IMO Davies and McDonald (No.2)
[2013] VSC 312
•7 June 2013
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
SCI 2012 06632
IN THE MATTER of the Property Law Act 1958 Section 84
- and –
IN THE MATTER of an application by GLENN STEVEN DAVIES and WARREN JAMES McDONALD for the discharge and or modification of the restrictive covenants contained in Instruments of Transfer Nos 2542125 and 2492985 registered in the Land Titles Office in the Register Book and imposed upon the land more particularly described in Certificates of Title Vol 9353 Folio 829 and Vol 7928 Folio 137
| GLENN STEVEN DAVIES and WARREN JAMES McDONALD | Plaintiffs |
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JUDGE: | LANSDOWNE AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 7 June 2013 | |
DATE OF JUDGMENT: | 7 June 2013 | |
DATE OF REASONS: | 14 June 2013 | |
CASE MAY BE CITED AS: | IMO Davies and McDonald (No.2) | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 312 | |
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REAL PROPERTY - restrictive covenant – construction – whether in personam or runs with the land - whether error in the description of the benefited land –Property Law Act 1958 s84(c).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Ms L. Harrison | Aughtersons Solicitors |
HER HONOUR:
Introduction
These proceedings concern the application by the plaintiffs to discharge or modify two restrictive covenants in similar terms, one of each of two adjacent parcels of land. The land in question is known as 10 and 12 Derby Road, Kilsyth. The parcels of land affected by the covenants are Lots 82 and 83 on Plan of Subdivision LP 22317 (“the Subdivision”) respectively. The covenants prevent the construction of more than one dwelling on each parcel. The plaintiffs wish to construct multiple units on the combined parcels. The proposal identified in their application is for ten single storey units.
In my previous reasons in this matter[1] I set out the history of the proceedings to that date and raised the possibility of error in the description of the benefited land in the covenants. Specifically, I raised the possibility that on the proper construction of the covenants, the benefited land should be read as the land remaining untransferred as at the date of the transfer creating each covenant out of the parent title, rather than the grandparent title of the transferred land. On that construction, there would be many more benefited lots than if the benefited land is, as stated in the covenants, the land remaining untransferred out of the grandparent title as at that date. In particular, the adjoining land at 14 Derby Road, Kilsyth, being Lot 84 in the Subdivision may, if the benefited land was the land remaining in the parent title, be a benefited lot. It is necessary to determine the identity of those persons currently with the benefit of the covenants for the purposes of notification to them of the application so that they may be joined as defendants and heard if they wish to oppose it.
[1][2013] VSC 236.
The proceedings came back before me on Friday, 7 June 2013 in accordance with the orders that accompanied my previous reasons. I was satisfied on that date that the plaintiffs had complied with my order that they notify the adjoining landowners, Mr and Mrs Reynolds of 14 Derby Road, Kilsyth, of the earlier reasons and the orders that accompanied them.
Subsequent to that notification a number of landholders in the locality contacted the solicitors for the plaintiffs in relation to the plaintiffs’ application. In response to those enquiries, the solicitors for the plaintiffs advised the persons that the solicitors considered may be entitled to be joined to contend that their land was benefited land that they were required to attend Court on 7 June 2013 if they sought to be joined as a defendant.
In the event, no person attended Court on that date and sought either to be joined as a defendant or to be heard in opposition to the plaintiffs’ application. Mr Vaughan, of 8 Derby Road, Kilsyth who had attended the Court on previous occasions, attended as an observer only, on his own behalf and on behalf of the registered proprietor of 14 Derby Road, who, it transpires, is Mrs Jayne Reynolds only. The plaintiffs’ application is accordingly unopposed. The plaintiffs still need to satisfy the Court of the proper construction and so effect of the covenants, but they do so in the absence of any competing argument.
Construction of the covenants
In response to my earlier reasons counsel for the plaintiffs made a number of further submissions.
First, counsel put a new submission, not previously made, that the covenants should be discharged because they were now unenforceable, i.e. there was no person with the benefit of the covenant who could now seek to enforce it. The basis for this submission is that the covenantee in the covenants, Timms Subdivisions Pty Ltd, did not own the land expressed in the covenants to have their benefit. Counsel submits that the benefit of the covenant was thus personal to Timms Subdivisions Pty Ltd. That company was deregistered, i.e. ceased to exist, on 22 December 1981.[2] Accordingly the covenants can no longer be enforced.
[2]As established by an ASIC search tendered by the counsel for the plaintiffs.
The Court has power in an application made under s 84(1) of the Property Law Act 1958 to discharge or modify a restriction imposed by covenant on the application of a person interested in land “affected by” (i.e. burdened by) that restriction. This was the basis of the plaintiffs’ application as made. The Court also has power under s 84(2) to determine if, in fact, land is so burdened or a covenant is enforceable. That subsection provides as follows:
(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.
The plaintiffs do not seek to amend their originating motion to seek a declaration under s 84(2). Counsel asserts that discharge of the covenants is justified on the basis that they are no longer enforceable (as could be declared under s84(2)(b)).
If this submission is correct, then there was never any benefited land. The covenant was personal to the original beneficiary, Timms Subdivisions Pty Ltd, and the benefit was not attached to any land. It follows that the notification previously undertaken to the current registered proprietors of the small amount of land remaining untransferred out of the grandparent title as at the date of the transfers was unnecessary, although it may still have been prudent. As it transpired, none of those proprietors objected to the application and one consents.
If am against her on her principal submission, counsel for the plaintiffs reiterates her earlier submission that the covenants should be read strictly, and so the benefited land is limited to the land there identified i.e. the land remaining untransferred out of the grandparent title. In addition to the submissions previously made and recorded by me in my earlier reasons, counsel relies on an additional affidavit by the solicitor for the plaintiffs sworn 6 June 2013 which exhibits the results of a number of searches undertaken by him in relation to other transfers out of the Subdivision. The searches show that the form of the covenant that applies to Lots 82 and 83 was adopted in other instances of transfer by Timms Subdivision Pty Ltd. In all but one of the transfers identified in that further affidavit, both the burdened and benefited land is described by reference to the grandparent rather than the parent title.
In one instance, being the instance identified in paragraph 8 of that affidavit, a transfer of Lot 127 of the Subdivision together with two lots on Plan of Subdivision 22316 from Timms Subdivisions Pty Ltd to Robert Arthur Spinks identifies the burdened land (and consequently the benefited land) by reference to the parent title, rather than the grandparent title. This contrast with a transfer of the adjacent Lot 128 of the Subdivision between the same parties and earlier in the same year, in which the affected land was described by reference to the grandparent title, as in the other transfers examined by Mr Egerton.
Counsel for the plaintiffs also made a submission in respect of the suggestion in my earlier reasons that the handwritten reference to the parent title on the transfers in question next to the typed reference to the grandparent title may suggest an error in the description of the burden (and so benefited) land.[3] Counsel correctly identifies that a handwritten reference to the parent title also appears on the transfer of Lot 127 discussed above, although the transfer in its terms refers to the parent title. In these circumstances I accept that no inference can be drawn that the handwritten reference is any necessary indication of error in the description of the land in the transfer.
[3]Paragraph 25 of the earlier reasons.
Counsel for the plaintiffs further submits that the handwritten notes and ticks that are evident on the transfers are examiner’s notes, for internal checking purpose and do not suggest error. There is no evidence as to the meaning of these marks, as opposed to submission, but certainly those submissions are sufficient in my view to displace might what otherwise have been an inference of error.
On the basis of all of these matters, counsel for the plaintiffs submits that the Court cannot conclude that the description of the benefited land was an error, which should now be corrected. Counsel submits that the intention may have been to create a covenant that was personal only as far as the covenantee is concerned.
Conclusion as to construction of the covenants
Having considered the matter and the submissions by the plaintiffs I reach the following conclusions. It is important to record that these conclusions are binding only in this proceeding and in relation to the covenants here in question. I am conscious that there are many similar covenants recorded as burdening other land in the Subdivision. As there is no defendant opposing the construction of the covenants advanced by the plaintiffs in this case I have had the benefit only of submissions, evidence and authorities advanced in support of the propositions favouring the plaintiffs in reaching these conclusions. My reasons are not intended to exclude the possibility of another conclusion being reached, particularly if after hearing from a contradictor and with the benefit of full argument, in respect of a similarly worded covenant recorded as burdening another lot in the Subdivision.
As set out in more detail in my earlier reasons, the land transferred was described in each transfer both by lot and subdivision details, and by certificate of title reference. The lot and subdivision details were correct; the certificate of title details were not. At the time of the transfer of each of Lots 82 and 83 the land transferred was no longer part of the land contained within the Certificate of Title identified in the transfer, being Volume 7319 Folio 778 (the grandparent title). It was contained within the land described in Certificate of Title Volume 7706 Folio 118 (the parent title). Accordingly, the land transferred was wrongly described.
That error was, however, in each case corrected by registration of the transfers on the parent title. In Fitt v Luxury Developments Pty Ltd[4] (“Fitt”), relied upon by the plaintiffs, Gillard J noted that:
Under the Torrens system the change in land ownership is effected by registration of the instrument of transfer and not upon the execution of that instrument. Under the system registration is everything and registration cures any defects in the instrument registered.[5]
[4][2000] VSC 258
[5]At [164].
The land intended to be benefited by the covenants was identified on the transfers as the land “now comprised in the said Certificate of Title (which was Volume 7319 Folio 778) other than the land hereby transferred”. Timms Subdivisions Pty Ltd was not the owner of the land in the “said Certificate of Title”. The owners were the individuals Robert Timms, Frederick Timms and Robert Timms the younger.[6]
[6]Paragraph 17 of my earlier reasons.
Notwithstanding that the description of the benefited land depended on the description of the transferred land, and registration of the transfers cured the defect in the description of the transferred land, registration did not cure any other defect in the transfer such as the identification of the benefited land. This is made clear by s.88 of the Transfer of Land Act 1958. That section authorises the practice of the Registrar of Titles to record on a folio of the Register a restrictive covenant but provides in s.88 (3) that:
Apart from the operation of Part III (which deals with registration of dealings) a recording in the Register of any such restrictive covenant, charge, easement or right shall not give at any greater operation than it has under the instrument or Act creating it.
Accordingly, the operation of the restrictive covenants is to be determined on examination of the covenants themselves. Not all covenants created on a transfer of land run with land i.e. bind the successors in title to the original parties to the transfer. Some are merely personal to the original parties to the transfer i.e. operate as a contract between those two persons or entities. The circumstances in which a restrictive covenant contained in a transfer of land runs with the land were exhaustively analysed by Gillard J in Fitt.
In particular, Gillard J noted in Fitt that the benefit of a covenant is personal only to the original covenantee if that covenantee (here Timms Subdivisions Pty Ltd) does not own the land for the benefit of which the covenant is taken.[7] That is the situation here on the face of the covenants.
[7]Fitt [152] to [156].
That consequence is not saved by the deeming provision contained in s 78 of the Property Law Act 1928. That section provides that a covenant “relating to any land of the covenantee” is deemed to be made with the covenantee and his successors in title, i.e. the benefit runs with the covenantee’s land, even if that is not expressly stated in the covenant. The effect of the section is limited as is apparent, however, to covenants “relating to any land of the covenantee”.
I conclude that, unless there is a sufficient basis to depart from the description of the benefited land in the covenants, the restrictive covenants contained in the transfers were personal to the original transferor/covenantee Timms Subdivisions Pty Ltd. It follows that only Timms Subdivisions Pty Ltd could enforce the benefit of the covenants, and not its successors in title. Not even the land expressly identified in the covenants as benefiting, the land remaining untransferred out of the grandparent title, has the benefit of the covenant because the covenant was not made with the owners of that land.
Timms Subdivisions Pty Ltd no longer exists and so the covenants are no longer enforceable. In the interests of clarity it would be desirable by Court order to make this plain. The originating motion does not seek a declaration to this effect, and no amendment is sought. While it would have been preferable in my view for the plaintiffs to seek to amend their originating motion to seek a declaration that the covenants were no longer enforceable, and discharge or modification in the alternative, I do not consider the absence of such amendment to be critical. I accept the submission of counsel that discharge of the covenants is one way to effect the outcome that would flow from a declaration that the covenants are no longer enforceable.
Paradoxically, identification in the covenant of benefited land which could not, in fact, benefit is arguably a strong, and perhaps the strongest, basis for suggesting that the reference to the grandparent title rather than the parent title was an error. In the absence of a contradictor prepared to argue that point as a party I do not consider, however, that sufficient reason is shown to depart from the words used in the covenant. The covenants still conferred some benefit, albeit personal only to Timms Subdivision Pty Ltd, and so the covenants were not entirely devoid of meaning.
A similar conclusion as reached by Morris J, the president of the Victorian Civil and Administrative Tribunal in Thornton v Hobson’s Bay City Council.[8] Morris J declared that a particular covenant did not bind any successor in title to the original covenantor because the words used in the covenant did not sufficiently identify any benefited land. The benefited land was identified by reference to a certificate of title which at the time of the transfer was no longer in existence, having been entirely cancelled prior to the transfer. Accordingly there was no land remaining untransferred in that certificate of title that could have the benefit of the covenant. The benefit of the covenant was limited to the original covenantee, a company which no longer existed.
[8][2004] VCAT 383.
Merits of the application
It follows from my conclusion on the construction of the covenants, that it is strictly unnecessary to consider the merits of the plaintiffs’ application to discharge or modify the covenants because those covenants are no longer enforceable in any event. Should my conclusion that the covenants are unenforceable be incorrect, however, the following findings provide an alternative basis for discharge of the covenants under s 84(1)(c) of the Property Law Act. That paragraph permits modification or discharge of a restrictive covenant where the Court is satisfied that the modification or discharge “will not substantially injure the persons entitled to the benefit of the restriction”.
I make these findings on the basis that the benefited land is that identified in the covenants themselves i.e. the land then remaining untransferred out of the grandparent title. As outlined in my previous reasons, in accordance with Westfield Management Ltd v Perpetual Trustee Co. Ltd[9] extrinsic evidence is not permitted to inform construction of the covenants. On the basis of the plaintiffs’ further submissions, and in the absence of a contradictor, I do not consider there is any basis shown in the transfers or otherwise from information obtainable from the Register to depart from the express description of the benefited land in the covenants themselves.
[9](2007) 233 CLR 528.
Considering the benefited land to be so identified, I take the following matters into account in relation to the merits of the application. First, there is no objection from the owners of the land remaining untransferred out of the grandparent title and one owner consents.
Further, it is apparent from the report of Mr Robert Easton exhibited to his affidavit sworn 3 December 2012 that there are matters that support a conclusion that the discharge or modification of the covenants to permit up to ten units on the combined parcels will not substantially injure the benefited lot owners. I note the following in particular. First, the subject blocks are very large and so the proposed development would result in 284 square metres per dwelling, only slightly below the current local Council standard of 300 square metres per dwelling. Secondly, single dwelling covenants have already been discharged on Lots 86, 110, 101, 99, 97, 96 and 87 in the immediate proximity of the subject lots. Mr Easton reports that the proposal for development in Lot 110 at the time the covenant was discharged was up to five dwellings; counsel for the plaintiffs informs me that she was briefed in the application for discharge of the covenant apparently burdening Lot 86, and that from her recollection that proposal was also for a number of dwellings; and Lot 89 now contains multiple dwellings. In other words, there have already been substantial changes in the neighbourhood proximate to the subject lots, including developments similar in scope and intensity to the proposal of these plaintiffs for ten units over the two blocks.
Where a multi-unit development is proposed on a lot currently burdened with a single dwelling covenant, the Court’s practice is to discharge the covenant, if that is warranted, rather than modify it to allow a specified number of multiple dwellings. This practice is followed to avoid any inference that the Court is sanctioning a particular number of dwellings, and in the knowledge that multi-unit development usually requires local Council permit, as I am informed it will in this instance. The Council planning process is the more appropriate mechanism for determining the number of dwellings to be permitted, their style and other matters affecting the amenity of other residents, if a covenant is to be discharged.
Thus on its merits, even if the covenants are still enforceable, the application for their discharge should succeed.
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