Liv Pty Ltd & Ors v Accor Australia & New Zealand Hospitality Pty Ltd & Anor

The applicants, Liv Pty Ltd and others, sought to restrain Accor Australia & New Zealand Hospitality Pty Ltd and another party from continuing to operate a hotel in a manner that allegedly breached a restrictive covenant. The dispute concerned the interpretation and enforceability of a covenant that prohibited the operation of a hotel on a particular parcel of land. The matter came before the High Court of Australia.

The central legal issue before the High Court was whether the covenant, as it applied to the land owned by the respondents, was valid and enforceable. This required the Court to consider the principles of restrictive covenants, including their creation, transmission, and the circumstances under which they might be discharged or rendered unenforceable, particularly in light of changes in the character of the neighbourhood or the purpose for which the covenant was originally intended.

The High Court ultimately found that the covenant was not enforceable against the respondents. Their Honours reasoned that the covenant had been created for a specific purpose that was no longer applicable due to significant changes in the surrounding area and the nature of the development. The Court applied the equitable principles governing restrictive covenants, noting that where the original purpose of a covenant has been frustrated by circumstances that have arisen since its creation, and the covenant no longer serves a practical benefit to the covenantee, it may be discharged or deemed unenforceable. The Court considered the evidence of the substantial changes to the locality and the commercial realities of hotel operations, concluding that the covenant no longer represented a reasonable restriction.