The following paper Restrictive Covenants in Victoria–Theory and Practice is based on a presentation to the University of Melbourne’s undergraduate Property Law class. It provides a reasonably comprehensive overview of the law in relation to the construction, modification and removal of restrictive covenants in Victoria.
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.
The Supreme Court published a guide for objectors in December 2017.
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 not often established. 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. See Randell v Uhl [2019] VSC 668. 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 unwise 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.
For a more detailed analysis, see here:
Feel free to contact me by email for further information.
Matthew Townsend
townsend@vicbar.com.au
A step by step guide to modifying a restrictive covenant under the Property Law Act 1958 with 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, this, this or this. More complex examples that incorporate applications for declarations can be found here, here, here and here.
In determining how to phrase the modification sought, you should seek the minimum change necessary to achieve your objectives. That is, if you are after a dual occupancy, seek to replace ‘one dwelling’ with ‘two dwellings’ or draft a variation to allow a particular form of development. Although a practice has been to vary covenants with the addition of the following words “… but this covenant will not prohibit the construction of any development generally in accordance with the development described in the plans prepared by ABC Architects dated 1 July 2016 numbered A00 to A30”, this technique known as the ‘proviso’ has recently fallen out of favour with the Court because it means attaching plans to an instrument of transfer that may sit in the Office of Titles for decades to come. For this reason, orders that incorporate a simple building envelope are preferred. The broader point, however, is that if you ask for removal of the covenant and you don’t actually need it, you may attract unwarranted opposition. Moreover, the Court is increasingly unwilling to allow the complete removal of anything but obsolete covenants.
No summons is required at this time given that the first hearing will ordinarily be ex parte.
While the schedules of parties may have been removed from the attached examples, such a schedule is ordinarily not added until after the first return of the application, for the identity of the Defendants is not likely to be known until that time.
Overarching Obligations Certification and Proper Basis Certification should also be provided.
The Court will also want an application form completed.
A helpful Guide for Practitioners has also been prepared by the Supreme Court. This provides a checklist for applications and some draft precedents. This version was updated by the Court in December 2016, but to be prudent, download the latest version from the Supreme Court website. As at March 2018, it is understood that a review is presently underway.
Affidavit in support of and in opposition to an application to remove a single dwelling covenant
Current practice is to include an affidavit from the Plaintiff setting out the intended use and development for the property. If the land is to be sold, that should be disclosed and the Court given a realistic understanding as to how the land might be used or developed. An example of a Plaintiff’s affidavit can be found here. Traditionally, solicitors would give this information to the Court on instructions, but the emerging best practice is to hear from the applicant directly.
The Court will also want to know whether there has been previous applications to modify or remove a restrictive covenant on the land.
If the land is under contract, full details of that should be out too. Indeed, there is an argument to suggest that the application should be made under the name of the owner, even if the land is under contract.
The objective is to provide the Court with reliable information about the covenant; its purpose; the identification of land with the benefit of the covenant; and any relevant circumstances surrounding the application. Ensure you have an up-to-date certificate of title for the land and that the application is made on behalf of that party or those parties.
If relying on a map showing the location of beneficiaries, ensure the map is clear and legible and accurately reflects the location of beneficiaries.
The quickest and most cost-effective means of establishing who has the benefit and the burden of the relevant covenant is to call a professional title searching service such as Feigl and Newell on (03) 9629 3011. Dinah Newell should be able to provide you with a colour-coded cadastral plan such as this. However, you should double-check any advice you receive to identify transcription or other errors. Mistakes made at this point of the process can be expensive to fix later on.
Evidence in support and in opposition to the modification of a covenant
Once you have the above information, you can provide it to a town planner for the preparation of a planning report. Two further examples can be found here and here. This version was in support of an application to modify a covenant restricting the height of a dwelling and was praised by the Court for its clarity.
A letter instructing a town planner in a s84 application can be found here. If you want the names of planners to prepare evidence in support of (or against) an application to modify or remove a covenant, find someone who has given evidence in a contested s84 application. You can look through Supreme Court cases in relation to restrictive covenants here. Unfortunately, all too often, planners approach the task as if it were a common or garden planning application in VCAT relying on principles of public policy rather than analysing impacts on proprietary rights. This evidence will almost certainly be useless. Just as importantly, a ‘cheap’ planning report may end up becoming expensive once it becomes clear how much additional work it will create for the lawyers to fix it up. Applicants are reminded that the Supreme Court is not the Victorian Civil and Administrative Tribunal where the tribunal member can patch up evidentiary gaps with their own knowledge and experience. In the Court, judges are confined to the evidence and if your planner does not adequately address the merits of the application in his or her written evidence, at trial, any significant omissions can be fatal.
A planning report should include photographs of the neighbourhood so the Court can gain a clear understanding of the context in which the application is being made.
It should also identify land within the parent title that has been varied since the time of the original subdivision, whether this is by order of the Court, planning permission or simply a breach that has gone unchallenged. Evidence demonstrating how that change has occurred, should be annexed to the planning report when available. Often this will be the pivotal evidence in the hearing and it must be done with precision.
Applicants are sometimes keen to lodge the application without planning evidence to save costs or time, but this risks the application being dismissed for being improperly supported. Any planning evidence should be before the Court at or before the first return of the application.
In some cases, lay evidence may be sufficient, at least in opposition to a modification or removal application. For instance, in Gardencity v Grech, the defendants were successful despite the absence of any expert evidence, for the Court found the plaintiff had failed to prove the absence of substantial injury. Evidence from the defendants in that case can be found here, here and here. An example of an expert report in support of an application to oppose a modification can be found here.
For a separate discussion about what to include in an objection, look here.
The first return of the application
At the first hearing of an application, which is usually done ex parte, the Court is likely to make further orders, similar to the following for a sign to be placed on the land and for direct notice to be given to the closest beneficiaries. This raises a tactical question for applicants for it may be prudent to suggest to the Court that all beneficiaries be notified directly rather risk attracting the attention of non-beneficiaries via a sign on the land.
On the other hand, the Court has been known to be content with simply a sign on the land and no direct notification if there are no nearby beneficiaries.
The Court now also directs applicants to notify the beneficiary at the address indicated on title and at the street address, if different.
As always, practitioners should attend the Court with draft orders, preferably forwarded to the Court a few days beforehand. The Court is now directing the attachment of Information for Objectors to the draft orders. An example can be found here.
The normal standards expected of practitioners in ex parte applications apply, and you should disclose to the Court any necessary countervailing facts even if they are not helpful to your case. For instance, if your client is running a simultaneous application to modify a covenant elsewhere (which isn’t a good idea), the Court will want to know about it.
The second return–if the application is opposed
Once advertising has been carried out, an affidavit should be prepared that describes the process undertaken, the nature of responses received and whether any beneficiaries objected. This is a short example and a more comprehensive example. Leave sufficient time to complete this as it may be time consuming.
A sample letter sent should be included in the affidavit–not a copy of each letter sent.
In answering queries from third parties, including beneficiaries, avoid giving advice about who has the benefit of the covenant. Inquirers need to make their own investigations about their entitlement to participate in the proceedings and the answer is not always clear. Record details of all phone calls and emails as a summary should also be included in the affidavit of compliance.
The Court may then make orders providing for the further provision of evidence and the listing of the matter for hearing. Two examples can be found here and here. The schedule of parties may have been removed.
Increasingly, covenant cases are being set down for mediation.
The second return–if the application is not opposed
If no person seeks to become a Defendant, draft orders should be provided to the Court along with an affidavit to that effect (see examples above). Try to get the papers to the court three or four days in advance of the directions hearing so that the judge has time to read them before the hearing. An example can be found here.
Significantly, you may find that despite the absence of any defendants, you may still need to make out your argument for modification on the basis of the evidence provided. For instance, in Re Jensen, and Re: Morihovitis the Court refused relief despite the absence of any objectors.
A written outline of argument setting out why the variation or removal of the covenant should be provided to the Court, preferably in advance of the hearing. Two examples can be found here and here.
Submissions in support and in opposition to application to modify a single dwelling covenant
If the matter runs to a contested hearing, you will need to prepare a more comprehensive outline of argument. Submissions in support of a modification application can be found here: from Wong v McConville (opening); Wong (closing) and Re: Milbex. Submissions in opposition to a modification application can be found here from Re Pivotel; Suhr v Michelmore; and Prowse v Johnstone; and Re: Morrison.
To improve your client’s costs position in the litigation, a Calderbank letter or offer of compromise may be appropriate to disturb the defendants’ presumption that their costs will be reimbursed by the Plaintiff at the conclusion of the proceedings, irrespective of the outcome. A Calderbank letter needs to be drafted with precision and according to established principles if it is to be effective. Examples can be provided upon request.
Needless to say, all applications are different and great care should be taken to ensure that the relevant matters are placed before the Court.
townsend@vicbar.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Removing or modifying a restrictive covenant in Victoria
This article briefly describes a number of ways to modify or remove a restrictive covenant in Victoria, namely:
– by planning permit pursuant to clause 52.02 of a planning scheme–mostly useful for a deadwood or non-contentious covenant;[1]
– the making of orders pursuant to s84 of the Property Law Act 1958 (PLA)–the most common route for potentially contentious applications;
– by amending the relevant planning scheme–useful where there is considerable support for the proposed change at the municipal or state level;
– by consent–useful where there is a small number of beneficiaries and/or good relations amongst beneficiaries; and
– at the direction of the Registrar of Titles–useful where the covenant might be said to be personal or where the benefit of the covenant fails to pass.
For completeness, there has also been at least one instance, where the Court has been prepared to amend a restrictive covenant under s103(1) of the Transfer of Land Act 1958, where the Court concluded there had been a common mistake made by the parties to a transfer of land in the expression of a restrictive covenant.
The planning permit process
For what might be described as “deadwood” covenants, an application may be made for a planning permit to remove or modify a covenant pursuant to clause 52.02 of the relevant planning scheme.
However, the operation of s60(5) of the Planning and Environment Act 1987 (PEA) means that where there is a real prospect of genuine opposition, this avenue is to be avoided. Section 60(5) provides:
The responsible authority must not grant a permit which allows the removal or variation of a restriction … unless it is satisfied that—
(a) the owner of any land benefited by the restriction … 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;
As described by DP Gibson of the Victorian Civil and Administrative Tribunal (VCAT) in Hill v Campaspe SC [2011] VCAT 949 this is “a high barrier that prevents a large proportion of proposals.” For covenants created on or after 25 June 1991, a less restrictive test applies.[3] Hill v Campaspe was recently applied in Dacre v Yarra Ranges SC [2015] VCAT 1453.
A further disincentive to rely on this provision is the need to notify all, rather than the closest beneficiaries of the application.[4]
Interestingly, there is a provision that allows the circumvention of the onerous advertising provisions in the PEA where the breach has been in existence for two years or more. Section 47(2) of the PEA 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.
Section 84 of the Property Law Act 1958
Where some degree of opposition is expected from one or more beneficiaries, an application may be made to remove or modify the covenant pursuant to s84(1) of the PLA.
S84(1) is currently structured as a series of threshold tests to be satisfied before the court’s discretion to exercise the power is enlivened. The two most commonly relied upon are ss84(1)(a) and (c):
(1) The Court shall have power … to discharge or modify any such restriction (subject or not to the payment by the applicant of compensation to any person suffering loss in consequence of the order) upon being satisfied:
(a) that by reason of changes in the character of the property or the neighbourhood or other circumstances of the case which the Court deems material the restriction ought to be deemed obsolete or that the continued existence thereof would impede the reasonable user of the land without securing practical benefits to other persons or (as the case may be) would unless modified so impede such user; or …
(c) that the proposed discharge or modification will not substantially injure the persons entitled to the benefit of the restriction…
An application under s84(1) usually involves the filing of an Originating Motion and Summons for Relief with the Supreme Court. This application should be accompanied by planning or other evidence in support of the application for modification or removal.
This is returnable before an Associate Judge who may inquire as to the nature and location of beneficiaries before determining the extent of advertising—often a combination of letters to the closest beneficiaries and the posting of a sign on the land.
Orders may then be made for the return of the summons at a future directions hearing at which objectors may attend.[5]
A surprising number of applications attract no objections. Upon being satisfied that this is the case, the Court may grant the application.
Alternatively, objections may be received and/or objectors may attend court on the return.
If a mutually acceptable agreement on the application cannot be reached with the objectors, orders may be made for the exchange of further evidence before the matter is listed for mediation and/or final hearing.
Historically, the courts have taken a conservative approach to applications for the removal or modification of restrictive covenants. In the often cited words of Farwell J in Re Henderson’s Conveyance:
… I do not view this section of the Act as designed to enable a person to expropriate the private rights of another purely for his own profit. I am not suggesting that there may not be cases where it would be right to remove or modify a restriction against the will of the person who has the benefit of that restriction, either with or without compensation, in a case where it seems necessary to do so because it prevents in some way the proper development of the neighbouring property, or for some such reason of that kind; but in my judgment this section of the Act was not designed, at any rate prima facie, to enable one owner to get a benefit by being freed from the restrictions imposed upon his property in favour of a neighbouring owner, merely because, in the view of the person who desires the restriction to go, it would make his property more enjoyable or more convenient for his own private purposes.[6]
However, in recent times, the Court has been more prepared to agree to modification applications based on s84(1)(c) of the Property Law Act 1958. See Wong v McConville & Ors and Maclurkin v Searle.
The practical challenge is to reassure the court about the likely impacts of the proposed development scheme, while allowing sufficient flexibility in the subsequent town planning permit application process.
As Morris J explained in Stanhill:
… the lack of specific plans makes it more difficult for the plaintiff to discharge the onus of showing that a modification of a restriction will not substantially injure persons entitled to the benefit of the restriction.[16]
In view of this judicial need for certainty, or at least reassurance based on the ability to consider the detail of a development proposal, it would be sensible to allow the grant of a planning permit conditional upon the subsequent removal or variation of the subject covenant, but this possibility was ruled out by VCAT in Design 2u v Glen Eira CC[17]. In that case, DP Gibson held:
5 … I find that unless there is a prior or simultaneous grant of a permit or decision to grant a permit to allow the removal of variation of the covenant, a permit cannot be granted by either the responsible authority or the Tribunal if the grant of a permit would authorise anything which would result in a breach of the covenant. I find that as the grant of a permit in this particular case would result in a breach of the covenant affecting the subject land, the application for review must fail and should therefore be dismissed.
Regrettably, the Victorian Government elected to not remove this obstruction in its Response To The Key Findings Of The Initial Report of the Victorian Planning System Ministerial Advisory Committee.[18]
Applicants now need to substantially reduce the scope of development schemes in anticipation of a worst-case assessment by VCAT or simply articulate building envelopes into which future applications for planning permission may subsequently be contained.
Alternatively, for modest variations to covenants there is some scope to rely on the planning system as a means of ensuring that substantial injury would not result from the variation. This recently occurred in Hermez v Karahan [2012] VSC 443 when Associate Justice Daly held:
4 … in respect of the relevance of town planning principles in determining whether an applicant has established a ground for removal or modification of a restrictive covenant, Cavanough J agreed with the general principle laid down by the authorities that the desirability or otherwise of a proposed development, taking into account such considerations was not part of the Court’s function. However, his Honour was prepared to assume, without finally deciding the matter, that the existence of statutory planning provisions aimed at protecting the amenity of neighbours might be relevant for assessing substantial injury. For the purposes of this application, I am also prepared to assume that planning and building regulations governing building size and height, set backs, and allowable overshadowing and overlooking are relevant to assessing whether modifying the covenant would cause substantial injury.
Significantly, the court in Hermez allowed a variation of the covenant to replace the reference to “one dwelling” with “two dwellings” and didn’t confine the applicant to building two dwellings generally in accordance with a given set of plans.
Notwithstanding these matters, it would be a mistake to frame an application under s84(1)(c) solely on town planning concepts of amenity. For instance, in Fraser v Di Paolo[19] Coghlan J reviewed a number of authorities before observing: “These decisions were made more than 30 years ago but they do give an insight into the importance of the rights which go with a covenant beyond town planning rights.” In other words, substantial injury may occur merely through the diminution of proprietary rights, particularly if the decision may set a precedent.
The importance of costs in s84 applications
Potential applicants should be familiar with the cost implications of Re: Withers[20] that:
… unless the objections taken are frivolous, an objector in a proper case should not have to bear the bitter burden of his own costs when all he has been doing is seeking to maintain the continuance of a privilege which by law is his.
Re Withers was applied by Justice Morris in Stanhill v Jackon[21] who noted:
The principle set out in Re Withers is consistent with other decisions of the Court, such as that by Gillard J in Re Markin[22], Lush J in Re Shelford Church of England Girls’ Grammar School[23] and McGarvie J in Re Ulman.[24] In my opinion, it is a sound principle.
When acting for objectors, this rule may be of corresponding significance.
The combined permit/amendment process
Interestingly, the least-used means of removing or amending a covenant is also that arguably capable of delivering the most ambitious proposals, namely amending the planning scheme to remove or amend a covenant.[25]
In this process, the assessment is made according to ordinary planning principles:[26]
In the Mornington Peninsula C46 Panel Report, Member Ball explained:
First, the Panel should be satisfied that the Amendment would further the objectives of planning in Victoria. …
Second, the Panel should consider the interests of affected parties, including the beneficiaries of the covenant. It may be a wise precaution in some instances to direct the Council to engage a lawyer to ensure that the beneficiaries have been correctly identified and notified.
Third, the Panel should consider whether the removal or variation of the covenant would enable a use or development that complies with the planning scheme.
Finally, the Panel should balance conflicting policy objectives in favour of net community benefit and sustainable development. If the Panel concludes that there will be a net community benefit and sustainable development it should recommend the variation or removal of the covenant.[27]
Here an applicant runs an entirely different risk, for while the planning system might eschew Farwell J’s disdain for profitable property ventures, to succeed, an application will need the support of the local council and the relevant Minister at the time the amendment is both prepared and adopted. In the worst case, the period between these two events may be many months and punctuated by Council elections thus adding a political wildcard into an already unpredictable process.
An example of this process being successfully employed was the recent approval of a Place of Assembly (museum) at 217 And 219 Cotham Road, Kew as part of Amendment C143 to the Boroondara Planning Scheme. The proposal involved the conversion of two dwellings into a contemporary museum with liquor licence and few on-site parking spaces, contrary to a restrictive covenant that prevented the use of the land for anything other than dwellings. Arguably, there would have been no prospect that such an ambitious project would have been approved under s84 of the Property Law Act 1958, but the project received Council backing at both ends of the process and a highly favourable planning panel report.[28]
Removing or modifying a covenant by consent
A restrictive covenant can be removed or modified by consent. Section 88(1AC) of the Transfer of Land Act 1958 provides:
A recording on a folio of a restrictive covenant that was created or authorised in any way other than by—
(a) a plan of subdivision or consolidation; or
(b) a planning scheme or permit under the Planning and Environment Act 1987—
may be deleted or amended by the Registrar if the restrictive covenant is released or varied by—
…
(d) the agreement of all of the registered proprietors of all land affected by the covenant; …
If the proposed modification or removal is not controversial and/or the number of beneficiaries is not large, this may be the most efficient means of proceeding.
Removing a covenant at the direction of the Registrar of Titles
Finally, a covenant may be removed at the direction of the Registrar of Titles pursuant to s106(1)(c) of the Transfer of Land Act 1958. This provides:
(1) The Registrar—
(c) if it is proved to his satisfaction that any encumbrance recorded in the Register has been fully satisfied extinguished or otherwise determined and no longer affects the land, may make a recording to that effect in the Register;
This provision can be used for covenants that do not define the land to which the benefit is affixed or where the benefit of the covenant might be said to have not passed to subsequent successors or transferees. Covenants of this nature were discussed in Prowse v Johnstone [No. 2] [2015] VSC 621 at [62].
Download a .pdf of this article.
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] “A permit is required before a person proceeds: – Under s23 of the Subdivision Act 1988 to create, vary or remove an easement or restriction or vary or remove a condition in the nature of an easement in a Crown grant.”
[2] [2011] VCAT 949 at [65]
[3] PEA s60(2): … must not grant a permit which allows the removal or variation of a restriction unless … the owner of any land benefited by the restriction … will be unlikely to suffer “a) financial loss; or b) loss of amenity; or c) loss arising from change to the character of the neighbourhood; or d) any other material detriment—as a consequence of the removal or variation of the restriction.”
[4] PEA s52(1)(cb).
[5] See R52.09 of the Supreme Court (General Civil Procedure) Rules 2005.
[6] [1940] Ch 835 at 846
[7] [2005] VSC 169; (2005) 12 VR 224, 231
[8] [2005] VSC 169; (2005) 12 VR 224, 231 [13], 239 [41]-[42]
[9] Per Daly AJ in Grant v Preece [2012] VSC 55 at [55]
[10] [2006] VSC 298
[11] [2007] VSC 426
[12] [2011] VSC 346
[13] [2008] VSC 281 at [48]
[14] (2007) 81 ALJ 68 at 71
[15] [2012] VSC 4
[16] [69]
[17] [2010] VCAT 1865
[18] Response to Committee Finding 26
[19] [2008] VSC 117 at [42]
[20] [1970] VR 319-320 at 320
[21] [2005] VSC 355
[22] [1966] VR 494.
[23] Unreported, 6 June 1967.
[24] (1985) VConVR 54-178.
[25] See Division 5 of the PEA “Combined permit and amendment process” or the use of site specific controls pursuant to clause 52.03 as occurred in Amendment C143 to the Boroondara Planning Scheme.
[26] M.A. Zeltoff Pty Ltd v Stonnington City Council [1999] VSC 270
[27] Amendment C46 to the Mornington Peninsula Planning Scheme at 25. Applied by the panels considering amendments C23 to the Stonnington Planning Scheme; C72 to the Manningham Planning Scheme; and C137 to the Mornington Peninsula Planning Scheme.
[28] http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/vic/PPV/2012/5.html?stem=0&synonyms=0&query=Amendment%20C143%20to%20the%20Boroondara%20Planning%20Scheme
[29] Easements and Covenants, Final Report #22; Recommendation 43.
Objectors are reminded about the Court’s power to impose costs orders
Objectors are again reminded that although they can be expect to be reimbursed for their standard costs for participating in a section 84 application (that is, reasonable costs, reasonably incurred), that expectation does not amount to an entitlement.
In 210 Hawthorn Road Pty Ltd v Megan Ellinson and Ors S ECI 2022 05081, Ierodiaconou AsJ took the unusual step of ordering indemnity costs against a defendant for persisting with an application for costs of no merit:
“I will allow the plaintiff’s application for indemnity costs in respect of the costs dispute. As the reasons above disclose, there was no proper basis in fact or law for Dr Shafer’s application to recover the costs of Mr Shafer’s invoices. I accept the plaintiff’s submission that it was a frivolous application. It was a poor use of time. It falls into the category of cases that is continued in wilful disregard of known facts or clearly established law, and warrants an order for indemnity costs: see Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189 at 7.”
In other cases:
a) an order for costs was made against the defendants in Rouditser & Rouditser v Schreuder & Schreuder S ECI 2018 01166 after the defendants were found by Derham AsJ to have been responsible for the trial being adjourned;
b) an order for costs was made against the defendants in Livingstone v Kelleher & Pomponio S ECI 2020 0460 after Matthews AsJ found the first defendant had put the court and the parties to unwarranted expense in necessitating an additional directions hearing; and
c) an order for costs was made against the defendants in Sijercic & Sijercic v Brotchie & Bennett S ECI 2021 03620 after Matthews AsJ concluded the defendant had not made sufficient effort to cooperate in the settling of pre-trial directions.
Prescriptive easements are alive and well in Victoria
In Valmorbida v Les Denny Pty Ltd [2023] VSC 680, Justice Gorton confirmed that prescriptive easements can still be established in Victoria.
Prescriptive easements, or the doctrine of the lost modern grant, is a legal fiction established whereby after 20 years of continuous use of another’s property, the law will assume a right to use that property had a lawful beginning. As Justice Gorton explained: “… if a person had notice of the use, and did nothing to prevent it for 20 years, then, just as if there were a statutory limitation period, they could no longer be permitted to complain if the use were to become permanent. A ‘lapse of time accompanied by inaction, where action ought to be taken’, may confer a right not previously possessed.”
Justice Gorton found that the law in Victoria, at least for the time being, continues to recognise prescriptive easements:
“The Court of Appeal in Laming v Jennings raised the possibility that the accepted notion that an owner of a burdened tenement is bound by the acquiescence of this or their predecessors of title might have to be reconsidered. I consider that accepted notion to be in accordance with the principles that apply to the doctrine and that it should continue to apply for so long as the doctrine remains available. But, in any event, as a trial judge hearing this matter at first instance, it is a notion that I must accept. Equally, the Court of Appeal in Laming v Jennings suggested that there may need to be a new approach to this area of law in light of the diminishing acceptance of ‘the historical rationale of legal fictions’. In both these respects, weight would have to be given to the fact that the Victorian legislature, in contrast to Tasmania, has not decided legislatively (at least explicitly) to oust the principle of the lost modern grant with its attendant common law principles and so some caution might have to be exercised before the Courts decide to effect substantial changes. Again, however, as a trial judge hearing this matter at first instance, I must apply the law as it currently is.”
In a subsequent decision on the precise form of the easement created, Justice Gorton found that the precise route of the carriageway easement might change from time to time, provided that the plaintiff’s access and ability to park was maintained.
If Victoria is short of land for housing, why do we still allow people to contract out of the planning system?
If the Victorian government wants to find land for additional housing, it should consider limiting people from contracting out of the planning system.
At the moment, the provisions for removing restrictive covenants via the Planning and Environment Act 1987 barely move the needle on releasing land for housing burdened by single dwelling covenants. This is perhaps not surprising, for the legislation was never intended to be broad in its application. In introducting section 60(5) of that Act, the Minister for Planning explained:
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.
However, in exercising its discretion pursuant to section 84 of the Property Law Act 1958 the Supreme Court is largely if not wholly concerned with the potential impacts on the private property rights of beneficiaries. As explained by Mukhtar AsJ in Re DVC Management & Consulting Pty Ltd:
“Recent decisions of this Court have it that town planning principles and considerations are not relevant to the Court’s consideration of whether an applicant has established a ground under s 84: see Vrakas v Registrar of Titles and Prowse v Johnstone.”
… Of course, if a covenant is removed or modified, disaffected neighbours may make later objections to the particular features of the proposed development to the planning authority on public planning grounds if and when a planning permit is sought.
Furthermore, it may even be inadmissible to rely on historical materials to explain to the Court why a restrictive covenant were created in the first place.
Take, for instance, a subdivision in which a single dwelling covenant was imposed on 4,000sqm lots by reason of an absence of reticulated sewerage. Upon the arrival of a full suite of services, those lots may now be capable of supporting a significant increase in the number of homes.
However, the Supreme Court might not only be legally incapable of taking into account the public benefits of releasing land for housing, it might be unable to properly consider the reason for the covenant in the first place, unless that reason is expressly stated in the restriction. The court is more likely to infer from the instrument’s language that the intention of the single dwellling restriction was to “preserve the area in question … as an area of spacious homes and gardens”.
True it is, that covenants can be removed by way of planning scheme amendments, but this option is rarely used because of its expense and political risks. To succeed, an application will need the support of the local council and the relevant Minister at the time the amendment is both prepared and adopted. The last time I recall this option being used the Council Officer was said to have declared “We won’t be doing that again. The next time someone asks us to remove a restrictive covenant, we will tell them to go through the Supreme Court.”
The nuclear option is to simply amend the Planning and Environment Act 1987 to provide that to the extent of any inconsistency between a restrictive covenant and a planning scheme, the planning scheme should prevail.
But there no doubt other, more incremental means of releasing land for housing presently burdened by restrictive covenants.
This would still allow the consideration of matters such as the protection of neighbourhood character, but in the framework of a discussion centred on the concept of net community benefit.
At the moment, tens of thousands of hectares of land in Victoria, must be subject to single dwelling restrictive covenants, yet there is no readily available means of convincing a Court or Tribunal that that land could be better used in the interests of the broader Victorian community.
Developers seeking certainty that plans comply with covenants should rely on the Court’s inherent declaratory powers
A developer may want to know whether a particular development proposal will comply with a restrictive covenant.
It might be a mistake to believe this power exists in section 84(2) of the Property Law Act 1958 that provides:
(2) The Court shall have power on the application of any person interested—
(a) to declare whether or not in any particular case any land is affected by a restriction imposed by any instrument; or
(b) to declare what upon the true construction of any instrument purporting to impose a restriction is the nature and extent of the restriction thereby imposed and whether the same is enforceable and if so by whom.
In Prowse v Johnston[1] the plaintiff’s case was put first as a declaration application and as a modification application in the alternative:
21 … so far as declaratory relief is concerned, the plaintiff now seeks, in substance, a declaration that a development generally in accordance with the current architectural plans would not contravene that part of the restrictive covenant which prohibits the erection of more than one house on each of Lots 7 and 8. In the alternative, the plaintiff seeks an order under s 84(1)(a) or (c) of the Act modifying that particular restriction. Further, the plaintiff seeks an order under s 84(1)(a) or (c) modifying the restrictions relating to excavation, building materials, subdivision and frontages. Taken together, the modifications sought are modifications that would permit the construction of a building generally in accordance with the current architectural plans.
In that case, Cavanough J expressed reservations as to whether section 84(2) was capable of being used to determine a hypothetical question such as whether a building constructed in accordance with a given set of plans would satisfactorily comply with a restrictive covenant. His Honour therefore relied on the Court’s general jurisdiction to make a declaratory order:
26 As indicated above, the declaration is sought under s 84(2) of the Act or under the Court’s general or inherent jurisdiction and powers, including under s 36 of the Supreme Court Act 1986. It would necessarily be a declaration as to a situation or position that has not yet arisen, in that the development is merely proposed. It is very doubtful whether s 84(2) of the Act would authorise the Court to make a declaration of that kind. The plaintiff acknowledged this during oral submissions and thereafter placed principal reliance on the Court’s general or inherent jurisdiction. I accept that that jurisdiction may extend to future questions, and that it is available in this case. The jurisdiction is apparently no less ample than any jurisdiction under s 84(2) of the Act. So it is not necessary to decide finally whether jurisdiction under s 84(2) of the Act also exists.
In Stoops v Lefas, Cavanough J again discussed section 36 of the Supreme Court Act and Rule 23.05 of the Supreme Court Rules in this context:
17. …However, the claim which Mr Stoops wanted to be free to advance at trial, as set out in the originating motion, was a claim of an entirely theoretical or hypothetical nature. It did not involve any definite development proposal for the land. In fairness to him as an unrepresented litigant, I informed him that, in my view, the Court would probably not entertain such a claim in any event and that, if he wished to proceed, he would probably need to put forward a definite building proposal. I also expressed concern that his claim might in any event amount to a claim for a declaration as to a future matter; that, in those circumstances, s 84(2)(b) of the Property Law Act 1958 might not be applicable; and that he might need to rely on the Court’s general jurisdiction and powers to grant declarations. …I ordered…that by a specified time the plaintiff file and serve a further amended originating motion confining the proceeding to a claim for a declaration in respect of a clearly defined proposal for the land in question, such as the proposal the subject of the decision given by VCAT in 2003 in the matter referred to above, namely Stoops v Frankston City Council; and that the parties be prepared on 14 May 2015 to advance the cases which, if this proceeding were not stayed, they would respectively advance at the final hearing of the proceeding (as confined in accordance with my order)…
19. In his further amended originating motion filed on 15 April 2015, Mr Stoops duly invoked s 36 of the Supreme Court Act 1986 and Rule 23.05 of the Supreme Court (General Civil Procedure) Rules 2005 (as well as s 84(2)(b) of the Property Law Act 1958 ) in relation to his claim for a declaration in the contingent final hearing. He substituted for his theoretical or hypothetical claim a claim with respect to the very building proposal (and associated architects’ plans) which had been the subject of the application for review determined by VCAT in 2003. He exhibited the relevant plans to an affidavit of his own affirmed on 10 April 2015 and filed on 15 April 2015.
The Court’s general power to grant declaratory relief is discretionary, and requires a real question to be tried. Query whether a contradictor would be required in practice, or whether the Court would be satisfied with notice being first given to beneficiaries.
A plaintiff seeking a declaration that a particular development proposal complies with a covenant should therefore invoke the Court’s powers under section 36 of the Supreme Court Act 1986 (Vic) (Supreme Court Act) and rule 23.05 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (Supreme Court Rules), which reads as follows:
23.05 Declaratory judgment
No proceeding shall be open to objection on the ground that a merely declaratory judgment or order is sought thereby, and the Court may make binding declarations of right whether or not any consequential relief is or could be claimed.
More generally, although plaintiffs are often tempted to run declarations as preliminary points, they are rarely short and sharp hearings, meaning that a failure in the declaration application can lead to litigation fatigue and the subsequent abandoning of an application. Far better then, in most cases, to run an application for declaration and an application for modification in the same hearing. As the adage goes “Most people who ask for a preliminary hearing on the separate question, eventually come to regret it.”
[1] Prowse v Johnstone [2012] VSC 4.
[2] [2016] VSC 350.
[3] These rules were repealed and replaced in 2015. The current corresponding provision is in the same terms.
[4] (1972) 126 CLR 297.
‘Substantial injury’ in s84(1)(c) must be seen through the prism of a covenant’s purpose
Justice Matthews has reaffirmed the principle established in Randell v Uhl [2019] VSC 668 that an assessment of substantial injury for the purposes of section 84(1)(c) in the Property Law Act 1958, must be seen through the prism of the covenant’s purpose.
At issue in Viva Energy Refining Pty Ltd v Sumervale Pty Ltd & Anor (No 2) [2023] VSC 396 was whether one service station could object to the establishment of another in the same network of covenants, where the financial impacts of that approval were not in dispute.
Read literally, the covenants restricted “any trade or business whatsoever” from being carried out on the Land, but the court held that the benefit enjoyed by the Defendants from having no commercial competitor on the Land is not a benefit initially intended to or actually conferred by the Covenants:
181 The essential difference between the parties as to the approach that the Court should take, when considering whether the Plaintiff has satisfied the requirements of s 84(1)(c) of the PLA, boils down to this: is the Court to look at the Covenants as a whole to discern their purpose, as part of assessing the benefits initially intended to be conferred and actually conferred by the Covenants (the Plaintiff’s approach); or does the Court look solely at the restrictions contained in the Covenants themselves to elucidate the benefits (the Defendants’ approach)? In effect, the Defendants would have it that the Court should focus on whether the Defendants were intended to be conferred, and were actually conferred, a benefit by the ‘no trade or business’ restriction on the Land, without reference to the purpose of the Covenants. If so, the question then is whether the removal or modification of the Covenant would substantially injure the Defendants if the benefit did not remain or was adversely affected.
182 In my view, it is clear that the Plaintiff’s approach is to be preferred. It is consistent with the authorities, whereas the Defendants’ approach is not.315 I accept the Plaintiff’s submission set out at paragraph 90 above. In Randell v Uhl, Derham AsJ clearly assessed substantial injury by reference to the purpose of the covenant.316 For example, it is not a single dwelling restriction per se which is the benefit, but a low density neighbourhood as a consequence of that restriction which is to be assessed against the proposed modification.
183 Taking an individual restriction, without reference to other restrictions and the purpose of the covenant, as discerned from the terms of the covenant itself, is not the correct approach
This underscores the need for a holistic and purposive approach to the construction of covenants (as distinct from a literal reading), quite possibly the most common failing of practitioners and decision makers alike.
From instructions to final orders in under four weeks
As a measure of how efficient the Supreme Court can be in processing applications to modify restrictive covenants, today we managed to modify a restrictive covenant within four weeks of taking instructions from a client.
The modification was a simple one that didn’t require notice to beneficiaries–namely, amending a building materials covenant to allow a substrate of concrete in addition to brick–but a similar pace can be achieved in applications made pursuant to section 84(1)(b) of the Property Law Act 1958–where there is agreement from beneficiaries to the modification or removal of a covenant.
A defendant’s costs are not an entitlement in section 84 applications
In ROJ Property & Ors v Eventpower Property [2023] VSC 268, Derham AsJ comprehensively reviewed the factors bearing on costs determinations in applications to modify restrict covenants pursuant to section 84 of the Property Law Act 1958.
In finding that the defendant had put the plaintiffs to needless expense, the Court determined that the plaintiffs should get their costs from the time the defendant had been able to assess the plaintiffs’ case and its own answer to it:
The conclusion to which I am forced is that there is some other reason for animosity between the parties that underpins the inconsistent and intransigent attitude of the defendant to the signage proposed by the plaintiffs. This has all the appearance of a desire to frustrate the plaintiffs’ signage display intended to advertise its home building business in the western suburbs. This attitude is reinforced by the evidence of the response to the fourth Calderbank offer, which was a rejection of the offer with a counter-offer that the plaintiffs withdraw their application for modification of the Covenant and pay the defendant’s legal costs fixed at $40,000.00 (see above [16(d)]). Given the nature of the restriction and the defendant’s and other landowners’ contravention of it, and the obvious, might I say, lack of injury arising from the proposed change, this counter-offer reveals a cavalier approach to the application in the proceeding and one that cannot have been rationally based on the prospects of the application being successful.
This might have been an unusual case insofar as the two parties to the litigation had some history, but it serves to reinforce the point that a defendant cannot assume it will invariably be entitled to its costs, nor should it ignore reasonable offers to settle.
A cost-efficient means of amending building materials covenants
Recently, we managed to modify a building materials restrictive covenant through the Supreme Court’s section 84 process–without advertising to beneficiaries.
We achieved it by applying to add in the words “or other materials with a rendered finish” after the brick and/or stone restriction.
This might not work in all cases, for there were peculiarities in the distribution of beneficiaries’ here, but we are often approached by developers wishing to construct a building out of contemporary building materials where there is a brick and/or stone restriction.
This may be one of the most cost effective means of doing it.
Restrictive covenants in Victoria–the case for reform
- Section 84 of the Property Law Act 1958, is now the principal means of modifying restrictive covenants in Victoria.
- Yet this provision was drafted in 1918 and essentially comes down to a test of “substantial injury” to beneficiaries.
- The Victorian Law Reform Commission reviewed section 84 in 2011, but few recommendations were adopted, leaving the private rights of beneficiaries to triumph over broader concepts of net community benefit.
Restrictive Covenants and Easements in Victoria 