Re Pomroy
[2021] VSC 739
•12 November 2021
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S ECI 2021 03444
IN THE MATTER of an application under ss 84(2) and 84(1)(a) of the Property Law Act 1958 (Vic)
IN THE MATTER of a restrictive covenant contained in Instrument of Transfer No. 1159026 registered in the Register Book at the Office of Titles and imposed upon the land known as 91 Shannon Avenue, Manifold Heights, and more specifically described in Certificate of Title Volume 10046 Folio 461 kept by the Registrar of Titles under the Transfer of Land Act 1958 (Vic)
| KATE EMMA POMROY | Plaintiff |
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JUDGE: | Matthews AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 21 October 2021 |
DATE OF JUDGMENT: | 12 November 2021 |
CASE MAY BE CITED AS: | Re Pomroy |
MEDIUM NEUTRAL CITATION: | [2021] VSC 739 |
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REAL PROPERTY – Restrictive covenant – Application for a declaration that land not affected by any purported restriction in the covenant – Whether appropriate to proceed without a contradictor – Whether benefit of the covenant is annexed to land – Held: there are no persons capable of enforcing the benefit of the covenant other than the covenantees and so the covenant does not affect the land – Appropriate to proceed ex parte – Declaration made that land not affected by the covenant – Property Law Act 1958 (Vic), s 84(2) – Re Mack and the Conveyancing Act [1975] 2 NSWLR 623 – Xu v Natarelli [2018] VSC 759 – Randell v Uhl [2019] VSC 668 – Re Hunt [2017] VSC 779.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M Townsend | Planning and Property Partners |
TABLE OF CONTENTS
Introduction........................................................................................................................................ 1
Background......................................................................................................................................... 2
The Subject Land and its history................................................................................................. 2
Chain of titles....................................................................................................................... 4
The Head Title........................................................................................................ 4
The Great Great Grandparent Title...................................................................... 5
The Great Grandparent Title................................................................................ 5
The Grandparent Title........................................................................................... 6
The Parent Title....................................................................................................... 6
The Subject Land.................................................................................................... 6
The Covenant................................................................................................................................. 7
Burden................................................................................................................................... 7
Benefit.................................................................................................................................... 8
Existence of a building scheme?........................................................................................ 8
Previous decisions of the Court in respect of the Covenant................................................. 10
Case Application................................................................................................................ 11
Clinton Application........................................................................................................... 12
Riddle Application............................................................................................................ 12
Applicable principles...................................................................................................................... 13
Consideration.................................................................................................................................... 14
Should the Court proceed to hear and determine the application on an ex parte basis?.. 14
Is there any land identified as benefiting from the Covenants?.......................................... 15
The Covenant fails for a lack of privity and is not saved by the existence of a building scheme.................................................................................................................................. 15
There are no persons capable of enforcing the benefit of the Covenant other than the Covenantees........................................................................................................... 17
The Covenant does not affect the Subject Land............................................................ 18
Obsolescence application........................................................................................................... 18
Conclusion......................................................................................................................................... 19
HER HONOUR:
Introduction
The plaintiff is the registered proprietor of the land known as 91 Shannon Avenue, Manifold Heights, also known as Lot 1 on Title Plan TP94451X and more particularly described in Certificate of Title Volume 10046 Folio 461 (‘Subject Land’). The Subject Land is burdened by the restrictive covenant contained in instrument of transfer IT1159026 (‘Covenant’). The Subject Land is presently developed with a single dwelling and detached garage. The plaintiff intends to redevelop the Subject Land and to apply to the Greater Geelong City Council (‘Council’) for planning permission to demolish the existing dwelling and construct five residential dwellings in a townhouse development.
This proceeding concerns the plaintiff’s application for a declaration that the Covenant is invalid on the basis that it does not affect the Subject Land and no person can enforce the Covenant, and for an order that the Covenant be discharged from the certificate of title for the Subject Land as it is obsolete.
At the first return of the application on 21 October 2021, the plaintiff sought to have the matter determined without notice being given to potential contradictors. At the hearing, Counsel for the plaintiff suggested that in light of other matters in the list that day, I further consider in Chambers the question of notice, along with the proceeding generally, and reach a view as to whether I was prepared to proceed ex parte and (if appropriate) to grant the relief sought in the proceeding, following which I would then either re-list the proceeding for further submissions or make final orders on the papers. I accepted this as an efficient and appropriate course to follow. No orders were therefore made at that stage for notice to be given pursuant to s 84(3) of the Property Law Act 1958 (Vic) (‘Act’).
The plaintiff relies upon the affidavit of Tyrone Emmet Rath affirmed 11 October 2021 and the exhibit bundle annexed thereto (‘Rath Affidavit’). Mr Rath is a solicitor employed by Planning & Property Partners Pty Ltd, solicitors for the plaintiff.
The plaintiff also relies on the written submissions of her counsel, Matthew Townsend, dated 18 October 2021 which have been placed on the Court file (‘Written Submissions’).
I have not set out in full the detailed evidence relied upon and the detailed Written Submissions, as it is not necessary to do so. However, all of the evidence and all of the Written Submissions have been taken into account.
For the reasons which follow, I accept the plaintiff’s submissions that it is appropriate to proceed ex parte and will make the declaration and orders sought.
Background
The Subject Land and its history
The Subject Land is approximately 613m2 and, as mentioned above, is presently developed with a single dwelling and detached garage. It is shown on Title Plan TP94451X, marked 1, re-produced below:
The Rath Affidavit exhibits the relevant title documents. In addition, the Written Submissions painstakingly set out the history of the Subject Land.[1] In summary:
[1]See Written Submissions, [13]-[22].
(a) The Subject Land is derived from Certificate of Title Volume 6670 Folio 865 (‘Parent Title’) and was created pursuant to Instrument R525187T on 3 September 1991.
(b) The Parent Title was derived from Certificate of Title Volume 5610 Folio 982 (‘Grandparent Title’) and created pursuant to Instrument of Transfer 1905561 on 20 January 1944.
(c) The Grandparent Title was derived from Certificate of Title Volume 5164 Folio 608 (‘Great Grandparent Title’) and was created pursuant to Instrument of Transfer 1438107on 21 November 1929.
(d) The Great Grandparent Title was derived from Certificate of Title Volume 4915 Folio 896 (‘Great Great Grandparent Title’) and was created pursuant to Instrument of Transfer 1275089 on 12 July 1926.
(e) The Great Great Grandparent Title was derived from Certificate of Title Volume 3543 Folio 461 (‘Head Title’) and was created pursuant to Instrument of Transfer 1159026, which contains the Covenant, on 4 July 1924.
(f) Notably, the Great Great Grandparent Title was created from the final transfer of land from the Head Title, which resulted in the cancellation of the Head Title.
(g) The Head Title was created on 15 November 1911 as a 95-acre parcel of land originally contained in Crown portions four, five, six and part of seven, section nine at Geelong West, parish of Moorpanyal county.
(h) The Head Title contained a large parcel of land which was subdivided pursuant to Plan of Subdivision LP5875 (‘Plan of Subdivision’). A plan generally consistent with the Plan of Subdivision is contained within the Head Title.
From this, it appears that:
(a) individual Lots on the Plan of Subdivision were transferred out of the Head Title; and
(b) these transfers occurred prior to Instrument of Transfer IT1159026 (being the Covenant) affecting the transfer of the remainder of the land in the Head Title to the Great Great Grandparent Title.
Chain of titles
In addition to the summary of the Subject Land’s history canvassed at paragraph 9, in order to understand how the plaintiff contends that the Covenant does not burden the Subject Land or benefit any other land it is necessary to set out the chain of titles. Again, I am grateful to the Plaintiff’s Counsel for his careful explication of this.[2] The chain of titles can be described as set out below.
The Head Title
[2]See Written Submissions, [23]-[49].
The Head Title was created in November 1911. At this time, the land in the Head Title was owned by William Thomson Manifold, James Chester Manifold and Edward Manifold who each owned one equal undivided share and shared the fourth share equally. The Head Title lists certain encumbrances, including the rights of William Forrester Volum as purchaser under a contract of sale dated 8 March 1911.
Edition 7 of the Plan of Subdivision, which saw the land contained in the Head Title subdivided into a series of consistently sized residential Lots, was lodged on 5 October 1912, between:
(a) 15 November 1911, when the land originally contained in the Head Title was acquired; and
(b) 18 November 1912, when the first Lot was transferred from the Head Title, being the land contained in Lot 76 on the Plan of Subdivision.
The Subject Land was originally known as Lot 155 on the Plan of Subdivision.
Between November 1912 and the Head Title’s cancellation in favour of the Great Great Grandparent Title in July 1924, numerous Lots on the Plan of Subdivision were subject to individual transfers from the Head Title, thus reducing the overall size of the estate.
The Covenant, contained in Instrument of Transfer IT1159026, was signed on 29 March 1924.
At this time, only the land to be transferred to the Great Great Grandparent Title remained in the Head Title.
The Great Great Grandparent Title
The land in the Great Great Grandparent Title was created pursuant to Instrument of Transfer IT1159026, which contains the Covenant, on 4 July 1924. The land in the Great Great Grandparent Title was all the land remaining untransferred in the Head Title at this time, including the Subject Land. This transfer of land into the Great Great Grandparent Title resulted in the cancellation of the Head Title.
Edward Manifold, John Manifold, Edward Walford Manifold, William Kinross Mackinnon and Leland James Greene were the proprietors of the remaining land in the Head Title.
William Forrester Volum, the covenantor, became the sole proprietor of the land contained in the Great Great Grandparent Title.
Part of the land in the Great Great Grandparent Title was subject to the Covenant, which was described as an encumbrance on the face of the title.
Between July 1924 and July 1926, further Lots were transferred from the Great Great Grandparent Title. The remainder of the estate was contained in the single title.
The Great Great Grandparent Title was eventually cancelled in 2018 by way of Dealing AR068471H.
The Great Grandparent Title
The Great Grandparent Title was created pursuant to Instrument of Transfer 1275089 on 12 July 1926, following the transfer of land from William Forrester Volum to Thomas Michael Burke.
As set out in Instrument of Transfer 1275089, the land transferred to the Great Grandparent Title still contained a significant number of Lots in the Plan of Subdivision, including the Subject Land.
The Covenant is listed as an encumbrance on both Instrument of Transfer 1275089 and the Great Grandparent Title.
However, it is worth noting that the burden of the Covenant is expressed in these documents as being for all Lots on the Plan of Subdivision, which is in slightly different terms to the burden as expressed in the Covenant itself.
The remaining land in the estate was transferred from the Great Grandparent Title between 1926 and 1948, before the Great Grandparent Title was eventually cancelled on 26 October 1970.
The Grandparent Title
The Grandparent Title was created pursuant to Instrument of Transfer 1438107 on 21 November 1929, following the transfer of Lots 154 and 155 from Thomas Michael Burke to Mary Alice Langtry.
The Covenant is listed as an encumbrance on both Instrument of Transfer 1438107 and the Grandparent Title.
The Grandparent Title was cancelled following the transfer of Lot 155 to Alfred Stanley, as set out below.
The Parent Title
The Parent Title was created pursuant to Instrument of Transfer 1905561 on 20 January 1944, when Lot 155 was transferred from Mary Alice Langtry to Alfred Stanley.
The Covenant is expressly listed as an encumbrance on both Instrument of Transfer 1905561 and on the Parent Title.
The Subject Land
The Subject Land was created pursuant to Instrument R525187T on 3 September 1991.
The Covenant is referred to indirectly on Instrument R525187T and more directly on the certificate of title to the Subject Land.
The Covenant
As noted above, the Covenant is contained in Instrument of Transfer IT1159026 which was signed on 29 March 1924 and registered on 4 July 1924, and is noted on the certificate of title for the Subject Land.
The Covenant restricts the construction of more than one house or shop, and any necessary accompanying outhouses, with such house or shop to have a street frontage and area of not less than that shown on the Plan of Subdivision:
…will not at any time erect or build or cause or suffer to be erected or built on any one of the lots on the said Plan of Subdivision hereby transferred except as aforesaid more than one house or shop with respective necessary outhouses AND FURTHER that the land to be enclosed with such house or shop with respective necessary outhouses shall have a frontage of not less than the frontage and an area of not less than the area shown on the said Plan of Subdivision in connection with each Lot… (emphasis added)
The original covenanting parties appear to be:
(a) William Forrester Volum (‘Covenantor’); and
(b) Edward Manifold, John Manifold, Edward Manifold, William Kinross Mackinnon and Leland James Greene (‘Covenantees’).
Burden
The Covenant states that the land to be burdened is “the land hereby transferred”, which is “the land now comprised in Certificate of Title Volume 3543 Folio 461”, being the Head Title:
DOTH HEREBY TRANSFER to the said William Forrester Volum All our and each of our estate and interest in ALL THAT piece of land being those parts of Portions Four Five Six and Seven of Section Nine at Geelong West Parish of Moorpanyal County of Grant and being the land now comprised in Certificate of Title Volume 3543 Folio 708461 … and that the burden of this covenant shall be annexed to and run at law and in equity with the land hereby transferred except as afore said…
In other words, the Covenant purports to burden the land remaining untransferred in the Head Title at the relevant time.
This form of wording is unconventional, in that rather than identifying the new certificate of title to be issued as the burdened land, it identifies the title to be cancelled.
Benefit
The Covenant describes the benefit as being for all the Lots in the Plan of Subdivision, other than Lots 1, 34–36, 39–48, 50–68, 75–76, 80, 85–87, 98–99, 100–101, 184–186 and 342 (‘Benefitting Land’):
…DOTH HEREBY TRANSFER to the said William Forrester Volum All our and each of our estate and interest in ALL THAT piece of land being those parts of Portions Four Five Six and Seven of Section Nine at Geelong West Parish of Moorpanyal County of Grant and being the land now comprised in Certificate of Title Volume 3543 Folio 708461 AND the said William Forrester Volum with the intent that the benefit of the covenant shall be attached to and run at law and in equity with every Lot on the Plan of Subdivision lodged in Office of Titles Number 5875 other than Lots One Thirty-four Thirty-five Thirty-six Thirty-nine to Forty-eight (both inclusive) Fifty to Sixty-eight (both inclusive) Seventy-five Seventy-six Eighty Eighty-five Eighty-six Eighty-seven Ninety-eight Ninety-nine One hundred One hundred and one One hundred and eighty-four One hundred and eighty-five One hundred and eighty-six and Three hundred and forty-two… (emphasis added)
There is no obvious correlation between the Lots excluded from the benefit of the Covenant and those transferred out of the Head Title prior to the Covenant being signed.
For instance, the Covenant excludes Lot 1 and Lot 34 on the Plan of Subdivision from the benefit of the Covenant, however:
(a) Lot 1 was transferred pursuant to Instrument of Transfer IT1159026 to the Great Great Grandparent Title; while
(b) Lot 34 was separately transferred pursuant to Instrument of Transfer 757946 on 20 August 1914.
Existence of a building scheme?
For reasons which I will later explain, it is necessary to consider whether a building scheme affects the Subject Land.
In the present case, there is no building scheme listed on the:
(a) certificate of title to the Subject Land;
(b) Parent Title;
(c) Title Plan TP94451X; or
(d) Covenant.
However, the Head Title does contain a ‘note’ that all the land on the Plan of Subdivision, except for those Lots specified, is transferred subject to a building scheme:
Importantly, there is no further notification of a building scheme on the:
(a) Great Great Grandparent Title;
(b) Great Grandparent Title;
(c) Grandparent Title;
(d) Parent Title; or
(e) Plan of Subdivision.
Previous decisions of the Court in respect of the Covenant
Annexed to the Covenant itself is a series of orders and similar court documents under which previously burdened Lots in the Plan of Subdivision have either had the Covenant discharged or modified via applications to this Court pursuant to s 84 of the Act.
These additional orders of the Court are provided as part of the Covenant document and a table summarising the reasoning behind the Court’s orders is set out in the Rath Affidavit.
In summary, 26 other Lots on the Plan of Subdivision[3] have had the Covenant modified or removed on the following bases:
[3]These are Lots 2, 5, 97, 108, 111, 120, 125, 132, 141, 143, 169, 193, 196, 206, 207, 208, 210, 213, 215, 216, 217, 231, 240, 283, 289, 341, 343, and 350: Rath Affidavit.
(a) for six Lots, the Court found that the Covenant does not affect the land as “no person other than Transferors at the time were entitled to enforce the benefit”, or “no person[s] [are] entitled to the benefit”;
(b) for three Lots, the Court only varied the Covenant but did not remove it;
(c) for 17 Lots, the Court removed the Covenant on the basis that it does not affect the land, however the plaintiff’s solicitors have been unable to identify or locate any reasoning as to why the Covenant was removed in these instances.
Nonetheless, the plaintiff’s solicitors have obtained further documentation in relation to certain previous decisions of the Court, which Lots are included in the 26 Lots referred to in the preceding paragraph. Those decisions are as follows:
(a) No. G763694, registering the order of the Court dated 10 June 1974, where Kendall Edward Case and Betty Florence Case were applicants, related to the land known as Lot 213 on Plan of Subdivision 5875 (‘Case Application’);
(b) No. G21244, registering the order of the Court dated 18 December 1975, where Clinton Constructions Pty Ltd was applicant, related to the land known as Lot 343 on Plan of Subdivision 5875 (‘Clinton Application’); and
(c) No. J695984, registering the order of the Court dated 28 September 1981, where Ronald Douglas Riddle and Nita Elizabeth Riddle were applicants, related to the land known as Lot 231 on Plan of Subdivision 5875 (‘Riddle Application’).
Case Application
Kendall Edward Case and Betty Florence Case applied to the Court for the Covenant to be discharged from Lot 213 on Plan of Subdivision LP5875.
An affidavit of Kendall Edward Case and Betty Florence Case, dated 11 April 1974, stated that:
(a) because Instrument of Transfer 1159026 affected the transfer of all remaining land in the Head Title (and therefore all remaining land owned by the Covenantees);
(b) no land was thus retained by the Covenantees upon creation of the Covenant; and
(c) thus, no land has the benefit of the Covenant:
6.BY the said Instrument of Transfer Number 1159026 all the lots remaining untransferred in the said Plan of Subdivision 5875 were transferred to the transferee under the said transfer and no land was retained by the transferors to have the benefit of the said covenant.
Consequently, Master Jacobs declared on 10 June 1974 that the covenant did not affect the land in Lot 213, stating inter alia that upon reading the affidavit of Kendall Edward Case and Betty Florence Case, he was satisfied that there was no person entitled to the benefit of the Covenant insofar as it affected Lot 231:
…IT APPEARING from the said affidavit and exhibit the said Instrument of Transfer and the said file that there is no person entitled to the benefit of the restrictive covenant contained in Instrument of Transfer Number 1159026…
Clinton Application
Clinton Constructions Pty Ltd applied to the Court for the Covenant to be discharged from Lot 343 on Plan of Subdivision LP5875.
An affidavit of Trevor Young, Managing Director of Clinton Constructions Pty Ltd, dated 7 November 1975, stated that:
(a) because Instrument of Transfer 1159026 affected the transfer of all remaining land in the Head Title (and therefore all remaining land owned by the Covenantees);
(b) no land was thus retained by the Covenantees upon creation of the Covenant; and
(c) the Covenant was ineffective as to each Lot thereby transferred:
7.I verily believe and I have been informed by my solicitors, Messrs. Harwood & Pincott of 77 Moorabool Street, Geelong that the said Transfer No. 1159026 was a Transfer of all the remaining land held by the said Transferor to the said William Forester Volum of any description and that on the 4th of July, 1924 the said Transferee was registered as the proprietor of the said land. As no land was retained by the Vendors of the said Lots the covenant was totally ineffective as to each of the Lots thereby transferred…
Consequently, Master Jacobs declared that the covenant did not affect the land in Lot 343, stating inter alia that upon reading the affidavit of Trevor Young, he was satisfied that the covenant was not enforceable by anyone other than the Covenantees:
upon reading…the affidavit of Trevor Winston Young…satisfied that no persons other than the Transferors named in the said Instrument of Transfer were at any time entitled to enforce the covenant that is contained therein and that the said Transferors are not now entitled to any estate or interest in the land…
Riddle Application
Ronald Douglas Riddle and Nita Elizabeth Riddle applied to the Court for the Covenant to be discharged from Lot 231 on Plan of Subdivision LP5875.
An affidavit of Ronald Douglas Riddle and Nita Elizabeth Riddle, dated 18 August 1981, stated that:
(a) because Instrument of Transfer 1159026 affected the transfer of all remaining land in the Head Title (and therefore all remaining land owned by the Covenantees);
(b) no land was thus retained by the Covenantees upon creation of the Covenant; and
(c) thus, no land has the benefit of the Covenant:
6.BY the said Instrument of Transfer Number 1159026 all the lots remaining untransferred in the said Plan of Subdivision 5875 were transferred to the transferee under the said transfer and no land was retained by the transferors to have the benefit of the said covenant.
Consequently, Master Brett declared on 28 September 1981 that that the Covenant did not affect the land in Lot 231, stating inter alia that upon reading the affidavit of Ronald Douglas Riddle and Nita Elizabeth Riddle, he was satisfied that Lot 231 was not affected by the Covenant:
…upon reading the Affidavit of Ronald Douglas Riddle and Nita Elizabeth Riddle and the exhibits therein referred to and the Affidavit of Paul Bernard Jens and the exhibits therein referred to I DECLARE that Lot 231 on Plan of Subdivision 5875…is not affected by the restrictive covenant contained in the said Instrument of Transfer numbered 1159026…
Applicable principles
I have previously summarised the applicable law and principles in the context of a similar application, albeit in respect of a different covenant, in Re Ferraro.[4] There is no need for me to set that out here, however I adopt the summary as set out in paragraphs 28, 30 to 32, and 35 to 40 of that decision.
[4][2021] VSC 166.
In particular, it is well established that a restrictive covenant only runs with the land to burden a successor in title if the following three elements are all met:[5]
[5]See Adrian J Bradbrook and M A Neave, Easements and Restrictive Covenants in Australia (Butterworths, 2nd ed, 2000), [1419]; Beman Pty Ltd v Boroondara City Council [2017] VSC 207, [18].
(a) the covenant must be negative;
(b) the burden of the covenant must be intended to run with the land; and
(c) the covenant must be given for the benefit of land, not simply for the benefit of the covenantee, and the covenant must touch and concern that land.
Consideration
Should the Court proceed to hear and determine the application on an ex parte basis?
I have considered whether the plaintiff should be required to give notice of the proceeding to any person who may wish to argue against it. If the application is to proceed ex parte then there is no contradictor to the plaintiff’s submissions, yet if the declaration is made, then by virtue of s 84(4) of the Act it will be binding on those persons who may have wished to contend that they were beneficiaries of the restrictions.
In order to form a view as to this, it was necessary for me to ascertain whether any land is identified as benefited by the Covenant. My reasons for concluding that no land is identified as being benefited by the Covenant are set out in the next section of these reasons.
After considering the evidence and the plaintiff’s submissions, like Lansdowne AsJ in Re Hunt,[6] I consider the plaintiff’s case to be such a clear case “that it is neither necessary nor appropriate to seek to elicit any contradictor”.[7] As her Honour stated:
… 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. …
[6]Re Hunt [2017] VSC 779 (‘Re Hunt’).
[7]Re Hunt, [14].
I share her Honour’s observation that applicants in other proceedings should not necessarily assume that applications for a declaration of the type sought by the plaintiff in this case will necessarily proceed ex parte, as it remains possible that potential beneficiaries may be put on notice of applications for analogous declarations as to enforceability of a covenant.[8]
[8]Re Hunt, [14].
In the exceptional circumstances of this case, however, I am satisfied that it is appropriate to determine the application without a contradictor.
Is there any land identified as benefiting from the Covenants?
The Covenant fails for a lack of privity and is not saved by the existence of a building scheme
The plaintiff submits that the Covenant fails for a lack of privity and is not saved by the existence of a building scheme. The plaintiff’s position is explained in the following paragraphs.
For a restrictive covenant to run with the land, a nexus of privity must exist between the original covenantees and the land to which the benefit is to attach. In other words, the benefit of a covenant can only run with land which is owned by the covenantees at the time the covenant is signed:[9]
The covenant clearly states the land to which the benefit of the restriction is intended to be appurtenant, and the only question is whether the benefit is in law so appurtenant, i.e. whether the restriction is validly created. There is ample authority that a vendor of land in respect of which he takes a restrictive covenant cannot, by the covenant, annex the restriction to land which he does not own, unless the covenant is given as part of a building scheme or development scheme...In the present case, the vendor purported to annex the benefit of the covenant to the whole of the land comprised in deposited plan No. 16,724, other than the land transferred.
[9]Re Mack and the Conveyancing Act [1975] 2 NSWLR 623 (‘Re Mack’), 626.
As detailed above, Instrument of Transfer IT1159026, which contains the Covenant, affected the transfer of all remaining land in the Head Title, and therefore the transfer of all remaining land in the subdivision owned by the Covenantees.
The practical effect of this is that no land was retained by the Covenantees upon the creation of the Covenant, and therefore there is no land that has the benefit.
The Victorian case of Xu v Natarelli[10] affirmed the need for privity between the covenantee and the benefitting land, and where this privity fails, so too does the benefit:[11]
However, contractual principles of privity exclude the registered proprietors of the lots transferred out of the parent title before the restrictive covenant was made. Equity does not extend the benefit of the covenant to them although it does extend the benefit to proprietors (and their successors in title) of the lots transferred out of the parent title, that is subdivided and sold, after the restrictive covenant was made.
[10][2018] VSC 759 (‘Xu v Natarelli’).
[11]Xu v Natarelli, [105].
Importantly, a breach of privity may be rectified through the establishment of a building scheme. The onus for negativing the existence of a building scheme rests with the plaintiff, being the party seeking a declaration to invalidate the Covenant.[12] As set out by Derham AsJ in Randell v Uhl,[13] under the Torrens system of land registration in Victoria, a building scheme will only be valid where it is discoverable on the face of the certificate of title to the land or on the documents referred to thereon:[14]
the result is that there is nothing in a search of the title to the plaintiffs’ land which either directly, or by reference to some instrument or other document referred to in a search of the title, indicates the existence of the scheme;
the reasoning of Hargrave J does not mean that it is enough that some other document, not referred to in a search of the title to the plaintiffs’ vendors’ land, contains notice of the building scheme. The fact that a wider search of the Register might reveal the Head Title is not sufficient. A wider search of the Register does not accord with the reasoning and logic of Dennerstein, from which Hargrave J drew the statement of conclusion to which I have referred above…Nor is a wider search in accordance with conveyancing practice or what I would expect a purchaser of land in Victoria to undertake by way of searches.
If it were sufficient notice that the Head Title in this case bears the notification of a building scheme, it would require a person interested in purchasing the Land to search the Register further than the title search indicated and to go back to the Head Title and the original, or first edition, of the Subdivision. That would render conveyancing a hazardous and cumbersome operation beyond what is reasonable to expect.
[12]Re Mack, 626.
[13][2019] VSC 668 (‘Randell’).
[14]Randell, [82(j)]-[82(l)].
The relevant head title in Randell also contained a similar undated notation of a building scheme to that described in paragraph 47 above for the Head Title in this case.
In Randell, Derham AsJ ultimately held that the notation was insufficient to bring notice of the building scheme to the attention of a potential purchaser of the land:[15]
In summary, I am satisfied that a building scheme was established but the notification of it was not sufficient to give notice of it to the plaintiffs because a search of the title of the Land by the plaintiffs did not, and would not, reveal the existence of the scheme either directly, or indirectly by reference to any instrument referred to in the search of the title.
[15]Randell, [83].
The plaintiff submits and I accept that it is therefore unlikely that the Subject Land will be considered subject to an effective building scheme.
Based on the Court’s decision in Randell, which requires notice of a building scheme to be discoverable on the face of the certificate of title to the land or documents referenced thereon, the notation of a building scheme on the Head Title is unlikely to be regarded as effective notice and therefore unlikely to be binding on the plaintiff.
There are no persons capable of enforcing the benefit of the Covenant other than the Covenantees
The effect of the analysis in the preceding section is that no land has the benefit of the Covenant and there are therefore no persons, other than the original Covenantees, capable of enforcing the restrictions.
As set out above, there was no land remaining in the Plan of Subdivision at the time of the transfer creating the Covenant, aside from the Subject Land and the balance of the burdened Lots. That is, all Lots apart from the burdened land had been transferred out of the Head Title prior to the Covenant being signed.
Due to this established lack of privity between the Covenantees and the land purported to take the benefit, there is no land that takes the benefit of the Covenant.
For this reason, the Covenant can only be said to have applied personally to the original covenanting parties and that now, given the passage of time since the Covenant was signed, there is now no person capable of enforcing the benefit.
The Covenant does not affect the Subject Land
It follows that the third element required in order for the Covenant to run with the Subject Land and burden the plaintiff, being a successor in title, is not present. This is because the Covenant has not been given for the benefit of land and does not touch or concern that land.[16]
[16]See paragraph 63 above.
As the benefit of the Covenant is unenforceable by any persons other than the Covenantees, it can no longer be said to affect the Subject Land.
Accordingly, the declaration sought by the plaintiff ought be made.
Obsolescence application
The first limb of s 84(1)(a) of the Act provides the Court with the power to modify or discharge a restrictive covenant on the basis that it is obsolete:
(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 …
The plaintiff submits that with respect to s 84(1)(a), if the Court is of the view that the Covenant is ineffective and therefore no longer has any work to do, it would be appropriate to issue an order for its removal from title to the Subject Land.
I agree with this submission and will therefore make such an order.
Conclusion
Accordingly, and for the reasons set out above, the proceeding may be determined without notice to any person who may be a contradictor. Further, the relief sought by the plaintiff will be granted.
In so finding, I have not expressed any view as to the plaintiff’s proposed development of the Subject Land. This is not an application made pursuant to s 84(1)(c) of the Act, where considerations of the proposal are relevant to determining whether a modification or discharge of a covenant will cause substantial injury to a person with the benefit of the restriction. The suitability of the plaintiff’s proposed development is a matter for the Council, following the usual town planning processes and considerations.
Given the research and analysis conducted by the plaintiff’s solicitors and counsel, and the fact that the Covenant has been the subject of numerous applications to the Court over the years where it has been removed or modified in respect of 26 other Lots on the Plan of Subdivision but where no reasons appear to be available other than through inspection of archived files, it seems to me that it is of some utility for the Court to publish its reasons in respect of this proceeding.
The plaintiff is requested to provide my Chambers with a proposed form of order to give effect to this judgment.
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