Re Hunt
[2017] VSC 779
•18 December 2017
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S CI 2017 01667
IN THE MATTER of the Property Law Act 1958 (Vic), section 84(2)
- and –
IN THE MATTER of an application by the plaintiff NICOLE ELIZABETH HUNT for a declaration that the land known as Lot 1 of Title Plan 4333891G being the land more particularly described in Certificate of Title Volume 3550 Folio 936 is not affected by any purported restriction contained in Instrument of Transfer No 665334
IN THE MATTER of an application by:
| NICOLE ELIZABETH HUNT | Plaintiff |
---
JUDGE: | Lansdowne AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 8 June 2017 and further submissions received 27 June 2017, further evidence received 7 and 15 December 2017. |
DATE OF JUDGMENT: | 18 December 2017 |
CASE MAY BE CITED AS: | Re Hunt |
MEDIUM NEUTRAL CITATION: | [2017] VSC 779 |
---
REAL PROPERTY – Restrictive covenant – Application for a declaration that land not affected by any purported restriction in the covenant – Whether appropriate to proceed ex parte – whether benefit of the covenant is annexed to land – Whether covenant part of a building scheme – Whether sufficient notice of such a building scheme appears on the Register of Titles – Held: the covenant does not identify any benefited land and so its benefit was personal to the transferor and his executor, both now deceased – Unlikely that the covenant was part of a building scheme, but in any event no sufficient notice of such a building scheme appears on the Register and so the successor in title to the original covenantor cannot be bound– declaration made that land not affected by the covenant – Property Law Act 1958 (Vic), s 84(2) – Re Dennerstein [1963] VR 688 – Fitt v Luxury Developments Pty Ltd [2000] VSC 258 – Vrakas v Mills [2006] VSC 463 – Westfield Management Limited v Perpetual Trustee Co Limited (2007) 233 CLR 528 – Beman Pty Ltd v Boroondara City Council [2017] VSC 207 considered.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr N Dragojlovic | Hall & Wilcox, Lawyers |
TABLE OF CONTENTS
Introduction......................................................................................................................................... 1
Procedural background..................................................................................................................... 2
Facts....................................................................................................................................................... 5
Legal principles.................................................................................................................................. 7
Annexation of benefit to land remaining in the parent title................................................... 8
Building scheme.......................................................................................................................... 10
Statutory provisions extending benefit or burden................................................................. 15
Discussion.......................................................................................................................................... 16
Annexation of benefit to land.................................................................................................... 16
Building scheme.......................................................................................................................... 18
Response by the Registrar of Titles................................................................................ 18
Elliston v Reacher applied............................................................................................... 19
History of transfers from parent titles............................................................................ 21
Conclusion......................................................................................................................................... 23
HER HONOUR:
Introduction
The plaintiff became the registered proprietor of land known as 12 Haverbrack Ave, Malvern, more particularly described in Certificate of Title Volume 3550 Folio 936 (Subject Land) on 4 May 2016. She wishes to subdivide the Subject Land. The title to the Subject Land notes as an encumbrance a restrictive covenant (Covenant) that if enforceable against the plaintiff would prevent the proposed subdivision because it allows the construction of one dwelling only on the Subject Land. The Covenant also requires that that dwelling be constructed in brick or stone and be constructed at a minimum cost.
These reasons concern the plaintiff’s application for a declaration that the Subject Land is not affected by any restriction purportedly imposed by the Covenant. The plaintiff submits that there are two reasons for this. First, she contends that the Covenant does not identify any land to take the benefit of the restrictions imposed by the Covenant and so on its proper construction those restrictions were for the benefit of the original transferor/covenantee and his executors and administrators only. In other words, the plaintiff submits that the benefit of the Covenant was personal to the original transferor, and does not run with his land for the benefit of his successors in title. If this construction of the Covenant is correct, then as the original transferor and his executor are both deceased, there is no longer any person who can enforce the Covenant.
The plaintiff also contends that even if the restrictions imposed by the Covenant were for the benefit of other land owned by the transferor by virtue of a building scheme, then the restrictions are not enforceable against a successor in title to the covenantor, such as herself, because there is no information on the Register available to a purchaser by which the purchaser can ascertain the extent of the benefited land.
For the reasons which I now set out, I accept the plaintiff’s contentions and will make the declaration that she seeks.
Procedural background
It is first appropriate to say something briefly about the manner in which this application has proceeded, and its history.
Before she instituted this proceeding, the plaintiff through her solicitors applied by letter dated 6 April 2016 to the Registrar of Titles (Registrar) seeking that he exercise his discretion under s 106(1)(c) of the Transfer of Land Act 1958 to note on the Register that the Covenant no longer affects the Subject Land. The plaintiff had not at that stage completed her purchase of the Subject Land, and made her request with the consent of the then registered proprietor.
That section relevantly provides as follows:
106 Powers of Registrar
(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;
The Registrar replied by letter dated 12 May 2016, declining to amend the Register as requested. The Registrar’s delegate stated that there was evidence to suggest that the restrictions imposed by the Covenant were part of a building scheme binding land in the parent title. The delegate conceded that the Covenant does not specifically identify benefited land, but also stated that ‘it can be inferred that the benefitted land was at least intended to be the land remaining un-transferred as was the practice of the day’.[1] The Registrar suggested that the plaintiff consider application under s 84 of the Property Law Act 1958 (PLA) or s 23 of the Subdivision Act 1988.
[1]Letter dated 12 May 2016 from Registrar of Titles to the solicitors for the plaintiff, being Exhibit NEH-5 to the affidavit of Nicole Elizabeth Hunt sworn 4 May 2017 (‘Plaintiff’s Affidavit’).
The plaintiff commenced this proceeding about a year later on 8 May 2017, making at that time an application pursuant to s 84(1) of the PLA to discharge or modify the Covenant so as to remove the restriction on materials and cost, and allow the construction of two or three dwellings. An application under s 84(1) of the PLA ordinarily requires the identification by the plaintiff of land with the benefit of the restrictions in the covenant in question, and notification to the current proprietors of that land, to give them the opportunity to oppose the application if they so wish.
The plaintiff subsequently amended her originating motion by leave to add an application for a declaration pursuant to s 84(2) that the Subject Land is not affected by any restriction contained in the Covenant. The plaintiff seeks to proceed ex parte with that application. These reasons concern that application only.
Section 84 of the PLA provides as follows:
84 Power for Court to modify etc. restrictive covenants affecting land
(1)The Court shall have power from time to time on the application of any person interested in any land affected by any restriction arising under covenant or otherwise as to the user thereof or the building thereon by order wholly or partially 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
(b)that the persons of full age and capacity for the time being or from time to time entitled to the benefit of the restriction whether in respect of estates in fee-simple or any lesser estates or interests in the property to which the benefit of the restriction is annexed have agreed either expressly or by implication by their acts or omissions to the same being discharged or modified; or
(c)that the proposed discharge or modification will not substantially injure the persons entitled to the benefit of the restriction:
Provided that no compensation shall be payable in respect of the discharge or modification of a restriction by reason of any advantage thereby accruing to the owner of the land affected by the restriction unless the person entitled to the benefit of the restriction also suffers loss in consequence of the discharge or modification nor shall any compensation be payable in excess of such loss; but this provision shall not affect any right to compensation where the person claiming the compensation proves that by reason of the imposition of the restriction the amount of consideration paid for the acquisition of the land was reduced.
(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.
(3)The Court may before making any order under this section direct such inquiries (if any) to be made of any local authority or such notices (if any) whether by way of advertisement or otherwise to be given to such of the persons who appear to be entitled to the benefit of the restriction intended to be discharged, modified or dealt with as, having regard to any inquiries, notices or other proceedings previously made given or taken the Court thinks fit.
(4)Any order made under this section shall be binding on all persons whether ascertained or of full age or capacity or not then entitled or thereafter capable of becoming entitled to the benefit of any restriction which is thereby discharged, modified or dealt with and whether such persons are parties to the proceedings or have been served with notice or not.
(5)An order may be made under this section notwithstanding that any instrument which is alleged to impose the restriction intended to be discharged, modified or dealt with has not been produced to the Court, and the Court may act on any evidence of such instrument as it thinks fit.
(6)This section shall apply to restrictions whether subsisting on the thirty-first day of December One thousand nine hundred and eighteen, or imposed thereafter and whether the land affected thereby is registered or not, and in the case of registered land the registrar shall if the restriction has been noted on the register give effect on the register to the order when made.
Section 84(3) confers a discretion on the Court to require notification of an application before making any order under that section. In terms, that power extends to an application for a declaration under s 84(2). I have considered whether the plaintiff should be required to give notice of her application for a declaration to any person who may wish to argue against it. This is because if the application is permitted to proceed ex parte then there is no contradictor to the plaintiff’s submissions, yet if the declaration is made it will be binding on those persons why may have wished to contend that they were beneficiaries of the restrictions. There is also the refusal by the Registrar to note on the Register that the Covenant is no longer enforceable to consider. This might suggest that the plaintiff’s contentions would benefit from testing.
The Registrar’s view was based in part on the possibility that the Covenant may be enforceable as part of a building scheme. The delegate reached that view without the benefit of submission to the contrary from the plaintiff. By contrast, the plaintiff has put detailed submissions to me on this issue, which were not before the Registrar.
After consideration of the plaintiff’s submissions, I have concluded that this is such a clear case that it is neither necessary nor appropriate to seek to elicit any contradictor. In any event, it would be difficult to identify any person with the standing to object to the declaration because such a person would need to have an interest in benefited land, and no land is identified as benefited.[2] I observe that in other cases to which I have been referred, applications for a declaration that restrictions in a covenant are not enforceable have been on notice to potential beneficiaries, and so applicants in other proceedings should not assume that applications for such a declaration will necessarily proceed ex parte.
[2]If the Covenant did arguably identify benefited land, then further evidence would have been required before notification orders could be made because the evidence that the plaintiff has filed identifying land transferred out of the parent title after the transfer creating the Covenant is not consistent – compare the Plaintiff’s Affidavit with that of Peter Robert Jenkin affirmed 7 June 2017.
Facts
The transfer that created the Covenant is dated 17 October 1911. It transferred the Subject Land from Robert Singleton to John Rogers May. It reads as follows:
I Robert Singleton of “Haverbrack” Glenferrie Road Malvern Gentleman being registered as the proprietor of an Estate in fee simple in the land hereinafter described subject to this encumbrance notified hereunder in consideration of the sum of SIX HUNDRED AND FIFTY POUNDS paid to me by JOHN ROGERS MAY of 317 Collins Street Melbourne in the State of Victoria Solicitor Do Hereby Transfer to the said John Rogers May ALL my Estate and interest in ALL THAT piece of land being part of Crown Portion Nine at Gardiner Parish of Prahran County of Bourke being part of the land comprised in Certificate of Title entered in the Register Book Vol 1367 Fol. 277605 and more particularly shown on the plan endorsed hereon and thereon colored red Together with a right of carriage way and drainage over the road colored brown on the said map AND the said John Rogers May hereby for himself his executors and administrators covenants with the said Robert Singleton his executors and administrators that he the said John Rogers May his executors administrators or transferees will not at any time hereafter erect on the said land colored red any buildings other than one dwelling house of brick or stone and the usual offices and outhouses and that the actual cost of the labor and material employed in the construction of such building shall not be less than the sum of Nine Hundred Pounds AND IT IS HEREBY AGREED that this covenant shall appear as an encumbrance to all future Certificates of Title to be issued with respect to the said land.
Restrictive covenants were in common use at the time of this Covenant, as a form of planning control designed to retain value for the transferor in respect of land he or she had not yet transferred out of a larger parcel. Such covenants commonly restrict construction on the transferred land to one dwelling and in some cases require that the construction be of brick or stone and of a certain value. In the common case, the land being transferred is identified as part of a parent title, and the restrictions are expressed to be for the benefit of the land remaining untransferred out of that parent title. Conveyancing practice at the time was to cancel that part of a parent title being transferred, and issue a new certificate of title for the transferred land. Successive transfers out of parent title would eventually lead to the cancellation of most, or all, of that parent title. It follows that where these words are used in a covenant to identify the benefited land, the benefit of the covenant is annexed to land not yet transferred out of the parent title as at the date of the covenant, and is not annexed to land already transferred out of the parent title. As a consequence in the case of covenants drafted in these terms, there is reducing field of benefited land, depending on the point in time at which the subject land was transferred out of the parent title. Often a similar form of restrictive covenant had been imposed in every earlier transfer, and so a network of covenants in similar terms was created on land out of the parent title, although the land burdened and benefited in each case differs.
In some instances of transfer from a common vendor, the network of covenants thus created does benefit all the land in the parent title or subdivision, and reciprocally burdens all the land in the parent title or subdivision, whatever the date of the transfer. For this to occur, the covenants must have been created as part of a building scheme. I will return shortly to the requirements of such a scheme.
The Covenant is not expressed in the conventional form. It identifies the land transferred as being ‘part of the land comprised in Certificate of Title … Vol 1387 Fol 277395’ but does not state that the restrictions to which the transferee/covenantor agreed are for the benefit of the land remaining untransferred out of that parent title. It is for this reason that the plaintiff says the Covenant was personal to the transferor/covenantee and does not confer benefit that runs with the transferor’s land.
The plaintiff also contends that the failure to identify the benefited land in the Covenant or any other document in the Register of Titles means that it is not enforceable against a successor in title to the covenantor, such as the plaintiff, as part of a building scheme even if a benefited landowner could be identified.
The restrictions in the Covenant are expressed to be for the benefit of Robert Singleton and ‘his executors and administrators’. The solicitors for the plaintiff produced to the Registrar and exhibited in this proceeding documents establishing that the original transferor/covenantee, John Singleton, died on 22 February 1914. Stanley Robert Embling Singleton was granted probate of John Singleton’s will on 26 May 1914. The subsequent grant of probate of the will of Stanley Robert Embling Singleton recites that he died on 20 September 1957. The plaintiff submits that accordingly there is no longer any person who can enforce the Covenant as a personal covenant against the original covenantor or his successors in title.
Legal principles
There are three ways by which a person who is not the original transferor/covenantee may obtain the benefit of a restrictive covenant. These are:
(a) By becoming the owner of land to which the benefit of the covenant has been annexed;
(b) By express assignment of the benefit of the covenant in respect of land which he or she owns; or
(c) By virtue of the land in question being part of a building scheme, which imposes reciprocal rights and obligations (i.e. benefit and burden) on all land in a defined area.[3]
[3]Pirie v Registrar General (1962) 109 CLR 619, 628 (per Kitto J); Re Arcade Hotel Pty Ltd (1962) VR 274, cited in Fitt v Luxury Developments Pty Ltd [2000] VSC 258, [88] (per Gillard J) (‘Fitt’); Vrakas v Mills [2006] VSC 463, [19] (per Hargrave J) (‘Vrakas v Mills’).
The plaintiff has not identified any express assignment of the benefit of the Covenant. Her submissions focus on the first and third of the means identified above.
Annexation of benefit to land remaining in the parent title
Whether or not the benefit of a restrictive covenant has been annexed to land still owned by the transferor, so that his or her successors in title also take the benefit of the restriction, turns on the intention of the original parties to the covenant.[4] It is necessary to construe the words of the covenant in their natural and ordinary meaning to determine the intention of the parties and whether they intended to annex the benefit of the covenant to ascertainable land, so that its benefit would run with that land[5].
[4]Fitt, [93].
[5]Ibid.
In an exhaustive consideration of the authorities to that date, Gillard J in Fitt v Luxury Developments Pty Ltd (‘Fitt’)[6] observed that in interpreting the words in the covenant, the court may take into account the ‘surrounding circumstances objectively known to the parties at the time’.[7] In this context, he also held that it is not essential for the words of the covenant to expressly identify the land to which the benefit is annexed, provided that the identity of the land is ‘easily ascertainable’ from the description in the covenant.[8]
[6][2000] VSC 258.
[7]Fitt, [93].
[8]Zetland v Driver [1939] Ch 1, 8 quoted in Fitt, [105]–[106].
Caution should be taken in applying this latter observation, because the underlying observation by Gillard J that surrounding circumstances can be taken into account in interpreting the words in a covenant is now the subject of High Court authority to the contrary.
In questions of the construction of contracts generally, extrinsic evidence can in certain circumstances be admitted to determine the intention of the parties to the contract. However, at least in the case of Torrens title land, the High Court held in Westfield Management Limited v Perpetual Trustee Co Limited (‘Westfield’)[9] that this general principle does not apply to the determination of interests in land. That case concerned an easement granting a right of way under one commercial building in Sydney to another. The successor in title to the dominant tenement advanced a broader interpretation of the right of way than the words of the easement supported, based on extrinsic evidence as to the intention of the original parties. The High Court held that this was not permissible. The Court expressed the view that to allow extrinsic evidence in the construction of a dealing with Torrens title land would be inconsistent with the operation of the Torrens system by these words:
To put the matter shortly, rules of evidence assisting the construction of contracts inter partes, of the nature explained by authorities such as Codelfa Construction Pty Ltd v State Rail Authority of NSW, did not apply to the construction of the Easement.
…
The third party who inspects the Register cannot be expected, consistently with the scheme of the Torrens system, to look further for extrinsic material which might establish facts or circumstances existing at the time of the creation of the registered dealing and placing the third party (or any court later seized of a dispute) in the situation of the grantee.[10] [citations omitted]
[9](2007) 233 CLR 528.
[10]Ibid 539.
The observation by Gillard J that extrinsic evidence may be taken into account would also appear to have been inconsistent with the judgment of Kitto J in the earlier High Court case of Pirie v Registrar General.[11] Kitto J held in that case that the annexation of the benefit of the covenant to other land requires ‘the use of appropriate language in the instrument creating the restriction’.[12]
[11](1962) 109 CLR 619.
[12]Ibid 628.
I conclude that it is only the terms of the Covenant itself that can annex its benefit to land, so as to confer its benefit on the successors in title to the transferor, by identification in the Covenant of the benefited land.
Building scheme
A building scheme is an arrangement entered into by a vendor with a number of purchasers of his or her land by which the vendor and the purchasers agree to reciprocal benefits and burdens in respect of the subsequent use of the land. It is more far reaching in impact than a covenant that annexes the benefit of a restriction to the land remaining in the parent title i.e. the land not yet transferred by the vendor. The restrictions imposed by a building scheme both burden all land the subject of the scheme, and benefit all the same land, irrespective of the date of transfer out of the parent title.
The circumstances giving rise to a building scheme enforceable at the instance of successors in title to the original vendor and purchaser were set out by Parker J in the English case of Elliston v Reacher in 1908 as follows:[13]
[I]t must be proved (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 or their predecessors with the common vendor irrespective of the dates of the respective purchases.[14]
[13][1908] 2 Ch 374.
[14]Ibid 384.
These principles have been cited with approval and applied on many occasions since, including in Fitt and Vrakas v Mills,[15] a 2006 decision of Hargrave J of this Court.
[15][2006] VSC 463.
Evidence of the circumstances of the original transfer and other transfers by the vendor that is required by these principles, in particular as to the intention of the vendors and purchasers, ordinarily would be extrinsic to the Register. This immediately invites consideration of the extent to which a successor in title to Torrens title land can be bound by a building scheme, given the intention of Torrens title to simplify conveyancing and enable a bona fide purchaser for value to take clear title on the basis of information ascertainable from the Register.
This issue arose in Re Dennerstein,[16] a 1963 decision of Hudson J of this Court. His Honour found on the basis of evidence extrinsic to the Register that the land in question was the subject of a building scheme, although the covenant did not in terms identify any benefited land. The evidence included the contract and conditions of sale pursuant to which the subject land had been sold at auction in 1911 together with a large number of other lots in the same subdivision and parent title. One of the conditions of sale required purchasers to enter into covenants constraining the future use of the land they purchased, for the benefit of the other land in the subdivision. Evidence was also before Hudson J as to the covenants in fact entered into by purchasers of lots in the subdivision sold at auction, and subsequently.
[16][1963] VR 688.
It can be immediately seen that evidence of the original contracts of sale would not be ascertainable from a search of the Register by a subsequent intending purchaser of a subject lot. The form of covenants on other lots in the original subdivision would be ascertainable, but only by exhaustive search of other transfers out of the parent title.
It was put to Hudson J that a subsequent intending purchaser could infer that a building scheme was in place by identifying other transfers in the same subdivision out of the parent title, searching those other transfers out of the parent title, and inferring the existence of a building scheme conferring reciprocal benefits and burdens on the land in the subdivision. Hudson J rejected that submission in these words:
In my view, a purchaser of land under the Transfer of Land Act is not bound to prosecute inquiries and searches and make deductions such as would be involved if (counsel’s) contentions were accepted. Even when all the materials and evidence in relation to the circumstances under which an estate has been subdivided and sold are available it is not by any means easy to determine whether the sale of allotments in the estate has been made under or pursuant to a common building scheme. To require a person interested in purchasing one of those allotments to make this determination after obtaining the necessary evidence perhaps years after the original sale if it is available would render conveyancing a hazardous and cumbersome operation, and, in the case of dealings in land under the operation of the Transfer of Land Act, would defeat the object of the Act and destroy in large measure the efficacy of the system sought to be established thereby.
I have reached the conclusion that, even assuming there is power under the Act to notify as encumbrances on a certificate of title restrictions arising under a building scheme, such a notification will not be effective to bind transferees of the land unless not only the existence of the scheme and the nature of the restrictions imposed thereunder, but the lands affected by the scheme (both as to the benefit and the burden of the restriction) are indicated in the notification, either directly or by reference to some instrument or other document to which a person searching the register has access. In the present case these requirements are not satisfied. The covenants contained in the instrument of transfer notified as an encumbrance, though they certainly set out the restrictions, give no indication that they arose under a building scheme, nor of the land to which the benefit thereof was intended to be annexed, under such a scheme. The applicant, therefore, had no notice of the existence of the scheme or of the restrictions imposed thereby. She did have notice that the covenants contained in the instrument of transfer had been entered into by her predecessor in title but those covenants as she had no doubt been advised are no longer enforceable by any person and, therefore, she took her transfer free of the restrictions contained therein and is entitled to a declaration accordingly.[17]
[17]Re Dennerstein [1963] VR 688, 696–7.
Whether the subject covenant was part of a building scheme was also considered in Fitt. In that case, the subject covenant expressed the restrictions to be for the benefit of the land in an identified parent title as was represented on an identified plan of subdivision, other than the land transferred. Gillard J held that the words in the covenant annexed its benefit to land remaining in the parent title as at the date of the covenant, which included the land of the plaintiffs.[18]
[18]Fitt, [238].
Thus it was not necessary for Gillard J to also consider whether or not the covenant was part of a building scheme, making it enforceable by all purchasers from the subdivision, and their transferees, irrespective of whether the date of their purchase was before or after the transfer creating the covenant. He did so, however, and concluded that a building scheme was in place. Gillard J was directed to Re Dennerstein but concluded that it did not stand in the way of the plaintiffs. This was because the plan of subdivision in Fitt stated on each of its pages that all of its lots ‘are affected by a building scheme’.[19] The plan of subdivision was identified in the covenant, and the covenant also identified the lands affected. The transfer creating the covenant was noted on the certificate of title. Gillard J noted that ‘(b)oth the original instrument of transfer and the plan of subdivision would be made available to anybody seeking to search the register’.[20] The facts in Fitt were thus clearly distinguishable from those in Re Dennerstein.
[19]Ibid [29].
[20]Fitt, [299].
Gillard J went further, however, and expressed doubt as to the conclusion by Hudson J that for a covenant to be enforceable as part of a building scheme the existence of the building scheme should be ascertainable from the Register. In his view, it is sufficient that the Register disclose the existence of a restrictive covenant ‘which sets out the nature of the restrictions and identifies the land.’[21] He did not consider it necessary for the Register to disclose that the land is subject to a building scheme, though he agreed that it would be advisable for it to do so. He reached this conclusion because he considered that the validity of a covenant is a matter for the Court.[22]
[21]Ibid [328].
[22]Ibid [328]–[331].
The possible difference of view as between Hudson J in Re Dennerstein and Gillard J in Fitt was considered by Hargrave J in Vrakas v Mills.[23] In that case, the covenant in terms conveyed its benefit to the vendor, ‘her heirs executors administrators and transferees registered proprietor or proprietors for the time being of the land comprised in the (identified parent title) other than the land hereby transferred’. The first issue considered by Hargrave J was the effect of s 79A of the PLA on the facts before him. That issue does not arise in this case. Hargrave J held that the covenant was for the benefit of land transferred out of the parent title after the subject land. It was also argued before him that the covenant was part of a building scheme, by reason of which the successors in title to transferees out of the parent title prior in time to the creation of the covenant could also enforce it.
[23][2006] VSC 463.
Hargrave J applied the principles of Elliston v Reacher and concluded on the basis of evidence relating to the original subdivisions and original sales out of those subdivisions that the first three requirements for the existence of a building scheme were met. He held that the fourth requirement was not met because the lots were sold over a period of 20 years and there was no proof of a contractual obligation on the vendor to impose a restrictive covenant on subsequent sales. Hargrave J held that in these circumstances he could not infer that subsequent purchasers were on notice that the vendor intended to benefit all lots in the subdivision. Nor was there any evidence that purchasers were informed that the restrictive covenant was imposed on them for the benefit of other purchasers of lots in the subdivision, or that they would be the beneficiary of a reciprocal covenant in their favour. I observe that in these respects the facts differed in Vrakas v Mills from those in Re Dennerstein.
Hargrave J also held that even if all the elements of a building scheme had been established, he would on application of Re Dennerstein have concluded that the current plaintiffs before him, successors in title to an original purchaser, purchased their land without notice of it and so are not bound by it. Hargrave J was invited to conclude that Re Dennerstein was wrong, having regard to the criticisms of it by Gillard J in Fitt. He held it was not necessary to do so, on a proper reading of those criticisms, but it is plain in my view that Hargrave J endorsed Re Dennerstein. He found that although the plaintiffs before him purchased the land with notice of the existence of the restrictive covenant, they could not be bound by it as part of a building scheme because the form of the covenant made no reference to such a building scheme, or the lands affected by it. He noted that in Fitt, unlike in the case before him, the covenant referred to a plan of subdivision that itself contained reference to a building scheme, and accordingly sufficient notice of the building scheme had been given in any event in the Register on those facts.[24]
[24]Fitt, [48].
The approval by Hargrave J of Re Dennerstein as it applies to Torrens title land is strictly obiter, because his Honour had held that there was no building scheme on the facts before him. However, the approach taken by Hudson J in Re Dennerstein is the same approach as was subsequently adopted by the High Court in Westfield.[25] For these reasons, I consider the clear summary by Hargrave J in Vrakas v Mills of the requirements if a covenant created as part of a building scheme is to bind a successor in title to a transferee of Torrens title land to be the correct statement of the law:
[25]Although Re Dennerstein does not appear to have been cited before the High Court.
It is necessary for the notification in the Register to give notice of:
(1) the existence of the scheme;
(2) the nature of the restrictive covenant; and
(3)the identity of the lands affected by the scheme, both as to the benefit and the burden of the restriction.
Further, it is necessary that this notice is given in the certificate of title, either directly or by reference to some instrument or other document to which a person searching the Register has access.[26]
[26]Vrakas v Mills, [45].
Statutory provisions extending benefit or burden
For completeness, I note that there are several statutory provisions that extend the benefit or burden of a covenant, being ss 78, 79 and 79A of the PLA. Section 78 provides that a covenant made after the commencement of the Act is deemed to be for the benefit of the covenantee and his successors in title, even if those words are not used, and s 79 applies the same deeming provision in respect of the burden of a covenant in relation to covenants made after the commencement of the Act. It is not necessary to consider those provisions further in this case, as the Covenant is of an earlier date.
Counsel for the plaintiff has taken me to an earlier provision, in force at the time of creation of the Covenant. That provision is s 65 of the Conveyancing Act 1904. Section 65(2) of that Act deemed a covenant ‘relating to land not of inheritance or not devolving on the heir as special occupant’ (which would appear to be the situation in respect of the Covenant) to be made with ‘the covenantee his executors administrators and assigns’ even if those persons were not expressed to be benefited in the covenant itself. That deemed extension does not in my view annex the benefit of the Covenant to land, but merely extends its personal benefit to those other persons. In this case, the covenantee’s executor is himself deceased, and there is no evidence of any assignee of the benefit of the Covenant from the covenatee. Thus s 65 does not undermine the plaintiff’s contentions in this case.
Section 79A of the PLA extends the benefit of a covenant that is annexed to land to every part of the land of that land, and is retrospective in effect.[27] It does not arise in this case.
[27]Vrakas v Mills, [23]–[25].
I turn now to the application of the principles relating to annexation of benefit to land and building schemes to the Covenant.
Discussion
Annexation of benefit to land
The Covenant does not identify in its terms any land to which its benefit is annexed. In my view, it is unarguable that the Covenant does not annex its benefit to land, and so is personal only to the transferor and his executor, both of whom are now dead.
It is sufficient to reach this conclusion to consider only the terms of the Covenant. For completeness, however, I was taken by counsel for the plaintiff to authority to support her contention. In Beman Pty Ltd v Boroondara City Council (‘Beman’),[28] Emerton J considered on appeal from the Victorian Civil and Administrative Tribunal whether a covenant ran with the land of the transferors, so as to confer its benefit on their successors in title. The relevant portion of the covenant conferred its benefit on the transferors ‘and their transferees’ but did not identify any land to be benefited. The covenant concluded with the words ‘it is intended that this covenant shall be set out as an encumbrance at the foot of the Certificate of Title to be issued in respect of the said land and shall run with the land’.
[28][2017] VSC 207.
The concluding words of the covenant in Beman were similar to the concluding words of this Covenant in evincing an intention that the burden of the covenant run with the land of the transferee. Emerton J held that the covenant did burden the land of the covenantor. The more difficult question before Emerton J was whether the covenant annexed its benefit to any land, so as to be enforceable by successors in title to the original covenantee. She held that it did not, despite the reference to the ‘transferees’ of the original transferors, because it was not made clear who the relevant ‘transferees’ were, and so what land was intended to benefit. It was not clear whether the intended ‘transferees’ were persons to whom land had been transferred prior to the subject transfer, or persons to whom land was transferred after the subject transfer, or both.[29]
[29]Ibid [27].
For these reasons, Emerton J overturned the decision of the Tribunal to the effect that the reference in the covenant to the ‘transferees’ of the transferor identified the benefited land on the assumption that it was a reference to subsequent transferees of the transferors. Emerton J conceded that this may have been a reasonable assumption, but the words of the covenant did not require such a conclusion and so failed to identify the benefited land.
I accept the submission of the plaintiff that the inclusion of the words ‘transferees’ in the covenant in Beman provided a stronger argument that it annexed its benefit to land than is possible in the case before me, given no such words are used in the Covenant. Thus, Beman is strong authority for the plaintiff’s proposition in this case that the Covenant does not annex its benefit to land.
Emerton J in Beman was taken to the decision of Ginnane J in Prowse v Johnstone which had been relied on by the Tribunal as authority for the proposition that the covenant in Beman annexed its benefit to land.[30] Emerton J distinguished Prowse v Johnstone on the basis that the covenant in that case was held to have been properly amended to include the words ‘Registered Proprietor or Proprietors for the time being of the untransferred part of the land in the said certificate of title’ after the reference to the benefited transferors and their executors and administrators. It follows that the covenant in Prowse v Johnstone contained words identifying the benefited land as that land subsequently transferred out of the parent title. Those words did not appear in the covenant in Beman and do not appear in the Covenant.
[30][2015] VSC 621.
For these reasons, I find that the Covenant does not by its terms annex its benefit to any land.
Building scheme
I also accept the plaintiff’s submission that the Covenant is not enforceable against the plaintiff, or indeed any successor in title to the covenantor, as part of a building scheme. I begin my discussion with the suggestion by the Registrar that such a scheme may apply.
Response by the Registrar of Titles
The Registrar declined to remove the Covenant from the title to the Subject Land for the following stated reasons:
The land in 3550/936 was transferred out of Volume 1387 Folio 395 (“the Parent Title”). I have examined a number of other folios of land transferred out of the Parent Title and have found that they contain the same restrictive covenant as is the subject of your proposed application. Factors such as a common vendor, many lots being offered for sale in a subdivision and the common form of the restrictive covenant create a strong argument that a building scheme in place (sic).
Whilst Transfer 0665334 does not specifically identify the benefitted land, it can be inferred that the benefitted land was at least intended to be the land remaining un-transferred as was the practice of the day. It is my understanding that case law now would attribute the benefit to all the land in the folio.
The second paragraph concedes that the Covenant does not specifically identify benefited land, but goes on to say that ‘it can be inferred that the benefitted land was at least intended to be the land remaining un-transferred as was the practice of the day’. I consider that Beman, which in fairness was decided after the date of the Registrar’s letter, shows that no such inference can be drawn.
The reasons given by the Registrar do not appear entirely consistent. Immediately after the statement just quoted, the letter states that ‘case law now would attribute the benefit to all the land in the folio’ (emphasis added). It is not clear what is meant by this. If the reference to ‘folio’ is intended to mean the parent title, then the statement that the benefit was annexed to all the land in the parent title is inconsistent with the immediately preceding statement, to the effect that the benefit was annexed to only the land ‘remaining un-transferred’ as at the date of the Covenant. It may be that what was intended was to refer back to the statement in the preceding paragraph, that there is a ‘strong argument’ to the effect that a building scheme is in place. If a building scheme was in place over the parent title, then the restrictions in the Covenant would both benefit and burden all the land in the parent title.
The delegate of the Registrar states that she has examined a number of other ‘folios’ i.e. presumably certificates of title ‘of land transferred out of the Parent Title’ and found that they contain the same form of restrictive covenant as the Covenant. She also notes that factors such as a common vendor, and ‘many lots being offered for sale in a subdivision’, together with the common form of covenant create a strong argument that a building scheme is in place. The delegate does not identify the case law on which she relies, but the factors she identifies are those identified by Gillard J in Fitt as being the significant factors that lead Hudson J in Re Dennerstein to the conclusion that a building scheme was in place.[31]
[31]Fitt, [148].
Elliston v Reacher applied
In this case I have required the plaintiff to put before me the two parent titles noted on the title to the Subject Land, but I do not have before me other certificates of title of land transferred out of the parent title, or the transfers that created them. For current purposes, I accept that at least some such transfers contain the same form of restrictive covenant as the Covenant. It is also the case that transfers out of the parent title had the same vendor, or the same vendor and his personal representative. Neither of these factors, however, necessarily advance the matter. If the form of the Covenant is personal to Mr Singleton and his executors and administrators only, and not annexed to land, then the fact that there were many such covenants may mean only that there were many personal covenants in favour of Mr Singleton and his executors and administrators.
In Vrakas v Mills, Hargrave J accepted that in a case with a common vendor, it was sufficient to establish that it was the vendor’s intention to sell his or her lots subject to restrictions intended to be imposed on all the lots that the restrictions are found in the individual transfers, and are not noted on the plan of subdivision itself. On that basis he held that both the first and second of the Elliston v Reacher factors (common vendor and all lots sold to be burdened respectively) were established in respect of the covenant before him.
The third Elliston v Reacher factor requires consideration of the vendor’s intention as to the benefit of the covenant – the vendor must have intended that all lots sold would be benefited by the restrictions, as well as burdened. Hargrave J found that that factor was also shown in Vrakas v Mills, although there was a small number of lots that were not sold subject to a restrictive covenant. It is important to remember, however, that the covenant in Vrakas v Mills on its face identified benefited land, and the Covenant does not. It is doubtful that in these circumstances an identical form of covenant, even if applying to every transfer out of the parent title, could establish in this case that the vendor intended to benefit all the lots in the parent title, when it cannot be shown that the form of covenant annexed its benefit to even the land then remaining in the parent title.
But even assuming that the vendor’s intention to benefit every lot could be shown, an argument that the Covenant imposed restrictions as part of a building scheme is likely to fail in my view for want of proof of the fourth Elliston v Reacher factor. This fourth factor requires proof of the intention not just of the vendor, but also of the purchaser at the time of the creation of the Covenant i.e. the predecessor in title to the current proprietor of the Subject Land. It would be necessary to show that that predecessor in title purchased the Subject Land on the footing that the restrictions imposed by the Covenant were for the benefit of all the other lots in the parent title. In Re Dennerstein most of the lots were sold at a common auction, and the remaining lots by private sale within the next two years. The auction form of contract for sale was in evidence. A building scheme was proved. In Vrakas v Mills, the submission that a building scheme was in place failed for want of proof of this fourth factor because the lots were sold over a period of 20 years, and there was no proof of a contractual obligation on the vendor to impose a restrictive covenant on any subsequent sale.
History of transfers from parent titles
Examination of the parent titles in this case also show sale of lots out of those titles over an extended period. The current Certificate of Title to the Subject Land identifies two parent titles - Vol 1324 Fol 672 and Vol 1387 Fol 395. Why two parent titles are listed is not entirely clear. The transfer that created the Covenant, dealing number 665334, recites only the second, Vol 1387 Fol 395. The dealing is described on Vol 1387 Fol 395 as being ‘Transfer as to part and creation of Easement’. The dealing is also recorded on the other parent title Vol 1324 Fol 672 where it is described only as ‘Creation of Easement’.
The registered proprietor of both parent titles identified in the current Certificate of Title was Robert Singleton, of Haverbrack, Glenferrie Road. Vol 1324 Fol 672 was created on 14 February 1882 and encompassed a large parcel of land between Glenferrie Road and what was then described as ‘Government Road’. The first transfer from that title was registered on 1 August 1882, and became Certificate of Title Vol 1379 Fol 743. It transferred a portion of the land in Vol 1324 Fol 672 between Glenferrie Road and Spring St to Donald Smith Wallace. Mr Wallace in turn transferred a portion of that land back to Mr Singleton later that same month, being a transfer registered on 22 August 1882. That transferred land became the land in Certificate of Title Vol 1387 Fol 395.
Scrutiny of the imaged version of Vol 1387 Fol 395 shows that there were a number of transfers of portions of land out of that parent title prior to the transfer that created the Covenant, and some after. The available imaged copy of the parent title is difficult to read, but it appears that the first transfer out was in 1893 and the last dealing in 1919, by which time Mr Singleton was deceased and the land was registered in the name of his legal personal representative.
From the limited scrutiny that the imaged parent title permits, it does not appear that any dealings were registered at the same time as one another (from which one might reasonably infer that no lots were sold together, unlike Re Dennerstein) and there was no regular pattern to the registration of the dealings (from which one might infer no regular pattern to sales). Some dealings are transfers as to part and creation of an easement (as in the case of the Subject Land) and some are creation of an easement only. The dealings are registered at different intervals of time i.e. there does not appear to have been a regular pattern to the transfers out of Vol 1387 Fol 395 or creations of easements. From my scrutiny of the imaged parent title, there were nine dealings registered prior to the subject transfer, and only two more, both transfers and creations of easements, after the subject transfer that created the Covenant prior to the death of Mr Singleton, one in 1912 and one in 1913. There were twelve dealings registered after the title became registered in the name of Mr Singleton’s executor i.e. 24 in total, twelve at the instance of Mr Singleton and twelve at the instance of his executor.
Given the absence of multiple sales at the same time, the period of over twenty years over which sales took place, the lack of a regular pattern to the sales, and the fact that half of the sales were at the instance not of the original vendor but his executor, it is very unlikely in my view that any interested person could establish that the sale to the predecessor in title to the plaintiff or indeed any sale was subject to a restriction imposed as part of a building scheme.
It is not necessary to form a final view on this issue, however, or to require further evidence on the point from the plaintiff, because even if it could be shown that original transferees from the vendor, including the predecessor in title to the current plaintiff, took their land with notice that it was subject to a restriction that benefited all lots in the parent title, there is insufficient information on the Register to that effect to bind any subsequent purchaser, including the plaintiff.
A person seeking to purchase the Subject Land would be able to ascertain from the certificate of title that it is said to be burdened by a restrictive covenant, created by an identified transfer, and that the title originates from two parent titles. There is nothing, however, in the transfer to suggest that a building scheme exists, let alone to identify the land with the benefit of any such scheme. There is no indication on the title plan identified in the certificate of title, TP 433891G that the Subject Land is subject to a building scheme, and no such indication on the plans attached to the parent titles, Vol 1387 Fol 395 and Vol 1324 Fol 672.
For these reasons, this case is entirely distinguishable from Fitt. On the basis of Vrakas v Mills and Westfield, a building scheme if it is to bind a successor in title to the original covenantor must be ascertainable from examination of the Register. No such scheme is ascertainable in this case, even if in fact it did exist at the time of the transfer creating the Covenant.
Conclusion
For these reasons I accept the submissions of the plaintiff that the Covenant is no longer enforceable. I will make the declaration that she seeks that the Subject Land is not affected by any purported restriction contained in the transfer.
3
5
0