Phillip Arthur Hosking & Anor v Peter Haas & Anor - [2009] NSWSC 624

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CITATION: Phillip Arthur Hosking & Anor v Peter Haas & Anor [2009] NSWSC 624

HEARING DATE(S): 2 and 3 April 2009

JUDGMENT DATE :
3 July 2009

JURISDICTION: Equity

JUDGMENT OF: Bergin CJ in Eq

DECISION: Benefit of covenant not annexed - Consideration to occur as to whether notification is to be given to other lot owners in the Estate before decision in relation to the existence or otherwise of a Common Building Scheme

CATCHWORDS: LAND LAW - Land subdivided - Lots sold at different times by developer/original vendor - Whether benefit of defendants' covenant annexed to plaintiffs' land - Whether Common Building Scheme exists - PROCEDURE - Whether owners of other lots in the Estate should be notified of the application prior to determination of whether a Common Building Scheme exists

LEGISLATION CITED: Conveyancing Act 1919

CASES CITED: Doyle v Phillips (No. 1) (1997) 8 BPR 15,523
Elliston v Reacher [1908] 2 Ch 374
Kerridge v Foley (1964) 82 WN (Pt 1) (NSW) 293
NSW Aged Pensioners Hostel and Conveyancing Act [1967] 1 NSWR 332

PARTIES: Phillip Arthur Hosking &
Dorothy Hosking (Plaintiffs)
Peter Haas &
Evelyn Haas (Defendants)

FILE NUMBER(S): SC 1767 of 2008

COUNSEL: M Stirling (Plaintiffs)
M Baird (Defendants)

SOLICITORS: Cosgriff Orchard Legal (Plaintiffs)
David Geddes (Defendants)

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BERGIN CJ IN EQ

3 JULY 2009

1767 OF 2008 PHILLIP ARTHUR HOSKING & ANOR v PETER HAAS & ANOR

JUDGMENT

1 The properties, the subject of these proceedings, form part of the River Park Estate (the Estate), a residential sub-division, with a one-kilometre frontage to a public reserve and the Murray River (the River) in southern New South Wales about 2.5 kilometres from the town centre of Moama. On 5 June 1995, a company known as North Mitmac Pty Ltd (Mitmac), the original vendor, sub-divided the land comprising the Estate that was previously contained in two lots into Lots numbered 1 to 21 in Deposited Plan 849935 (the Deposited Plan). Some of the properties in the Estate, Lots 7 to 16, back onto the public reserve and the River.

2 The information brochure produced by Mitmac described the Estate as a place of “tranquility, security, covenant protection” and included the following:

THE ESTATE COVENANTS

3 The Deposited Plan (Ex A) makes no mention of any covenants as described in the information brochure. It does disclose: (a) the intention to create Lot 22 (between the rear boundaries of Lots 7 to 16 and the River) as a public reserve; (b) the intention to dedicate McMahon Drive and River Park Drive (the two roads accessing the Lots in the Estate) as public roads; and (c) the intention to create easements under the Conveyancing Act 1919 for utilities.

4 The plaintiffs, Phillip Arthur Hosking and Dorothy Hosking, are the registered proprietors, as joint tenants, of Lot 15 in the Estate, and known as 7 Riverpark Drive, Moama in the State of New South Wales and described in Folio Identifier 15/DP849935 (the plaintiffs’ property). The defendants, Peter Haas and Evelyn Haas, are the registered proprietors, as joint tenants, of Lot 12 in the Estate and known as 10 Riverpark Drive, Moama and described in Folio Identifier 12/DP849935 (the defendants’ property). The plaintiffs seek an order that the defendants demolish a building at the rear boundary of the defendants’ property allegedly constructed in breach of covenant (the Building). The plaintiff also seeks orders in respect of the felling of a substantial gum tree by the defendants.

5 In about late 1995 Mitmac transferred the plaintiffs’ land to the plaintiffs’ predecessors in title, Craig Alexander and Susanne Wendy Beehag (the Beehags) by Memorandum of Transfer Registered No. 910580B. The Beehags covenanted with Mitmac in terms that included the following:

(a) The transferee for himself, his heirs, executors, administrators and transferee hereby covenants with the transferor its successors and transferee the registered proprietor or proprietors for the time being of all those pieces of land being Lot 1 to 21 (inclusive) on Deposited Plan No. 849935 (but excluding the land hereby transferred) and each and every part thereof and he shall not without the previous consent in writing of the transferor:

…

(xiii) erect or cause or suffer to be erected or re-erected on the land hereby transferred a garage or storage area other than one attached to the main dwelling and of a similar building material and design to the main dwelling or a detached garage of similar building material and design to the main dwelling not more than five metres from any external wall of the house PROVIDED HOWEVER that nothing contained herein shall be construed as to preclude the erection of a garden shed of colourbond construction of no more than 2.44 metres (8 feet) in height or no larger than 3.00 metres (10 feet) by 3.00 metres (10 feet) in area and such garden shed shall be hidden from road access view ;

(xiv) erect or cause or suffer to be erected or re-erected on the land hereby transferred a carport other than a garage of the description herein particularised or a detached outbuilding whatsoever other than a carport which is hidden from road access views ;

…

AND the Transferor reserves the right to sell lease or otherwise deal with any lot on the plan either subject to the conditions, stipulations and restrictive covenants hereinbefore set out or any one of them or not and subject to any waiver, modification, alteration or amendment or full release thereof as the Transferor thinks fit. The exercise of this right by the Transferor in relation to any lot shall not release the owner of any other lot from any of the conditions stipulations or covenants effected or imposed upon such other lots or lot or give to the owner of any lot any right or action against the Transferor any other person or persons.

The benefit of the foregoing covenant shall be appurtenant to the land being Lots 1-21 (both inclusive and excluding the land hereby transferred) in Deposited Plan 849935.

The burden of the foregoing covenant is upon the land hereby transferred.

The aforesaid covenant may be released varied or modified by or with the consent of the registered proprietor or proprietors for the time being of ALL THOSE pieces of land being Lots 1 to 21 (both inclusive) in Deposited Plan No. 849935.

6 On 5 December 1997 Mitmac transferred the defendants’ property to the defendants by Registered Transfer No. 3710644R. The defendants covenanted with Mitmac in terms identical to the terms of the Beehags’ covenant, except that the defendants’ covenant did not include those parts that are italicised in the above extract.

7 On about 23 December 2003 by Registered Transfer No. 9253003D the Beehags transferred their property to the plaintiffs. There is no mention in that Transfer of any covenant, however it is agreed that covenant 0910580 (the Beehags’ covenant) remains recorded in the Folio of the Register under the Real Property Act 1900 relating to the plaintiffs’ property.

Development Approval

8 On 24 August 2007 the defendants made application to the Murray Shire Council (the Council) for a Complying Development Certificate under s 81A of the Environmental Planning & Assessment Act 1979 for a “detached shed”. The main materials identified were concrete, aluminium cladding and steel with pre-coloured metal sheeting for the roof. The gross floor area was recorded as 66 square metres.

9 On 5 September 2007 the Council granted development consent to the defendants for a “Detached Shed” subject to conditions which included the following:

12 CONSTRUCTION WITHIN BOUNDARIES

(a) to meet the set/back requirements of the approved plans, and

(b) to be located within the confines of the lot.

If the Council has a policy requiring survey certificates, the owner is to comply with that policy during construction.

2. A licensed surveyor is to verify that the entire structure is located wholly within the subject allotment and submit such verification to Council in writing.

Reason: To ensure the structure does not encroach on neighbouring property

Complaints

10 On 2 November 2007 the firm of solicitors, Cosgriff Orchard Legal (the solicitors), wrote to the Director of Environmental Services at the Council advising that they acted for a number of concerned owners of land contained in Deposited Plan 849935. The solicitors reminded the Council that it controlled the reserve adjoining the River at the rear of lots 7-16 of the Deposited Plan, and that a locked gate had previously been erected on the access track between lots 10 and 11. The solicitors also referred to the sign at the entrance of the reserve prohibiting certain conduct, including the driving of vehicles on other than established tracks. There was also reference to the physical barriers that had been erected by the Council preventing vehicular access to the rear of lots 11 to 16.

11 The solicitors made a number of complaints including that the lock on the gate had been cut and that there was regular vehicular access to the public reserve on other than existing tracks. They also advised that the defendants had recently felled a significant tree and that they were proposing to erect “a substantial shed at the rear of Lot 12 on what clearly appears to be flood prone land”. The solicitors requested the Council to conduct an urgent inspection and advised as follows:

It appears that certain lot owners have flaunted Council’s requirements that there be no vehicular access in certain parts of the reserve. Furthermore the environment has been significantly disturbed by the earthmoving works in and around that area. This is a matter of considerable concern to the balance of the land owners.

Our clients are concerned that the owner of Lot 12 will continue with the construction of the shed and will continue to use the bush as a form of access for this purpose.

12 On 2 November 2007 the solicitors wrote to the defendants advising that they acted for a number of land-owners including the plaintiffs. That letter included the following:

(xi) fall or cause or suffer to be felled or cut or otherwise damage or cause or suffer to be cut or otherwise damage any trees growing on the land hereby transferred on the land at the time the transferee becomes the owner of the land hereby transferred except for the tree which has been identified by the transferee and the transferor hereof which can be trimmed and shaped

(xiii) erect or cause or suffer to be erected or re-erected on the land hereby transferred garage or storage area other than one attached to the main dwelling and of a similar building material and design to the main dwelling or a detached garage of similar building material and design to the main dwelling not more than 5 metres from any external wall from the house.

We are instructed that you have felled a tree at the rear of the land in breach of Covenant (xi). We are further instructed that you propose to erect on the land an outbuilding which is not of a similar building material to the main dwelling. We are instructed that you propose to erect either a tin or colorbond shed.

Our clients require that you advise in writing details of any trees that you have felled on the property and your intentions in respect of the erection of an outbuilding.

Our clients are entitled to the benefit of the Covenant and will not waive or allow any variation thereto in respect of the construction of the outbuilding.

Should legal proceedings become necessary in respect of this matter than (sic) our clients will produce this correspondence and the full terms of the Covenant both in relation to the substantive issues and in relation to costs.

13 On 14 November 2007 the solicitors wrote to the Director of Environmental Services at the Council in relation to the inspection held with them and the first plaintiff on 13 November 2007. They requested a copy of the Development Application, Development Consent and the endorsed plans for the Building and reiterated the “genuine concern” in relation to the nature and type of construction.

14 On 14 November 2007 the solicitors wrote to the defendants in terms that included the following:

Your conduct in removing the tree and commencing work on the shed is clearly in breach of the Covenants which burden the land. The balance of the land owners within the estate are entitled to enjoy the benefit of the Covenants.

15 On 20 January 2008 the defendants wrote to the Director of Environmental Services of the Council in terms that included the following:

sic

16 On 19 February 2008 the Council served on the defendants a Notice of Intention to serve an order under s 121H of the Environmental Planning & Assessment Act 1979 to demolish and remove the internal walls and plumbing fixtures of the Building because they were not carried out in accordance with the Development Consent.

Construction Completed

17 The Council and the defendants exchanged further correspondence in relation to the construction of the Building with the Council observing that they were going through the “frustrating process” as a direct result of the defendants undertaking works that were not in accordance with the Council’s approval. The Building has now been erected and there is green gauze along the side of the Building purporting to camouflage it from view from the plaintiffs’ property.

Proceedings Commenced

18 The plaintiffs commenced these proceedings on 7 March 2008. The matter was heard on 2 and 3 April 2009 when Mr M Stirling, of counsel, appeared for the plaintiffs and Mr M Baird, of counsel, appeared for the defendants.

Contentions

19 The plaintiffs seek a declaration that the Building and the felling and removal of the gum tree constitute breaches of restrictions imposed by the defendants’ covenant and an order that the Building be demolished.

20 The plaintiffs claim that the construction of the Building constitutes a breach of clause (xiii) and/or clause (xiv) of the defendants’ covenant and that to the extent that the Building is not a garage, it is not attached to the main dwelling on the defendants’ property. The plaintiffs also claim that to the extent that the Building is not a garage, it is a detached outbuilding prohibited by clause (xiv) of the defendants’ covenant. They also claim that the Building is not situated less than five metres from any external wall of the house and that it is not made of a similar building material and design to the main dwelling as required by the covenant.

Issues for Determination

21 The defendants admit that if the covenant is enforceable, the Building is not in accordance with the covenant. The questions for determination arising from the way in which the matter proceeded at trial and was argued are: (1) whether the benefit of the defendants’ covenant was annexed to the plaintiffs’ Lot entitling the plaintiffs to bring the proceedings and if not; (2) whether a common building scheme exists entitling the plaintiffs to bring the proceedings. If the plaintiffs are so entitled the next question is whether the Court should exercise its discretion in the plaintiffs’ favour.

22 After the Summons was filed on 7 March 2008 directions were given for the serving of Points of Contention and Points of Defence. The Points of Contention were served on 20 February 2009 and the Points of Defence were filed and served on 27 February 2009. Those documents, do not deal with the issues that were ultimately argued at trial. On the first day of the trial the defendant was granted leave to file in Court Amended Points of Defence that included the new claim that the defendants’ covenant could not benefit the plaintiffs’ Lot because Mitmac had sold the plaintiffs’ Lot to the Beehags prior to the time that the defendants purchased their Lot.

23 The plaintiffs did not file any Contentions in Reply but on the first day of the trial relied, without objection, on an affidavit of their solicitor that annexed Property Searches and Transfers (where available) of all the Lots in the Estate. The tendering of that evidence by the plaintiffs was to meet the issue raised in the Amended Points of Defence to claim that, if the plaintiffs’ Lot did not have the benefit of the defendants’ covenant by reason of Mitmac having sold the plaintiffs’ Lot at the time the defendants’ purchased their Lot, the plaintiffs were entitled to the benefit of the defendants’ covenant by reason of the existence of a Common Building Scheme.

The Covenants

24 The Property Searches and Transfers establish that there are no covenants registered on the titles of Lots 3, 4, 13 and 20 of the Estate. Three of those four lots (Lots 3, 4 and 20) do not back onto the public reserve. Lot 13 backs onto the public reserve with access to the River.

25 All covenants have a restriction as to the type of materials to be used in the construction of the dwelling house. There are two lots in which a “garden shed” is permitted, Lots 14 and 15. There is no restriction as to location of such a shed on Lot 15 (other than it must be hidden from road access view), however in Lot 14 the shed must be positioned beyond the building line of the main building. Lot 15 is also permitted a “carport” hidden from road access view.

26 Each of the covenants permits the construction of a garage proximate to the main dwelling. The covenants in respect of Lots 2, 6, 7, 8, 10, 11, 12, 15 and 21 require the garage to be not more than 5 metres from the main dwelling. The covenants in relation to Lots 1, 9, 18 and 19 require the garage to be not more than 20 metres from the main dwelling. The covenant on Lot 17 requires the garage to be not more than 8 metres from the main building. Although there is permission for a detached garage in Lot 14, the covenant does not restrict the distance from which such garage is to be from the main dwelling.

27 The covenants provide that Mitmac was entitled to sell any lot without the covenant and if it did so such sale did not release the covenantors from any of the conditions or covenants imposed on their Lots. Each of the covenants could not be released, varied or modified without the consent of the registered proprietors of all the Lots, purportedly including those Lots that were not restricted by any covenant.

28 The Lots in respect of which Transfers are in evidence (Lots 1, 2, 6 to 12, 14 to 19 and 21) were originally sold during the period 1995 to 1999; Lots 6, 15 and 17 in 1995; Lots 8 and 16 in 1996; Lot 12 in 1997; Lots 1 and 11 in 1998; and Lots 2, 7, 9, 10, 14, 18, 19 and 21 in 1999. The Property Searches in respect of the Lots in respect of which there is no Transfer in evidence (Lots 3, 4, 5, 13 and 20) establish that only Lot 5 is burdened with a covenant. Those searches do not disclose the date on which these Lots were transferred.

Is the benefit annexed?

29 The defendants submitted that it is not possible to annex the benefit of covenants to land that the covenantee, in this instance Mitmac, had disposed of at the date that the covenantor, the defendants, made their covenant promise. In support of this submission the defendants relied upon the decision of Jacobs J, as his Honour then was, in Kerridge v Foley (1964) 82 WN (Pt 1) (NSW) 293 at 296-7 as follows:

[1967] 1 NSWR 332 was a case relating to land known as the Berry Estate in Wollstonecraft, a suburb of Sydney, New South Wales. In May 1904 a large area of the estate was subdivided into 185 lots in Deposited Plan No 4319. Prior to the commencement of the Conveyancing Act 1919 (the Act), 180 lots were transferred to various purchasers. The remaining 5 lots were transferred after the commencement of the Act and the Transfers of these lots contained the express statement:

31 The question before the Court was the enforceability of the covenant against the applicant, being the owner of one of the 5 lots. Counsel for the applicant submitted that the restrictive covenant would only be valid and enforceable against subsequent owners of the land if it could be shown to be for the benefit of other land in circumstances in which that benefit had been expressly annexed to the land to be benefited. Street J, as his Honour then was, referred to a number of cases including Kerridge v Foley and said at 333:

32 In Doyle v Phillips (No. 1) (1997) 8 BPR 15,523 Young J, as his Honour then was, referred to the above passage of Street J’s judgment in NSW Aged Pensioners Hostel and Conveyancing Act and said, at 15,525, that he had cited this passage because counsel for the plaintiffs had submitted that the well known passage in Kerridge v Foley, also extracted above, which was consistent with what Street J said in NSW Aged Pensioners Hostel and Conveyancing Act, should not be followed. Young J said:

With respect, Kerridge v Foley is consistent with the authorities referred to in the passage I have quoted from the judgment of LW Street J: see also Re Barry (1962) 79 WN (NSW) 759. It is also consistent with English authority: see for instance, Re Union of London and Smith’s Bank Ltd’s Conveyance; Miles v Easter [1933] CH 611.

Goodwin v Papadopoulos

Kerridge v Foley

33 The plaintiffs in the present case sought to distinguish Kerridge v Foley and Doyle v Phillips (No. 1) on the basis that they were cases in which the provisions of s 88(1) of the Conveyancing Act 1919 were not satisfied and therefore have no application to the present proceedings. I do not agree with that submission. It is true that in this case there is no claim of non-compliance with s 88(1) of the Conveyancing Act, however that does not mean that the general principles referred to in these authorities are inapplicable to this case.

34 Similarly to the express statement in NSW Aged Pensioners Hostel and Conveyancing Act, the defendants’ covenant in the present case included the express statement:

35 Mitmac sold Lot 15 to the Beehags in late 1995. It was not until two years later, in 1997, that Mitmac sold Lot 12 to the defendants. It was in 2003 that the plaintiffs purchased Lot 15 from the Beehags. In those circumstances and consistently with these authorities, it was not possible for the benefit of the restrictive covenant on Lot 12 to be attached to Lot 15 because Mitmac had disposed of Lot 15 at the date of the transfer of Lot 12 to the defendants. The owners of lots that Mitmac sold later, in this instance the defendants, can enforce the covenant against the owners of lots that Mitmac sold earlier, in this instance the Beehags and later the plaintiffs, but not vice versa.

Building Scheme

36 It was in anticipation of this finding that the plaintiffs relied upon the evidence of the Property Searches and the Transfers in support of their reliance upon the equitable doctrine of the scheme of development, also known as a common building scheme or a building scheme (a Scheme). This doctrine was developed to accommodate certain circumstances where it was intended that parties be bound by and have the benefit of restrictive covenants but by reason of certain circumstances such as the timing of their purchase such benefit did not enure.

37 If a Scheme exists, the benefit of a covenant can be annexed to all land in the Scheme, even land that Mitmac had disposed of at the time it contracted with the later purchaser. The requirements for establishing the existence of a Scheme were said by Parker J in Elliston v Reacher [1908] 2 Ch 374 at 384-385 to be:

… (1.) that both the plaintiffs and defendants derive title under a common vendor; (2.) that previously to selling the lands to which the plaintiffs and defendants are respectively entitled the vendor laid out his estate, or a defined portion thereof (including the lands purchased by the plaintiffs and defendants respectively), for sale in lots subject to restrictions intended to be imposed on all the lots, and which, though varying in details as to particular lots, are consistent and consistent only with some general scheme of development; (3.) that these restrictions were intended by the common vendor to be and were for the benefit of all the lots intended to be sold, whether or not they were also intended to be and were for the benefit of other land retained by the vendor; and (4.) that both the plaintiffs and the defendants, or their predecessors in title, purchased their lots from the common vendor upon the footing that the restrictions subject to which the purchases were made were to enure for the benefit of the other lots included in the general scheme whether or not they were also to enure for the benefit of other lands retained by the vendors. If these four points be established, I think that the plaintiffs would in equity be entitled to enforce the restrictive covenants entered into by the defendants.

38 Parker J concluded that if these four points are established, "the community of interest imports in equity the reciprocity of obligation which is in fact contemplated by each at the time of his own purchase": at 385.

Procedural matter

39 There is no express application by the defendants for a declaration under s 89(3) of the Conveyancing Act 1919 as to the enforceability or validity of the defendants’ covenant. However in the light of the above finding the effect of what the plaintiffs are seeking is a declaration that a Scheme exists, whilst the defendants resist the making of such a declaration. It became clear to me after I reached the conclusion that the benefit of the defendants’ covenant could not be annexed to the plaintiffs’ Lot and I therefore had to consider whether a Scheme exists, that the other Lot owners in the Estate may also have an interest in being heard in relation to the relief sought and the possible orders that may affect their Lots. Accordingly I relisted the matter today to raise this issue with counsel for the parties.

40 Section 89(4) of the Conveyancing Act provides that if the Court so directs, notice of an application under s 89 may be given to a relevant Council and other interested persons. Even absent such an application, the Court has inherent power to ensure that proceedings are conducted in a fair and just manner. Although, this is not an application for an order under s 89, in terms, my preliminary view is that it is appropriate that the owners of the other Lots in the Estate be given notice of the fact that the Court is being asked to decide whether a Scheme exists over their land. It may also be appropriate to notify the Council.

41 The matter was listed at short notice. Mr Stirling appeared by telephone link from Melbourne for the plaintiffs and Mr Baird appeared in Court for the defendants. Neither counsel has had the opportunity to advise their clients of the present position or take instructions in relation to the preliminary view that I have expressed above, however both saw the force of such a view having regard to the fact that the other Lot owners in the Estate have an interest in this matter. It is appropriate to provide the parties with an opportunity to consider this matter in the light of my findings.

42 I list the matter for further directions at 9.30 am on 10 July 2009 to hear any submissions in relation to notification to the other Lot owners in the Estate and the Council and the process that should be adopted to effect such notification should it be considered necessary.

***

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Citations

Phillip Arthur Hosking v Peter Haas [2009] NSWSC 624

Most Recent Citation

Haas v Hosking [2010] NSWADT 42

Cases Citing This Decision

2

Hosking v Haas (No. 2) [2009] NSWSC 1328

Haas v Hosking [2010] NSWADT 42

Cases Cited

0

Statutory Material Cited

1

CITATION:	Phillip Arthur Hosking & Anor v Peter Haas & Anor [2009] NSWSC 624
HEARING DATE(S):	2 and 3 April 2009
JUDGMENT DATE :	3 July 2009
JURISDICTION:	Equity
JUDGMENT OF:	Bergin CJ in Eq
DECISION:	Benefit of covenant not annexed - Consideration to occur as to whether notification is to be given to other lot owners in the Estate before decision in relation to the existence or otherwise of a Common Building Scheme
CATCHWORDS:	LAND LAW - Land subdivided - Lots sold at different times by developer/original vendor - Whether benefit of defendants' covenant annexed to plaintiffs' land - Whether Common Building Scheme exists - PROCEDURE - Whether owners of other lots in the Estate should be notified of the application prior to determination of whether a Common Building Scheme exists
LEGISLATION CITED:	Conveyancing Act 1919
CASES CITED:	Doyle v Phillips (No. 1) (1997) 8 BPR 15,523 Elliston v Reacher [1908] 2 Ch 374 Kerridge v Foley (1964) 82 WN (Pt 1) (NSW) 293 NSW Aged Pensioners Hostel and Conveyancing Act [1967] 1 NSWR 332
PARTIES:	Phillip Arthur Hosking & Dorothy Hosking (Plaintiffs) Peter Haas & Evelyn Haas (Defendants)
FILE NUMBER(S):	SC 1767 of 2008
COUNSEL:	M Stirling (Plaintiffs) M Baird (Defendants)
SOLICITORS:	Cosgriff Orchard Legal (Plaintiffs) David Geddes (Defendants)