Re Prime Lands (Aust) Pty Ltd

Case •

[2022] VSC 545

•

16 September 2022
IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE
COMMON LAW DIVISION

PROPERTY LIST

S ECI 2022 02217

IN THE MATTER of the restrictive covenant contained in Instrument of Transfer AR902375G registered in the Register Book at the Office of Titles burdening the Land known as 90 Greendale Boulevard, Pakenham, more particularly described in Certificate of Title Volume 12051 Folio 810, by:

PRIME LANDS (AUST) PTY LTD (ACN 630 486 743) Plaintiff

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JUDGE:

Matthews AsJ

WHERE HELD:

Melbourne

DATE OF HEARING:

11 August 2022

DATE OF JUDGMENT:

16 September 2022

CASE MAY BE CITED AS:

Re Prime Lands (Aust) Pty Ltd

MEDIUM NEUTRAL CITATION:

[2022] VSC 545

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REAL PROPERTY — Restrictive covenants — Application for rectification of a recording on the Register Book kept by the Registrar of Titles in respect of a covenant — Inclusion of covenant in instrument of transfer a result of a common mistake — Application granted — Transfer of Land Act 1958 (Vic), s 88(1C).

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APPEARANCES:

 Counsel Solicitors
For the Plaintiff Mr M D Townsend Marshalls & Dent & Wilmoth Lawyers

HER HONOUR:

Introduction

  1. The Plaintiff is the registered proprietor of the land known as 90 Greendale Boulevard, Pakenham in the State of Victoria, being the land otherwise known as Lot 1616 on Plan of Subdivision 804775F (‘Plan of Subdivision’); or the land more particularly described in Certificate of Title Volume 12051 Folio 810 (‘Land’).  

  1. The Plaintiff seeks, by way of originating motion filed 15 June 2022, orders pursuant to s 88(1C) of the Transfer of Land Act 1958 (Vic) (‘TLA’) to rectify an error on the register (‘Rectification Application’). In the alternative, the Plaintiff seeks orders pursuant to s 84(1)(c) of the Property Law Act 1958 (Vic) (‘PLA’) that the registered covenant affecting the Land be discharged (‘Discharge Application’).

  1. In support of the Rectification Application, the Plaintiff relies upon the following materials:

(a)   affidavit of Chatura Hemantha Perera Jayawardena (‘Jayawardena’) sworn 23 March 2022 (‘Jayawardena Affidavit’).  Jayawardena is a director of the Plaintiff;

(b)  affidavit of Jacob Chrapot (‘Chrapot’) sworn 18 May 2022 (‘Chrapot Affidavit’).  Chrapot is the sole director of Tezek Pty Ltd (‘Tezek’);

(c)   affidavit of Kieran Patrick Best (‘Best’) affirmed 9 August 2022.  Best is a solicitor employed by Marshalls & Dent & Wilmoth Lawyers, solicitors for the Plaintiff; and

(d)  written outline of submissions dated 10 August 2022.

  1. This proceeding was listed before me on 11 August 2022 for its first return.  On that date, after hearing from Plaintiff’s Counsel, I indicated that the Court would consider the Rectification Application on the papers[1] and that if the Rectification Application was unsuccessful, then the proceeding would be listed for further directions before me so as to ensure the efficient conduct of the Discharge Application.

    [1]Pursuant to r 77.05 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) and by order of McDonald J on 24 August 2022, the Rectification Application was referred to me for hearing and determination.

  1. For the reasons which follow, the Rectification Application will be granted.  It is therefore not necessary for me to consider the Discharge Application.

Evidence

  1. In late September or early October 2017, Jayawardena received a telephone call from Ian Harris of KR Peters Pty Ltd (‘Agency’), a real estate agency with which Jayawardena was acquainted, in which Mr Harris told Jayawardena about the Land and said it was a large vacant block capable of being subdivided and developed.  Jayawardena expressed interest and Mr Harris sent him a copy of the contract of sale and s 32 vendor’s statement for his review.[2]

    [2]Jayawardena Affidavit, [3]–[5].

  1. On 7 October 2017, Jayawardena and his business partner, Sujith Chandimal Cooray (‘Cooray’) entered into a contract for the purchase of the Land from Tezek (‘Contract of Sale’).[3]  The Land was (and still is) an undeveloped vacant block of land of approximately 734m2, and forms part of the Arden Pakenham estate (‘Estate’).[4]  The Agency was the selling agent responsible for the marketing and sale of lots within the Estate.[5]

    [3]Ibid, [6].

    [4]Ibid, [7].

    [5]Chrapot Affidavit, [4].

  1. Prior to settlement under the Contract of Sale, Jayawardena and Cooray nominated the Plaintiff as purchaser under the Contract of Sale.[6]

    [6]Jayawardena Affidavit, [12].  That nomination was accepted by Tezek: Chrapot Affidavit, [11].

  1. Special Condition 21 of the Contract provided as follows:[7] 

If the area of the lot sold is less than 700m2

21.1The Purchaser will include in the Transfer of Land a Covenant in the form annexed to the Vendor’s Statement.

21.2The Purchaser must not do anything before taking a Transfer of the land that would not be allowed by the covenant.

21.3The Vendor reserves the right by law to alter or waive all or any of such stipulations to any lot or lots not sold and the Vendor is the only person whose consent to a release, variation or modification of such Covenant is stipulated by law.[8]

[7]Ibid, [8].

[8]Exhibit CJ1 to the Jayawardena Affidavit.

  1. Annexed to the Contract of Sale (rather than the Vendor’s Statement, as expressed in Special Condition 21) is a document titled ‘Restrictive Covenants to be Incorporated in the Transfer of Land’ (‘Annexure’).  This contained a number of provisions.[9]  Relevantly, it included that the transferee:

shall not at any time on the burdened land or any part or parts thereof: (a) erect, cause or permit to be erected or remain in the burdened land more than one dwelling which expression shall include a unit, flat or apartment; …[10]

[9]Jayawardena Affidavit, [9].

[10]Exhibit CJ1 to the Jayawardena Affidavit.

  1. Chrapot deposes that most of the lots sold as part of the Estate were less than 700m2, and that Special Condition 21 and the Annexure were included in the standard off‑the‑plan contracts so as to protect the amenity of the Estate.[11]  He says that a small number of the lots forming part of the Estate were larger than 700m2 and were marketed by the Agency on the express basis that the covenant would not apply, and the Land was one such lot.[12]

    [11]Chrapot Affidavit, [5]–[6].

    [12]Ibid, [7]–[8].

  1. Jayawardena deposes that on the basis of his conversations with Mr Harris and the wording of Special Condition 21.1, he understood that the Land would not be subject to this covenant as its area exceeded 700m2.  He says that he and Cooray entered into the Contract of Sale on that understanding and that the Land was capable of being subdivided and developed, subject to council approval.  He deposes that had he thought the Land would be subject to this covenant, he would not have entered into the Contract of Sale as “my business practice is to purchase land that can be developed into multi-dwelling subdivisions”.[13]

    [13]Jayawardena Affidavit, [10].

  1. Chrapot deposes that although the Contract of Sale contained Special Condition 21 and the Annexure, the covenant was not applicable to the Land as it is greater than 700m2 in area.[14]

    [14]Chrapot Affidavit, [10].

  1. The Plaintiff’s conveyancer, Tailored Conveyancing Services (‘Tailored’), prepared a transfer of land form that was uploaded onto the PEXA platform and digitally signed by Chrapot as legal practitioner on behalf of Tezek on 30 January 2019 and Rebecca Joan Grey of Tailored on behalf of the Plaintiff on 5 February 2019 (‘Transfer’).[15] 

    [15]Jayawardena Affidavit, [14]; Chrapot Affidavit, [14].

  1. The Transfer provided that “the transferor transfers to the transferee their estate and/or interest in the land specified for the consideration, subject to any restrictive covenant set out or referred to in this transfer.”[16]  The Transfer included reference to a covenant contained in MCP: AA4729.[17]  The wording of the covenant in MCP: AA4729 is the same as that set out in paragraph 10 above.[18] 

    [16]Jayawardena Affidavit, [15]; Exhibit CJ1 to the Jayawardena Affidavit, pp 83–4.

    [17]Jayawardena Affidavit, [16]; Exhibit CJ1 to the Jayawardena Affidavit, pp 85–6.

    [18]Jayawardena Affidavit, [17].

  1. Specifically, the Transfer contained the following:[19]

[19]Ibid, [18].

  1. Therefore, the Transfer contains a restrictive covenant that, amongst other things, precludes more than one dwelling being erected on the Land (‘Covenant’).

  1. Jayawardena deposes that he believes the inclusion of the Covenant in the Transfer was a mistake.[20]  He says that the inclusion of the Covenant in the Transfer was not identified by the Plaintiff nor brought to his attention prior to settlement, and that to the best of his recollection, he did not see the Transfer prior to it being signed by Ms Grey and lodged by Tailored on behalf of the Plaintiff.[21] 

    [20]Ibid, [17].

    [21]Ibid, [19].

  1. Chrapot deposes that the Transfer contained a reference to the Covenant and that due to the significant number of transfers of land that he was executing for the settlements of the sale of lots within the Estate around January 2019:

when I signed the Transfer I either did not notice this reference or did not appreciate that the Transfer related to one of the lots that were greater than 700sqm in area and therefore should not be subject to the [Covenant].[22]

[22]Chrapot Affidavit, [15].

  1. Chrapot further deposes that the inclusion of the Covenant in the Transfer was a mistake and that the land should not be encumbered by the Covenant.  He states that he understands that the Plaintiff has, in this proceeding, sought to rectify the mistaken inclusion of the Covenant by seeking its removal from the Land, and that he endorses and supports the Rectification Application and the relief sought.[23]

    [23]Ibid, [16]–[18].

  1. Settlement under the Contract of Sale was effected on 6 February 2019, following which the Transfer was electronically lodged with the Registrar of Titles.  The Registrar subsequently recorded the Transfer naming the Plaintiff as registered proprietor on and from 6 February 2019, and the title contained a reference to the Land being affected by a covenant lodged in dealing AR902375G (being the Transfer).[24]

    [24]Jayawardena Affidavit, [20]–[21].

  1. Jayawardena deposes that the Plaintiff was not aware of the Covenant being recorded against the title to the Land until around August 2020, when the person it had engaged to prepare a proposed plan of subdivision seeking to subdivide the Land into two lots received correspondence from the local council to say that a planning permit for the proposed subdivision could not be issued due to the Covenant.[25] 

    [25]Ibid, [22]–[24].

Nature of the Rectification Application and applicable law

  1. By the Rectification Application, the Plaintiff seeks an order pursuant to s 88(1C) of the TLA to rectify an error on the Register Book (‘Register’) kept by the Registrar of Titles (‘Registrar’) under the TLA.

  1. Section 88(1C) of the TLA relevantly provides:

A recording on a folio of a restrictive covenant that was created in any way other than by a plan under the Subdivision Act 1988 may be amended or deleted by the Registrar under this section if the restrictive covenant is varied or released by—

(a)the agreement of all of the registered proprietors of the land affected by the covenant; or

(b)       an order of a court or VCAT.

  1. Section 103(1) of the TLA relevantly provides:

In any proceeding in a court relating to any land or any instrument or dealing in respect thereof if the court directs the Registrar to make any amendments to the Register or otherwise to do any act or make any recordings necessary to give effect to any judgment decree or order of the court the Registrar shall obey such direction.

  1. The Plaintiff seeks an order rectifying the inclusion of the Covenant in the Transfer as registered on the title to the Land in dealing AR902375G.  In particular, the order sought is as follows (‘Rectification Order’):

pursuant to section 88(1C) of the Transfer of Land Act 1958 (Vic) rectifying a mistake in the inclusion of the restrictive covenant contained in Instrument AA4729 in Instrument of Transfer AR902375G dated 19 March 2019 from Tezek Pty Ltd to the Plaintiff of the land described in Lot 1616 on Plan of Subdivision 804775F being the whole of the land described in Certificate of Title Volume 12051 Folio 810 and being the land situated at and known as 90 Greendale Boulevard, Pakenham in the State of Victoria by deleting all reference to the said restrictive covenant

  1. The Plaintiff also seeks an ancillary direction under s 103(1) of the TLA that the Registrar make any amendments to the Register to do any act or make any recordings necessary to give effect to the Rectification Order, should the Court grant the Rectification Application.

Plaintiff’s submissions

  1. The Plaintiff submits that this is a clear case of a mistake in the registration of a transfer of land.

  1. It contends that the Land was sold by Tezek and purchased by the Plaintiff on the basis that a covenant would not apply as the land size is greater than 700m2.  It relies on Jayawardena’s and Chrapot’s evidence in this regard.[26]  The Plaintiff also relies on the terms of the Contract of Sale, in particular Special Condition 21, to evidence the parties’ agreement that the covenant was only to apply if the area of the lot sold was less than 700m2.

    [26]See paragraphs 12 and 13 above.

  1. The Plaintiff submits that contrary to the agreement, the Covenant appears to have been inadvertently annexed to the Land.  The evidence from both parties to the Contract of Sale is that this as an error.[27]

    [27]See paragraphs 18 and 20 above.

  1. The Rectification Application is now made to correct that error, relying on the equitable doctrine of common mistake that arises where the parties to a contract have reached consensus ad idem but have both erroneously assumed some matter to be true.

  1. The Plaintiff submits that where parties fail to record their intentions accurately, a court exercising equitable jurisdiction may rectify the contractual document so that it reflects the true intentions of the parties.  As explained by Campbell JA in Franklins Pty Ltd v Metcash Trading Ltd:[28]

In considering whether to grant rectification of a written contract, equity does not use any of its own principles to decide what the terms of the contract are, or how they are construed – those matters are decided solely by the common law.  Rather, equity focuses on what it is unconscientious for a party to assert about the contract.  The rationale is that it is unconscientious for a party to a contract to seek to apply the contract inconsistently with what he or she knows to be the common intention of the parties at the time that the written contract was entered.  In other words, when a plaintiff succeeds in a claim for rectification, the plaintiff is found to have been justified in in effect saying to the defendant “you and I both knew, when we entered this contract, what our intention was concerning it, and you cannot in conscience now try to enforce the contract in accordance with its terms in a way that is inconsistent with our common intention.”

[28]Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407, [444].

  1. The Plaintiff submits that here, both parties intended at the point of entering into the Contract of Sale that the Land would not be subject to any restrictive covenant.

  1. The Plaintiff submits that similar circumstances arose in the statement of reasons of Mukhtar AsJ in Re Saliba.[29]

    [29]Order of Mukhtar AsJ in Alexander Ronald James Saliba and Ebony Vaher-Colenso (Supreme Court of Victoria, S CI 2017 04200, 24 November 2017) (Unreported).

  1. In that case, his Honour was presented with an application under s 84 of the PLA to remedy what was clearly an error in the registration of a restrictive covenant:

When the motion first came before this Court, I formed the view that despite the obvious good intentions or the perceived expedience of an application under s 84 of the Property Law Act, it was dubious. But to my mind, the ‘modification’ sought is not of the type or nature that comes within the purview of s 84. The predicament here was an error by common mistake in an instrument made between two parties which needs to be corrected, and should be of no concern to anyone else in the neighbourhood but the parties to the contract.[30]

[30]Ibid, [14].

  1. His Honour concluded that application under s 84 of the PLA was misconceived and that the better course was to treat the error as a common mistake:

I think what has occurred in this case is a paradigm example of a common mistake which would readily attract a court’s equitable jurisdiction under the doctrine of rectification. The court can discern from the transfer of land itself and the surrounding evidence that ‘something has gone wrong’ which cannot be cured by construction …[31]

[31]Ibid, [15].

  1. His Honour viewed the width of rectification as wide enough to apply to a transfer of land:

The relevant intention was manifested plainly in the special conditions of the contract of sale, as now confirmed, if that be necessary, by a director of the vendor.  The parties were in complete agreement about the word 'including' in the covenant, but by error the word 'excluding' was put in.  Although rectification is most commonly sought over agreements, the width of the remedy means that it may be applied to a variety of classes of documents, and I can see no reason why it would not apply to a transfer of land particularly as the transfer is a concomitant of an agreement to sell and buy land.[32]

[32]Ibid, [16].

  1. The Plaintiff submits that the situation in this case is similar to that in Re Saliba and that the Rectification Application should be granted.

Consideration

  1. I accept the Plaintiff’s submission that rectification is not confined to a contract and may be appropriate in respect of other instruments.  Like Mukhtar AsJ in Re Saliba, I consider that where a transfer of land contains a mistake, in the sense of a failure to accord with the common intention of the parties to that transfer, it is susceptible to rectification and that the instrument of Transfer is “a concomitant of an agreement to sell and buy land”[33] and provides a clear nexus to the intention of the parties as evinced in the Contract of Sale.  However, it is not necessarily the case that the instrument sought to be rectified be one of a suite of documents giving effect to the contract.

    [33]Ibid.

  1. For rectification on the grounds of a common mistake, that is, that the document does not reflect the common intention of the parties, the party seeking rectification must show a common intention continuing down to the execution of the document.[34]  While it is not necessary to show a prior agreement amounting to a contract provided that a continuing common intention has been established,[35] in this instance, this is what we have.  Here, the Transfer has not given effect to the common intention of the parties, that common intention being manifested in the Contract of Sale.[36] 

    [34]Joscelyne v Nissen [1970] 2 QB 86; Pukallus v Cameron (1982) 180 CLR 447, 452, 456; Simic v New South Wales Land and Housing Corp (2016) 260 CLR 85, [103] (‘Simic’).

    [35]Shipley Urban District Council v Bradford Corporation [1936] Ch 375; Crane v Hegeman-Harris Co Inc [1971] 1 WLR 1390; Slee v Warke (1949) 86 CLR 271, 280; Simic, [117].

    [36]Winks v WH Heck & Sons Pty Ltd [1986] 1 Qd R 226.

  1. I consider that it is appropriate to grant the Rectification Application, for the reasons which follow.

  1. The evidence establishes that the common intention of the parties was that there be no restrictive covenant applying to the Land.  This is evident from a plain ordinary reading of the express terms of the Contract of Sale and as is apparent from Special Condition 21.  It is also consistent with the evidence from Jayawardena and Chrapot.

  1. Therefore, the evidence also establishes that the inclusion of the Covenant in the Transfer, as executed and subsequently registered on the title to the Land, is contrary to the common intention of the parties.

  1. The Transfer ought not have contained the reference to the Covenant and the Covenant ought not be annexed to and burden the Land.

  1. Accordingly, the Transfer ought be rectified to remove the reference to the Covenant, and the title to the Land ought be rectified to remove the reference to the Land being affected by a covenant lodged in dealing AR902375G.

Conclusion

  1. The Plaintiff is directed to provide a draft form of orders to my Chambers to give effect to this judgment. An ancillary order pursuant to s 103 of the TLA may be included if the Plaintiff is so advised.

  1. The Rectification Application having been granted, there is no need for me to consider the Discharge Application, either in these reasons or in the future.


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