the removal or variation of a restriction referred to in subsection (4) unless it is satisfied that –

(a)          the owner of any land benefitted by the restriction (other than a owner who, before or after the making of the application for the permit but not more than three months before its making, has consented in writing to the grant of a permit) will be unlikely to suffer any detriment of any kind (including any perceived detriment) as a consequence of the removal or variation of the restriction; and

(b)          if that owner has objected to the grant of the permit, the objection is vexatious or not made in good faith.

The Tribunal quoted from the second reading speech of the Planning and Environment (Amendment) Act 1993 (Vic) that inserted section 60(5) into the Act. This speech coined the term “deadwood” covenants or covenants without a continuing purpose:

The effect of the clause is that permits should be granted only for “dead wood” covenants if no owner benefitting from the covenant objects to its removal or variation. The alterative avenues to remove or vary a covenant remain in place, being applications to the Supreme Court under the Property Law Act 1958 and the preparation of a planning scheme amendment.

After quoting from Carabott and Ors v Hume City Council (1998) 22 AATR 261 that considered the effect of s60(5) of the Act in some detail, the Tribunal raised a particular flaw with the proposal before it—the absence of plans:

17           Unlike many applications for a variation of a restrictive covenant the present applicant has not concurrently sought approval for any particular form of development. This makes it difficult for the responsible authority to be satisfied as required by paragraph (a) because it must consider all possible forms of three unit multi-dwelling development and conclude that it is unlikely that any of them would cause detriment to a benefitting owner.

The Tribunal found in the absence of a firm development proposal there were an infinite number of three unit or three dwelling developments that could take place in consequence of the variation of the covenant and that it could not be “positively satisfied of a negative, namely, that there is unlikely to be detriment of any kind”:

21           … In my view it is simply not possible to say that none of those developments would be likely to have a detrimental impact of some kind on the benefitting properties, particularly the adjoining units at 28 Maclagan Crescent. The application for permit therefore falls at the first hurdle.

This case therefore underscores the limited utility of applying to VCAT to modify or remove a covenant in the face of heartfelt opposition on the part of one or more beneficiaries. The absence of plans simply made the task more difficult.

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