Blue Concept Pty Ltd v Farnan
[2015] VSC 125
•20 April 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
S CI 2014 1852
| BLUE CONCEPT PTY LTD (ACN 136 439 882) | Plaintiff |
| v | |
| CHRISTINE FARNAN, PETER AARONS, GALLAGHER, SUZANNE | Defendants |
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JUDGE: | McDONALD J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 11 February 2015 | |
DATE OF JUDGMENT: | 20 April 2015 | |
CASE MAY BE CITED AS: | Blue Concept Pty Ltd v Christine Farnan & Ors | |
MEDIUM NEUTRAL CITATION: | [2015] VSC 125 | First revision 25/5/2015 |
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REAL PROPERTY ‑ Restrictive covenant ‑ Whether obligations created by covenant bind the plaintiff – Whether covenant prohibits construction of multiple apartment units – Whether declaratory relief should be refused on discretionary grounds – Property Law Act 1958 s 84; Supreme Court Act 1986 s 36.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S R Morris QC and Mr MD Townsend | HTH Lawyers |
| For the Defendants | Ms T Acreman | Gadens Lawyers |
HIS HONOUR:
Introduction
The plaintiff is the current registered proprietor of land situated at 35, 37 and 39 Murrumbeena Road, Murrumbeena. It is a property developer and wishes to erect a multi-apartment development on this land. The defendants are opposed to any such development. The central question in the current proceedings involves the construction of a restrictive covenant registered in June 1912 in respect of seven lots of land adjoining the intersection of Murrumbeena Road and Blackwood Street, Murrumbeena. Three of those lots comprise the land which is 35, 37 and 39 Murrumbeena Road.
The terms of the covenant which are relevant to the issues which fall for determination before me are as follows:
And in consideration that the premises and to the intent that the covenant hereinafter contained shall be noted on and referred to in the Certificate of Title for the land hereby transferred or any part thereof as an encumbrance affecting the same the said Transferee (so as to bind herself her heirs executors administrators and transferees only while she or they shall actually be or remain the registered proprietor or proprietors of the said land hereby transferred or any part thereof and to the intent that this covenant shall run with the said land hereby transferred and every part thereof and be binding on the registered proprietor or proprietors for the time being) doth hereby for herself her heirs executors administrators and transferees covenant with the said transferors and each of them and each of their heirs executors administrators and transferees registered proprietors or proprietor for the time being of the land described in Certificate of Title Volume 2857 Folio 571364 other than so much thereof as is hereby transferred that not more than one dwelling house shop or other building with out buildings in either case shall be erected on each of the said lots hereinbefore expressed to be hereby transferred with the exception of Lots 2 and 3 and those parts of Lots 1 and 4 as are now contained in Certificates of Title 3777 Folio 333 and Volume 5538 Folio 530 upon each of which lots or parts of lots not more than 2 dwelling houses with outbuilding shall be erected.[1]
[1]Covenant extracted from exhibit “WHN–6”to the affidavit of Wen Hui Ngooi sworn 17 April 2014 (emphasis added). The 1959 amendments have single underlining. The words ‘each of’ which were inserted in 1961 are double underlined.
The covenant was amended in 1959 and 1961 to create restrictions applying only to 35 and 37 Murrumbeena Road. During the proceedings before me it was an agreed matter that post 1961 the original terms of the covenant continue to apply to two-thirds of 39 Murrumbeena Road, being a parcel of land 200 feet deep and 40 feet wide. The full terms of the covenant are set out at Appendix A to these Reasons for Judgment.
The plaintiff concedes that the obligations created by the covenant ‘run with the land’. The plaintiff also concedes that it is a registered proprietor of the land ‘for the time being’. Nevertheless, the plaintiff seeks a declaration that the obligations created by the covenant expired prior to it becoming the registered proprietor of the land. The plaintiff contends that the obligations created by the covenant were binding only upon Elizabeth Birtchnell, the initial transferee of the land at the time of the creation of the covenant in June 1912, and the immediate transferee of the land from Elizabeth Bitchnell. The plaintiff contends that the obligations created by the covenant are not binding upon it, as a subsequent transferee of the land.
In the alternative, the plaintiff seeks a declaration that if the obligations created by the covenant are binding upon it, the obligations created in respect of 35 and 37 Murrumbeena Road by the amendments in 1959 and 1961 were in addition to rather than in lieu of those created by the original covenant. Accordingly, the covenant does not prevent the construction of a multi-apartment development on 35 and 37 Murrumbeena Road, because such a development is ‘one other building’ as permitted by the covenant. In the further alternative, the plaintiff seeks a declaration that if the amendments to the covenant in respect of 35 and 37 Murrumbeena Road are in lieu of the obligations created by the original covenant, then it is permitted to erect a multi-apartment development on the two-thirds of 39 Murrumbeena Road which is subject to the original covenant.
I have concluded that the obligations created by the covenant continue to bind the plaintiff as the registered proprietor of the land. I have also concluded that the 1959 and 1961 amendments in respect of 35 and 37 Murrumbeena Road were in lieu of those created by the original covenant. As such, on each of 35 and 37 Murrumbeena Road a maximum of two dwelling houses with outbuildings, but no other type of construction, may be erected. Thus, the amended covenant precludes the construction of a multi-apartment development on 35 and 37 Murrumbeena Road. Further, I have rejected the plaintiff’s contention that insofar as the covenant allows not more than one other building to be constructed, the covenant does not prevent the construction of one building comprising apartment units on the two-thirds of 39 Murrumbeena Road which is subject to the original terms of the covenant.
The covenant continues to bind the plaintiff as the registered proprietor of the land
Mr Morris QC, who appeared with Mr Townsend of counsel for the plaintiff, placed particular weight upon the words of the covenant ‘so as to bind herself her heirs executors administrators and transferees only while she or they actually be or remain the registered proprietor or proprietors of the said land hereby transferred or any part thereof…’[2]
[2]Covenant extracted from exhibit “WHN–6”to the affidavit of Wen Hui Ngooi sworn 17 April 2014 (emphasis added).
Mr Morris submitted that the class of persons bound by the covenant is confined to Elizabeth Birtchnell as the original transferee, together with her heirs executors administrators and transferees while she or they remain the registered proprietor or proprietors of the land. The plaintiff submits that these obligations lapsed prior to the point in time that it became the registered proprietor of the land.
The construction of the terms of the covenant begins with consideration of the ordinary meaning of the words contained therein, read in context.[3] The objective is to ascertain the intention of the parties as revealed by the language of the covenant.[4] The plaintiff’s contention that it is not bound by the obligations created by the covenant cannot be reconciled with the plain meaning of the words contained in the covenant. The covenant records the express intention of the covenator that the covenant ‘shall run with the said land’ and ‘be binding on the registered proprietor or proprietors for the time being.’[5] This language weighs heavily against the plaintiff’s contention that the obligations created by the covenant expired prior to it becoming the registered proprietor of the land.
[3]See Prowse v Johnstone & Ors [2012] VSC 4 [52].
[4]See Tonks v Tonks (2003) 11 VR 124 [8].
[5]Covenant extracted from exhibit “WHN–6”to the affidavit of Wen Hui Ngooi sworn 17 April 2014 (emphasis added).
A covenant which runs with the land binds the successors in title to the original parties to the transfer. A covenant which runs with the land is to be distinguished from one which creates personal obligations as between the parties to a transfer of land.[6] Mr Morris submitted that the covenant did run with the land but only for such period of time as the registered proprietor of the land was Elizabeth Birtchnell and/or her immediate transferee.
[6]Fitt & Anor v Luxury Developments Pty Ltd [2000] VSC 258 [64]-[86].
I inquired of Mr Morris whether he could point to any authority in support of the proposition that obligations created by a covenant expressed to ‘run with the land’ and be ‘binding on a registered proprietor for the time being’ had expired.[7] Mr Morris candidly conceded that he had been unable to locate any such authority. I accept Mr Morris’ submission that the construction of a covenant turns upon the particular wording of the covenant in question. Nevertheless, as Mr Morris conceded the concept of a covenant running with the land is one which dates back for hundreds of years.[8] The absence of any case in which the obligations created by a covenant running with the land — and binding upon a registered proprietor for the time being — have been held to have expired, is telling. It serves to highlight the internal inconsistency underpinning the plaintiff’s construction of the covenant. Central to that argument is the proposition that although the obligations created by the covenant were expressed to run with the land, they only bound Elizabeth Birtchnell and the immediate transferee of Elizabeth Birtchnell. This contention invites the court to turn a blind eye to the express statements of intent that the obligations created by the covenant run with the land and are to be binding upon a registered proprietor for the time being.
[7]Transcript of Proceedings, Blue Concept v Christine Farnan & Ors (Supreme Court of Victoria, S CI 2014 1852, McDonald J, 11 February 2015) T20 LL10–26.
[8]Transcript of Proceedings, Blue Concept v Christine Farnan & Ors (Supreme Court of Victoria, S CI 2014 1852, McDonald J, 11 February 2015) T26 LL12–13.
Had the original covenantor and covenantee intended that the obligation created by the covenant would lapse upon the transfer of the land from the immediate transferee of Elizabeth Birtchnell, it would have been a simple matter for the covenant to have expressly so provided. Rather than doing so the covenant expressly records the mutual intention of the parties that the covenant will run with the land and be binding upon the registered proprietor for the time being. The contention that the obligations created by the covenant had expired prior to the plaintiff becoming the registered proprietor of the land is rejected. It is therefore necessary to address the question of what obligations are imposed upon the plaintiff by the covenant.
The obligations created by the amended covenant in respect of 35 and 37 Murrumbeena Road
Prior to 1959, the obligation created by the covenant was that ‘not more than one dwelling house shop or other building with out buildings in either case shall be erected on each of the said lots.’ In 1959 the following words were added:
[W]ith the exception of Lots 2 and 3 and those parts of Lots 1 and 4 as are now contained in Certificate of Title 3777 Folio 333 and Volume 5538 Folio 530 upon which lots or parts of lots not more than two dwelling houses without buildings shall be erected.[9]
In 1961 the words ‘each of’ were inserted after ‘upon’ and before ‘which lots’.
[9]Covenant extracted from exhibit “WHN–6”to the affidavit of Wen Hui Ngooi sworn 17 April 2014 (emphasis added).
The plaintiff contends that the construction of a multi-apartment building of not more than 70 apartment units on 35 and 37 Murrumbeena Road is an ‘other building’. It contends that such a development would have been permitted by the covenant prior to its amendment in 1959. It further contends that the 1959 and 1961 amendment should be read as being additional to, rather than in lieu of, the obligations created by the covenant prior to 1959. Thus, the plaintiff contends that the effect of the 1959 and 1961 variation was that the registered proprietor of 35 and 37 Murrumbeena Road was permitted to erect on each lot or each part of a lot:
·not more than two dwelling houses;
·one shop; or
·one other building
with out buildings in either case.
The contrary construction advanced by the defendants is that the introductory words of the 1959 variation: ‘with the exception of’, support the conclusion that the variation created different obligations in respect of 35 and 37 Murrumbeena Road compared to the balance of the seven lots which were the subject of the covenant when it was initially created in 1912. Those obligations permitted only the construction of a maximum of two dwelling houses on 35 and 37 Murrumbeena Road. The 1961 variation made clear that up to two dwelling houses could be erected on each of 35 and 37 Murrumbeena Road; ie a maximum of four dwelling houses in total.
Two matters weigh heavily against the construction favoured by the plaintiff. First, as a matter of plain English, the phrase ‘with the exception of’ points to the creation of a different set of obligations in respect of 35 and 37 Murrumbeena Road. The Oxford English Dictionary defines ‘exception’ as ‘the act of excepting (a person or thing, a particular case) from the scope of a proposition, rule, etc.; the state or fact of being so excepted.’[10]
[10](JA Simpson and ESC Weiner eds), The Oxford English Dictionary (Clarendon Press, 2nd ed, 1989) vol 5, 498.
The use of the phrase ‘with the exception of’ supports the conclusion that the 1959 and 1961 amendments created different obligations with respect to 35 and 37 Murrumbeena Road. The relevant difference being that the only buildings that could be erected upon 35 and 37 Murrumbeena Road were dwelling houses, albeit that up to two dwelling houses could be erected on each lot. If the proponent of the 1959 variation had intended that the restraint upon the construction of more than two dwelling houses would not detract from the right to erect a shop or other building, this could have been made clear at the time of the further variation in 1961. This did not occur. Rather, the 1961 amendment did no more than make clear that a maximum of two dwelling houses could be erected on each of 35 and 37 Murrumbeena Road.
The plaintiff’s contention that the 1959 and 1961 amendment did not detract from the right of the registered proprietor of 35 and 37 Murrumbeena Road to erect a shop or other building on the site, is rejected. Consequently, there is no basis for the plaintiff’s claim for a declaration that insofar as the covenant allows ‘not more than one other building’ to be constructed, it does not prevent the construction of one building of not more than 70 apartment units to be constructed on 35 and 37 Murrumbeena Road.
The plaintiff’s claim for declaratory relief in respect of the two-thirds of 39 Murrumbeena Road subject to the original covenant
The 1959 and 1961 amendments to the covenant apply only in respect of the land which is 35 and 37 Murrumbeena Road. As regards the land which is 39 Murrumbeena Road, counsel for the plaintiff and the defendants agreed in the proceedings before me that two-thirds of this land (being an allotment 200 feet deep and 40 feet wide) is subject to the covenant in its original form.[11] Given the continued application of the original covenant to this land, the plaintiff seeks a declaration that the covenant does not prevent the construction of one building comprising apartment units to be constructed on the two-thirds portion of 39 Murrumbeena Road which is subject to the original covenant.
[11]Transcript of Proceedings, Blue Concept v Christine Farnan & Ors (Supreme Court of Victoria, S CI 2014 1852, McDonald J, 11 February 2015) T74 LL8-14.
Mr Morris QC candidly acknowledged that no plan has been developed for the construction of multiple apartments on the two-thirds of 39 Murrumbeena Road which is the subject of the original covenant. Nevertheless, he submitted that ‘it certainly would not be beyond the realm of imagination to think four, six, eight, something like that’, could be the subject of a development application. [12]
[12]Transcript of Proceedings, Blue Concept v Christine Farnan & Ors (Supreme Court of Victoria, S CI 2014 1852, McDonald J, 11 February 2015) T88 LL25–7.
I raised with Mr Morris the question of whether the court would be entitled to refuse the plaintiff’s claim for declaratory relief on the basis that the absence of any plans to construct any apartments on the two-thirds of 39 Murrumbeena Road, the subject of the original covenant, meant that the court was being asked to grant declaratory relief in respect of a purely hypothetical controversy. Mr Morris’ response was to the effect that the plaintiff is a developer, that it wants to develop the land one way or another and if a declaration was made in respect of 39 Murrumbeena Road or two/thirds of 39 Murrumbeena Road, that would have utility because it would then provide a basis for the plaintiff to spend thousands of dollars engaging architects to design a building for which planning permission could then be obtained.[13]
[13]Transcript of Proceedings, Blue Concept v Christine Farnan & Ors (Supreme Court of Victoria, S CI 2014 1852, McDonald J, 11 February 2015) T89 LL9-15.
In seeking declaratory relief, the plaintiff seeks to enliven the court’s powers pursuant to s 84(2) of the Property Law Act 1958, s 36 of the Supreme Court Act 1986 and/or the inherent jurisdiction of the court. Whether the source of the court’s power to grant declaratory relief is the statutory power conferred by the Property Law Act or s 36 of the Supreme Court Act, or alternatively the court’s inherent jurisdiction, in each case the grant or refusal of declaratory relief is within the discretion of the court.[14] In Ainsworth v Criminal Justice Commission[15] the plurality stated:
Hence, declaratory relief must be directed to the determination of legal controversies and not to answering abstract or hypothetical questions. The person seeking relief must have ‘a real interest’ and relief will not be granted if the question ‘is purely hypothetical’, if relief is ‘claimed in relation to circumstances that [have] not occurred and might never happen’ or if “the court’s declaration will produce no foreseeable consequences for the parties’.[16]
In Longo Investments Pty Ltd[17] Osborn J stated that it is ‘undesirable to frame a declaration with respect to a hypothetical development.’[18]
[14]AWB Ltd v Cole & Anor (No 2) (2006) 233 ALR 453 [45]–[46]. See also Ambridge Investments Pty Ltd (In liq) (Receiver Appointed) v Baker & Ors [2010] VSC 59 [61]–[73].
[15](1992) 175 CLR 564 (‘Ainsworth’).
[16]Ainsworth 582 (citations omitted).
[17][2003] VSC 37 (‘Longo’).
[18]Longo [16]. See also Prowse v Johnstone & Ors [2012] VSC 4 [29].
The absence of any plans to develop the two/thirds of 39 Murrumbeena Road which is the subject of the original covenant is a telling factor weighing against the grant of the declaratory relief sought by the plaintiff. The declaration is sought in relation to circumstances that have not occurred and might never happen.
Further, there are significant practical considerations which weigh against the court exercising the discretion to grant declaratory relief in circumstances where there are no plans in existence in relation to any proposed development of 39 Murrumbeena Road. Whether a multi-apartment development would or would not constitute ‘one other building’ permitted by the original covenant requires consideration of the scale and design of any proposed development. Issues such as the number of pedestrian entry points, the number of driveways and whether it is apparent from the exterior design of the building that it is a multi-apartment development — albeit one contained within a single building — are matters which bear upon the question of whether the development can properly be construed as being ‘one other building’. In the absence of any plans, it is simply not possible to undertake this task. Accordingly, the plaintiff’s claim for declaratory relief in respect of 39 Murrumbeena Road is refused.
Conclusion
The plaintiff’s application by way of the amended originating motion filed pursuant to orders made by the court on 18 February 2015 is dismissed. The plaintiff must pay the defendants’ costs to be taxed on a standard basis in default of agreement.
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APPENDIX A
… We DO HEREBY grant unto the said Elizabeth Birtchnell Birtchnell [sic] and her transferees registered proprietor or proprietors for the time being of the land hereby transferred a right to use for the purpose of draining the land hereby transferred or any part hereof the land being those parts of Lots 8, 9 and 10 as are delineated and coloured blue on the said Plan of Subdivision and also the land delineated and coloured purple and shown on the said plan And in consideration of the premises and to the intent that the covenant hereinafter contained shall be noted on and referred to in the Certificate of Title for the land hereby transferred or any part hereof as an encumbrance affecting the same the said Transferee (so as to bind herself her heirs executors administrators and transferees only while she or they shall actually be or remain the registered proprietor or proprietors of the said land hereby transferred or any part thereof and to the intent that this covenant shall run with the said land hereby transferred and every part thereof and be binding on the registered proprietor or proprietors thereof for the time being) doth hereby for herself her heirs executors administrators and transferees covenant with the said transferors and each of them and each of their heirs executors administrators and transferees registered proprietors or proprietor for the time being of the land described in Certificate of Title Volume 2857 Folio 571364 other than so much thereof as is hereby transferred that not more than one dwelling house shop or other building with out buildings in either case shall be erected on each of the said lots herein before expressed to be hereby transferred with the exception of Lots 2 and 3 and those parts of lots 1 and 4 as are now contained in Certificates of Title 3777 Folio 333 and Volume 5538 Folio 530 upon each of which lots or parts of lots or parts of lots not more than two dwelling houses with outbuildings shall be erected.
Dated the seventeenth day of April one thousand nine hundred and twelve. …[19]
[19]Extract from exhibit “WHN–6”to the affidavit of Wen Hui Ngooi sworn 17 April 2014 (emphasis added).
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