Re Pulitano Properties Pty Ltd
[2023] VSC 404
•12 July 2023
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S ECI 2023 00886
IN THE MATTER of an application under s 84(2)(b) of the Property Law Act 1958 (Vic)
and
IN THE MATTER OF restrictive covenant contained in Transfer of Land No. 763976 registered in the Register Book at the Office of Titles and imposed upon part of the land known as 14 Monbulk Road, Belgrave, more specifically described in Certificate of Title Volume 04596 Folio 151 kept by the Registrar of Titles under the Transfer of Land Act 1958 (Vic)
and
IN THE MATTER OF restrictive covenant contained in Transfer of Land No. 815801 registered in the Register Book at the Office of Titles and imposed upon part of the land known as 2 - 12 Monbulk Road, Belgrave, more specifically described in Certificate of Title Volume 04013 Folio 524 kept by the Registrar of Titles under the Transfer of Land Act 1958 (Vic)
and
IN THE MATTER OF restrictive covenant contained in Transfer of Land No. 931502 registered in the Register Book at the Office of Titles and imposed upon part of the land known as 2 - 12 Monbulk Road, Belgrave, more specifically described in Certificate of Title Volume 04457 Folio 364 kept by the Registrar of Titles under the Transfer of Land Act 1958 (Vic) by:
| PULITANO PROPERTIES PTY LTD | Plaintiff |
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JUDGE: | Matthews J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 22 June 2023 |
DATE OF JUDGMENT: | 12 July 2023 |
CASE MAY BE CITED AS: | Re Pulitano Properties Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2023] VSC 404 |
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REAL PROPERTY – Restrictive covenants – Application for declaration that covenants were discharged – Property Law Act 1958 (Vic), s 84(2)(b) – Crest Nicholson Residential (South) Ltd v McAllister [2003] 1 All ER 46 – 196 Hawthorn Road Pty Ltd v Duszniak [2020] VSC 235 – Lahanis v Livesay [2021] VSC 29 – Subject land is sterilised – Application granted and covenants discharged.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr A Finanzio SC and Mr R Watters | Planning & Property Partners Pty Ltd |
TABLE OF CONTENTS
Introduction........................................................................................................................................ 1
Background......................................................................................................................................... 1
The Subject Land and its history................................................................................................. 1
The covenants................................................................................................................................ 2
Brief procedural history............................................................................................................... 3
Evidence............................................................................................................................................... 5
Applicable law and principles........................................................................................................ 7
The Plaintiff’s submissions............................................................................................................. 8
Plaintiff’s submissions regarding the Prohibition.................................................................... 8
Plaintiff’s submissions regarding the Dispensing Power..................................................... 11
Plaintiff’s submissions regarding the consequences of accepting that the Covenants have the effect of preventing any further building on the Subject Land............................................. 13
Plaintiff’s submission regarding any discretionary considerations.................................... 15
Consideration.................................................................................................................................... 16
Conclusion......................................................................................................................................... 18
HER HONOUR:
Introduction
The Plaintiff is the registered proprietor of the land located at 2-12 and 14 Monbulk Road Belgrave (‘Subject Land’), which comprises several parcels of land, which I shall describe later. Each such parcel is subject to a restrictive covenant – there are three such covenants, as I shall explain.
By originating motion filed 8 March 2023 (amended 28 March 2023), the Plaintiff applies pursuant to s 84(2)(b) of the Property Law Act 1958 (Vic) (‘PLA’) for declarations that, upon their true construction, the three covenants were discharged upon the death of Ms Elizabeth Annie Lipscomb (‘Ms Lipscomb’).
The application is supported by the affidavits of Tyrone Emmet Rath affirmed 8 March 2023 (‘Rath Affidavit’) and 23 May 2023 (‘Service Affidavit’). Mr Rath is a solicitor at Planning & Property Partners Pty Ltd, the solicitors for the Plaintiff.
The Plaintiff also relies on the written submissions from its counsel dated 13 June 2023 and the oral submissions made at the hearing.
For the reasons which follow, the application will be granted.
Background
The Subject Land and its history
As mentioned above, the Subject Land is comprised of several parcels including the land contained in the following certificates of title:
(a) Volume 04596 Folio 151, known as part of 14 Monbulk Road, also known as Lot 7 (‘Lot 7’) on Plan of Subdivision 006470 (‘Plan of Subdivision’);
(b) Volume 04013 Folio 523, known as part of 2 – 12 Monbulk Road, also known as Lot 6 on the Plan of Subdivision (‘Lot 6’); and
(c) Volume 04457 Folio 364, also known as part of 2 – 12 Monbulk Road, also known as Lot 4 on the Plan of Subdivision (‘Lot 4’).
Lots 4, 6 and 7 were originally part of a larger parcel of land, being the land described in certificate of title volume 03826 folio 094 (‘Parent Title’). The land described in the Parent Title was subdivided and gradually sold or transferred out of the Parent Title between 1914 and 1946 in accordance with the Plan of Subdivision.[1]
[1]Rath Affidavit, [7]-[8].
The covenants
Each of the parcels comprising the Subject Land is subject to a restrictive covenant.[2]
[2]Rath Affidavit, [9]; exhibit bundle pp 17-19.
In respect of that part of the Subject Land contained in Lot 7, the covenant is contained in instrument of transfer number 763976 (‘Covenant 763976’), registered on 13 November 1914. Relevantly, it provides as follows:[3]
… AND the said Hugh Stanley McLaren his heirs, executors, administrators and transferees hereby covenant with the said Elizabeth Annie Lipscomb and her heirs, executors, administrators and transferees registered proprietor or proprietors for the time being of lots 3, 4, 5, 6, 8, 11, 12 and 13 on the said Plan of Subdivision that the said Hugh Stanley McLaren his heirs, executors, administrators and transferees shall not erect on said Lot Seven any building (whether shop or dwelling house) except in accordance with a plan thereof which shall first have been submitted to and approved by the said Elizabeth Annie Lipscomb and that no such building shall cost less than Two hundred pounds exclusive of architects fees and it is intended that this covenant shall be set forth as an encumbrance on each and every Certificate of Title to be hereafter issued in respect of the said Lot and shall run with the land.
[3]Rath Affidavit, [9]; exhibit bundle pp 20-24.
In respect of that part of the Subject Land contained in Lot 6, the covenant is contained in instrument of transfer number 815801 (‘Covenant 815801’), registered on 29 November 1916. Relevantly, it provides as follows:[4]
… AND the said Agnes Alice Jones her heirs, executors, administrators and transferees hereby covenant with the said Elizabeth Annie Lipscomb and her heirs, executors, administrators and transferees registered proprietor or proprietors for the time being of the untransferred land in Certificate of Title Volume 3826 Folio 765094 that the said Agnes Alice Jones her heirs, executors, administrators and transferees shall not erect on said Lot six any building (whether shop or dwelling house) except in accordance with a plan thereof which shall first have been submitted to and approved by the said Elizabeth Annie Lipscomb and that no such building shall cost less than Two hundred pounds exclusive of architects fees and it is intended that this covenant shall be set forth as an encumbrance on each and every Certificate of Title to be hereafter issued in respect of the said Lot and shall run with the land.
[4]Rath Affidavit, [9]; exhibit bundle pp 25-29.
In respect of that part of the Subject Land contained in Lot 4, the covenant is contained in instrument of transfer number 931502 (‘Covenant 931052’), registered on 29 March 1920. Relevantly, it provides as follows:[5]
… AND the said Arthur William Franklin and Albert Ernest Franklin DO each of them DOTH HEREBY for themselves and himself their and his heirs, executors, administrators and transferees COVENANT with the said Elizabeth Annie Lipscomb and her heirs, executors, administrators and transferees registered proprietor or proprietors for the time being of the untransferred land in Certificate of Title Volume 3826 Folio 765094 that the said Arthur William Franklin and Albert Ernest Franklin their and each of their heirs, executors, administrators and transferees shall not erect on said Lot six any building whether shop or dwelling house except in accordance with a plan thereof which shall first have been submitted to and approved by the said Elizabeth Annie Lipscomb and that no such building shall cost less than Two hundred pounds exclusive of architects fees and it is intended that this covenant shall be set forth as an encumbrance on each and every Certificate of Title to be hereafter issued in respect of the said Lot and shall run with the land.
[5]Rath Affidavit, [9].
Unless necessary to distinguish between them, I shall refer to Covenant 763976, Covenant 815801 and Covenant 931052 as the Covenants.
While the three Covenants differ in the specifics, the substance of each covenant is the same. In particular, in each covenant:
(a) there is a prohibition on erecting a building on the Subject Land unless approval for such building has been obtained from Ms Lipscomb (‘Approval Requirement’). As I will later explain, there is a dispute as to the scope of the Approval Requirement, hence I have attempted to summarise it here in neutral terms; and
(b) there is a minimum cost requirement of the building (‘Cost Requirement’).
Brief procedural history
On 28 March 2023, Derham AsJ made orders for the notification to all parties who may have the benefit of the restrictions contained in the Covenants, by requiring direct notice in the form set out in Schedule B to the order (‘Notice’) to those parties listed in Schedule A to the order. For the avoidance of any doubt in respect of potentially affected persons receiving notice of the application, his Honour also required notice of the application to be provided by placement of a sign containing the Notice on the Subject Land. The order noted in ‘other matters’ that the Plaintiff’s position was that no persons presently gain the benefit of any restrictions purportedly imposed by the Covenants, which position was also stated in the Notice.
The Notice required any person who is entitled to the benefit of the Covenants and who wishes to oppose the application to give written notice of their intention to object to the Plaintiff’s solicitors by 19 May 2023 and attend the hearing to be conducted via audio-visual link (Zoom) on 22 June 2023 at 10.30am before me. The Notice stated that if no person appears on that day to oppose the application, then the Court may hear and decide it on that day.
The Service Affidavit confirms that the notice requirements set out in the orders made on 28 March have been complied with. It also sets out details regarding the objections received by the Plaintiff’s solicitor. I will describe these objections later in these reasons.
When the proceeding returned to Court on the scheduled date of 22 June 2023 for hearing, no objector appeared or sought to appear. The objectors had stated to the Plaintiff’s solicitor that apart from notifying of their objections and wanting those to be placed before the Court, they did not intend to appear or participate in the application or the hearing.
Although the Notice stated that an objection had to be made by giving written notice to the Plaintiff’s solicitor and appearing at the hearing on 22 June 2023, I consider it appropriate to take the matters raised by the objectors into account when considering the application. The Plaintiff did not cavil with this approach.
I heard the application on 22 June 2023 and at the conclusion of the hearing indicated that I would reserve my decision.
Evidence
Some of Mr Rath’s evidence has already been summarised above, when explaining the background regarding the Subject Land and the Covenants.
The Plaintiff has been the registered proprietor of Lot 7 since 1 March 1985, and of Lots 4 and 6 since 18 October 1985.[6]
[6]Rath Affidavit, [4]-[5].
The southern part of the Subject Land is presently developed with industrial buildings constructed of a mix of materials of a dilapidated state, and the northern part is a clearing comprised of car parking spaces.[7]
[7]Rath Affidavit, [6].
Mr Rath deposes that:[8]
[8]Rath Affidavit, [14]-[16].
(a) in 2017 the Plaintiff applied to Yarra Ranges Shire Council (‘Council’) for a planning permit allowing use and development of the Subject Land for the purposes of a mixed-use retail, office and child care development (‘Permit Application’). As part of the Permit Application, the Plaintiff applied for a planning permit to remove the Covenants;
(b) the Council refused the Permit Application on several grounds which did not include any grounds related to the Covenants;
(c) the Plaintiff sought review of the Council’s decision at the Victorian Civil and Administrative Tribunal (‘Tribunal’) pursuant to s 77 of the Planning and Environment Act 1987 (Vic);
(d) by final orders on 14 January 2022, the Tribunal refused the Plaintiff’s application for review, in Pulitano Properties Pty Ltd v Yarra Ranges SC;[9] and
(e) the Tribunal refused the application on both substantive town planning grounds such as visual bulk, traffic and poor landscape response and in light of the Covenants.
[9][2022] VCAT 32 (‘Pulitano v Yarra Ranges SC’).
Mr Rath deposes to enquiries he or his firm received after giving the Notice required by the Court’s orders, and to the written objection received by way of letter dated 19 May 2023 from Mr Myles Watson of MPW Lawyers (‘Objection Letter’).[10]
[10]A copy of the Objection Letter is located at pages 43-44 of the exhibit bundle to the Service Affidavit.
In the Objection Letter, Mr Watson states that he acts on behalf of (each an ‘Objector’, together, the ‘Objectors’):
(a) Bob Quirk of 24 Monbulk Road, Belgrave;
(b) Bruce Beswick of 22 Monbulk Road, Belgrave;
(c) Marika McAdam and Johann Aigner of 20 Monbulk Road, Belgrave;
(d) Paul and Catherine O’Halloran of 17 Monbulk Road, Belgrave; and
(e) Claire O’Halloran and Ahmed Eissa of 15 Monbulk Road, Belgrave.
Mr Rath deposes that the properties at 15 and 17 Monbulk Road were not included in the schedule detailing properties to receive the Notice.[11] However, I do not think that anything effectively turns on that for the purposes of this application, as no submission was made in respect of this issue.
[11]Service Affidavit, [11].
In the Objection Letter, Mr Watson states that:
(a) the Objectors object to the declaration sought in respect of the Covenants affecting the Subject Land;
(b) it appears to the Objectors that the Covenants do not effect a sterilisation of the Subject Land by reason of the inability to have plans approved by Ms Lipscomb, as the Covenants on an ordinary reading relate specifically to certain building types, but arguably not all building types: ‘… any building (whether shop or dwelling house) …’. He says that the words in parentheses appear to narrow the operation of the restriction, so that it only applied in the event that shops or dwellings were to be constructed. Mr Watson states that the evidence filed discloses that industrial buildings are present on the Subject Land and that this, and other commercial uses, would appear to not be restricted by the terms of the Covenants;
(c) the Tribunal found in Pulitano v Yarra Ranges SC that the restrictions in the Covenants are now absolute, on a basis that no building may now be constructed, whereas the Objectors’ suggestions take a different view;
(d) s 84 of the PLA provides a registered proprietor with avenues for the modification or discharge of covenants that impede the intended use and development of the land; and
(e) recognising that the Plaintiff wishes to develop the Subject Land in a manner at the Covenants presently appear to restrict, the Objectors contend that a more appropriate course would be for the Plaintiff to seek modification of the Covenants thus enabling the Court and beneficiaries of the Covenants to consider the Plaintiff’s proposed development.
Mr Watson also states in the Objection Letter that the Objectors do not intend to appear or be heard further in relation to the application as presently made, and are content for the Court to determine the matter. If the Plaintiff amends the application to proceed on a different basis, then the Objectors wish to have the opportunity to participate at that time. The Objectors requested that the Objection Letter be brought to the Court’s attention at the hearing.
Applicable law and principles
Section 84(2) of the PLA relevantly provides as follows:
The Court shall have power on the application of any person interested –
(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.
This naturally raises the question of how the Court should approach ascertaining the ‘true construction’ of the Covenants.
Covenants are to be interpreted by reference to their terms and without reference to any extrinsic material; they are to be interpreted according to what is ascertainable from the register of titles.[12] In doing so, regard may be had to matters of common or commercial sense in determining the presumed intention of the Covenants, in this way:
It is important that what their Honours [in Westfield] state is that it is rules of evidence assisting the construction of contracts inter partes, of the type referred to in Codelfa at 350–352, that do not apply to construction of the easement. They do not deny the applicability of the principle whereby a document will be construed as having the meaning that a reasonable reader, with such knowledge of the surrounding circumstances as is available to him or her, would attribute to it. If surrounding circumstances cannot be established by evidence to construe an easement, that does not mean that one is thrown back onto the discredited exercise of seeking to construe a document simply by reference to a supposed “natural and ordinary meaning” of the words. Rather, it means that the sort of surrounding circumstances to which one can look are limited to those that one can know without evidence from outside the terms of the document itself.[13]
[12]Westfield Management Ltd v Perpetual Trustee Co Ltd (2007) 233 CLR 528 (‘Westfield’); Deguisa v Lynn (2020) 268 CLR 638.
[13]Phoenix Commercial Enterprises v Canada Bay Council [2010] NSWCA 64, [158], citations omitted. While the passage cited refers to ‘easement’ rather than ‘covenant’, the principle is the same.
The Plaintiff’s submissions
The Plaintiff submits that the Approval Requirement has two components, in that it:
(a) imposes a prohibition on the erection of any building whether shop or dwelling (‘Prohibition’); and
(b) provides an exception to the Prohibition where plans have been submitted to and approved by Ms Lipscomb (‘Dispensing Power’).
Plaintiff’s submissions regarding the Prohibition
The Plaintiff submits that the terms of the Approval Requirement are straightforward. It provides that the covenantor shall not erect on the relevant lot ‘any building’ except in accordance with a plan approved by Ms Lipscomb.
It says that on a plain reading, the Approval Requirement is a complete bar to development. It prohibits the erection of ‘any building’. This is said to be consistent with the findings of the Tribunal in Pulitano v Yarra Ranges SC. After considering the text of the Covenants at some length, the Tribunal concluded, relevantly,
Absent the dispensing power, the purpose of the restriction not to erect any building on the relevant lots is clear enough – it is an absolute prohibition.[14]
[14]Pulitano v Yarra Ranges SC, [353].
The Plaintiff submits that the principles applicable to the interpretation of restrictive covenants were summarised by the Court in Clare & Ors v Bedelis,[15] which include that:
(a) the object of interpretation is to discover the intention of the parties as revealed by the language of the document in question; and
(b) the words of a restrictive covenant should be given the meaning that a reasonable reader would attribute to them.
[15][2016] VSC 381, [31].
The Plaintiff refers to the suggestion in the Objection Letter that the phrase ‘whether shop or dwelling house’ ought to be read as qualifying the phrase ‘any building’ so that the Prohibition applies only to buildings which are used as shops or dwelling houses. The Plaintiff says this interpretation should be rejected, having regard to the principles referred to in the preceding paragraph, for the following reasons:
(a) First, that interpretation is inconsistent with the inclusion of the phrase ‘any building’ in the Covenants:
(i) Had it been intended to prohibit shops and dwelling houses, the Covenants could have simply prohibited the erection of ‘any shop or dwelling house’ without any reference to buildings as a class. In this context, the better view is that the phrase ‘whether shop or dwelling house’ is simply intended to put beyond doubt that the prohibition extends to those types of buildings.
(ii) This is consistent with decision of the Court of Appeal in Shadda Abercrombie v Salter Architects & Anor.[16] In that case, the Court recognised that, on its preferred interpretation, certain text in a planning scheme was redundant. The Court also recognised that, as a general rule, instruments should be interpreted to give effect to every word. The Court, however, recognised that it might not do so where there was a ‘good reason’ not to give every word independent meaning. It said:
[16][2018] VSCA 74 (‘Abercrombie v Salter’).
In the present case, the good reason for including the words in issue appears to us to be simply to underline and make abundantly clear within the particular schedule that a discretion exists to vary the particular provisions. The fact that the Planning Scheme is not a piece of legislation but a subordinate instrument intended to be understood and used by non-lawyers encourages this view.[17]
[17]Abercrombie v Salter, [63].
(b) Second, and perhaps more significantly, that interpretation would lead to an absurd outcome such that the Subject Land could be developed for industrial purposes without Ms Lipscomb being able to exercise any control over that development, even though she would have been entitled to veto even the most modest residential or shop building:
(i) The obvious purpose of imposing the Approval Requirement is to confer a high degree of control over development on Ms Lipscomb. This is reflected in the fact that ‘any’ building requires approval. This is not a covenant where, for example, some level of development is permissible without consent and only non-conforming development requires approval. Rather, ‘any’ building must be approved before it can be erected.
(ii) The effect of reading ‘shops or dwelling houses’ as qualifying ‘building’, however, would be that any building used for any other purpose – including industrial purposes – did not require approval.
(iii) This leads to the absurd situation where Ms Lipscomb could, for example, veto the development of the Subject Land (or part of it) for a single-storey dwelling on the Subject Land, but would have no capacity to prevent the erection of a four-storey warehouse or a materials recycling facility – notwithstanding that these commercial / industrial uses are likely to have far greater aesthetic and amenity impacts than the prohibited dwelling.
(iv) Further, because the Cost Requirement only applies to buildings caught by the Approval Requirement,[18] exempt development would not even be subject to the minimal demands of the Cost Requirement.
(v) In the absence of a clear and compelling explanation for why Ms Lipscomb might have wanted to take the risk of the Subject Land being developed for industrial purposes without being able to exercise any control over that development, this is not a reasonable interpretation to attribute to the language of the Covenants.
[18]This is because the Cost Requirement is expressed to apply to ‘such’ buildings – ie, buildings of the identified kind. In the context of the Covenants, the use of ‘such’ can only be understood as referring to the buildings that are subject to the Approval Requirement.
The Plaintiff submits that beyond this, as the Objection Letter conceded, the Objectors’ interpretation is inconsistent with the conclusions of the Tribunal in Pulitano v Yarra Ranges SC.
The Plaintiff submits that, in the absence of any plausible alternative reading and consistent with the findings of the Tribunal, the Court should find that the Approval Requirement imposes an absolute prohibition on the development of the Subject Land, subject to any exercise of the Dispensing Power.
Plaintiff’s submissions regarding the Dispensing Power
The Covenants expressly create an exception to the Prohibition where Ms Lipscomb has approved plans for a proposed development.
The Plaintiff submits that Ms Lipscomb is very likely dead. It says that while there is no direct evidence of Ms Lipscomb’s death, the Court should find on the balance of probabilities that Ms Lipscomb is dead because:
(a) The earliest of the three Covenants is dated 27 October 1914, in which Ms Lipscomb is named as a party in her own right and identified as being married, suggesting that she was a legal adult, and was entered into approximately 108 years ago.
(b) The covenantee is identified in the Covenants as ‘Elizabeth Annie Lipscomb of Belgrave the wife of John Lipscomb Gentleman’. A probate notice for a ‘Elizabeth Annie Lipscomb, late of Glen Harrow, Belgrave’ appeared in the 18 January 1944 edition of The Argus.[19]Given the identical names and the fact that both Ms Lipscombs are residents of Belgrave, it is reasonable to infer that this a probate notice in respect of the covenantee.
(c) This is supported by a death notice in the 13 October 1956 edition of The Argus in relation to Ms Mary Stewart McCoy, which identifies her as the daughter of ‘the late John and Annie Lipscomb, of Glen Harrow, Belgrave’.[20] The identification of a late Ms Annie Lipscomb, married to a John Lipscomb, both of Glen Harrow in Belgrave, is consistent with the Ms Lipscomb named in the probate notice being the covenantee, noting that the Covenants identified Ms Lipscomb as the wife of a John Lipscomb.
(d) No evidence has emerged of Ms Lipscomb being alive. This is in a context where the Plaintiff’s solicitors have undertaken the process of identifying beneficiaries and undertaking advertising and might reasonably be expected to have come across some evidence of Ms Lipscomb being alive if that evidence existed.
[19]A copy of the notice can be found at
[20]A copy of the notice can be found at
The Plaintiff notes that the Tribunal in Pulitano was prepared to proceed on the basis that Ms Lipscomb was dead as indicated by the age of the Covenants.[21]
[21][2022] VCAT 32, [306].
The Plaintiff submits that, in these circumstances, the Court should conclude that, following the death of Ms Lipscomb, the Covenants prevent any development or redevelopment of the Subject Land.
Plaintiff’s submissions regarding the consequences of accepting that the Covenants have the effect of preventing any further building on the Subject Land
The Plaintiff submits that, if it is accepted that the Covenants have the effect of preventing any further building on the Subject Land, the Court should also find that the Approval Requirement has been discharged in each of the Covenants.
This is said to be consistent with recent decisions of the Court in 196 Hawthorn Road Pty Ltd v Duszniak[22] and Lahanis v Livesey.[23] In the latter case, the Court stated:
In relation to the modification of the Covenant to remove the requirement for the approval of plans and specifications by the Peter Lalor Co-operative, because that body no longer exists, its consent cannot be obtained. As the plaintiff submitted, and the defendants did not dispute, if the covenant were construed as if the requirement continued to apply, the practical effect would be to prohibit the commencement or reconstruction on the land of any building and thus to sterilise the land. In these circumstances I agree that the restriction should be considered to have been discharged by the winding up of the Co-operative (in effect, severed from the covenant), as was held in the English authorities considered by Lansdowne AsJ in 196 Hawthorn Road Pty Ltd v Duszniak. The Covenant should be modified so as to remove this restriction.[24]
[22][2020] VSC 235 (‘196 Hawthorn’).
[23][2021] VSC 29 (‘Lahanis’).
[24]Lahanis, [122], emphasis added.
It is appropriate to note that, contrary to the above submission, the Tribunal in Pulitano v Yarra Ranges SC found that the Covenants continued to operate after Ms Lipscomb’s death.[25] In reaching this conclusion, the Tribunal emphasised the ‘strict literal meaning of the actual words of the covenant’. The Tribunal also purported to distinguish the decision of the English High Court in Crest Nicholson Residential (South) Ltd v McAllister,[26] apparently construing Crest Nicholson as applying only to covenants where an exception to a prohibition is ‘intimately bound together’.[27]
[25]Pulitano v Yarra Ranges SC, [362].
[26][2003] 1 All ER 46 (‘Crest Nicholson’).
[27]Pulitano v Yarra Ranges SC, [340] and [348] (finding that the exception in this case was not ‘interdependent’ on the prohibition).
The Plaintiff submits that the Tribunal erred in this approach and failed to give adequate weight to decisions of this Court relating to covenants which have the effect of sterilising land, referring to the following:
(a) The Court in 196 Hawthorn specifically drew a distinction between those cases where the effect of the loss of the ability to consent would sterilise land and those where some level of development of the subject land would still be possible.
(b) In discussing the Australian authorities, the Court said:
The more significant distinction to my mind is that West Lakes, like Palm Beach Lands, and some of the English cases, prevented any development without approval. In other words, the land in question in those cases would be effectively sterilised unless consent could be obtained, making it imperative that a person or entity who could give that consent remained. Here, by contrast, development of a certain kind was always permitted. Ms Langdon could allow development of a different kind, but her consent was not essential to the land being utilised at all.[28]
[28]196 Hawthorn, [117], citations omitted.
(c) The Court subsequently returned to this point in its discussion of the English authorities:
I agree that the reasoning in Crest Nicholson, Margerison and Churchill is persuasive in respect of the covenants there in question. However, I also agree with the defendants that those cases are distinguishable from this because the restriction in this case does not prevent all development without consent. The Covenant becoming absolute does not sterilise the land – it merely limits development to a single dwelling. This was the distinction made by Bartlett QC, President of the Lands Chamber in Woodhouse v Woodhouse …, and I think it a compelling one. The President in that case held that a restriction that prevented a building being used for trade without the previous consent of the vendor, now deceased, had become absolute. He applied Bell v Ashton in reaching that conclusion. He distinguished Crest Nicholson, and other cases in which the vendor’s consent was required for any development, noting that in those cases, but not in that before him relating to expansion of permitted use, there was a ‘strong argument for construing the restriction as one that becomes spent if the vendor dies (or is dissolved)’.[29]
[29]196 Hawthorn, [129], citations omitted.
(d) The distinction drawn by the Court in 196 Hawthorn was then applied by this Court in Lahanis to discharge an approval requirement from a deregistered company.
(e) Although the Tribunal in Pulitano v Yarra Ranges SC made repeated reference to the decision of the Court in 196 Hawthorn as supporting its approach and its interpretation, its reasons demonstrate no engagement with the distinction drawn in that case between covenants which sterilise and those which do not. It is also apparent that the Tribunal may not have been taken to the decision of the Court in Lahanis.
(f) Further, in characterising Crest Nicholson as a decision confined to circumstances where a prohibition and an exception are ‘intimately bound together’, the Tribunal departed from the reasoning of the Court in 196 Hawthorn which had not identified the principle in Crest Nicholson as confined in that way.
(g) The Plaintiff submits that, in these circumstances, the Tribunal’s conclusion should not be regarded as any barrier to this Court making the declarations as sought.
To the extent it might be put that the Covenants here do not sterilise the Subject Land because the existing buildings can continue to be used, the Plaintiff says that this should not be accepted. It says that in Lahanis itself, as here, the subject land had already been developed.[30] This did not prevent the Court from finding that the practical effect of the covenant in that case would be to sterilise the land.
[30]Lahanis, [23].
Plaintiff’s submission regarding any discretionary considerations
The Plaintiff then addresses the suggestion in the Objection Letter that the ‘more appropriate’ course would be for the Plaintiff to seek modification of the Covenants in order to provide the beneficiaries an opportunity to consider the merits of any proposed development.
The Plaintiff says that this would not be a more appropriate course. To the contrary, if the Approval Requirements, properly construed, were intended to be discharged on the death of Ms Lipscomb, then it was never intended that the beneficiaries would have any right to object to development. Indeed, even while Ms Lipscomb was alive, the beneficiaries were entirely dependent on Ms Lipscomb’s judgment as to what constituted appropriate development and had no capacity to challenge that judgment if they were to disagree. As such, to seek modification in circumstances where the Approval Requirements should be regarded as discharged would be to confer on the beneficiaries rights which they were never intended to have.
The Plaintiff submits that, apart from this issue, no discretionary reasons have been identified which make it inappropriate for the Court to grant the declarations sought, and it requests that the declarations be made.
Consideration
While it might be trite to say so, it is best that I begin by noting that I am not bound by the Tribunal’s decision in Pulitano v Yarra Ranges SC.
I therefore approach this application from first principles, by determining the true construction of the Covenants and then whether that means they were discharged upon the death of Ms Lipscomb.
I find the Plaintiff’s submissions as to the true construction of the Covenants to be compelling.
In particular, I accept the Plaintiff’s submissions that the phrase ‘any building (whether shop or dwelling house)’ is an absolute prohibition on the erection of any building on the Subject Land unless written approval is obtained from Ms Lipscomb. I do not accept the interpretation proffered by the Objectors that the phrase ‘whether shop or dwelling house’ qualifies the phrase ‘any building’ so that the Prohibition applies only to buildings which are shops or dwelling houses. In this regard, I accept the Plaintiff’s submission as set out at paragraph 36 above. In my view, whether the phrase ‘whether shop or dwelling house’ appears in parentheses, as it does in Covenant 763976 and Covenant 815801, or not, as it does in Covenant 931052, is immaterial to the true construction of the Covenants being that the Prohibition is absolute.
In my view, this construction arises from the terms of the Covenants themselves as well as having regard to matters of common or commercial sense when determining the presumed intention of the Covenants.
Since the Prohibition is absolute, if the exception of obtaining Ms Lipscomb’s consent to the erection of any building on the Subject Land is no longer possible, then the Subject Land is sterilised such that the Covenants are discharged once that consent can no longer be obtained. In other words, if the Dispensing Power can no longer be exercised in circumstances where the Prohibition is absolute, the Subject Land is sterilised and the Covenants are discharged.
Thus, the next question for consideration is whether the Dispensing Power can now be exercised. In this case, the Dispensing Power can only be exercised by Ms Lipscomb. By the terms of the Covenants, it is not a power that is conferred on her heirs, executors, administrators and transferees. In this instance, the only inference available for the Court to draw is that Ms Lipscomb is dead, for the reasons set out in paragraph 40 above.
That being the case, the final question that arises (before consideration of any discretionary factors) is whether the Subject Land is now sterilised. I find that it is, for the simple reason that the Prohibition is absolute and the Dispensing Power cannot be exercised, such that no building can be erected on the Subject Land.
The painstaking analysis undertaken by Lansdowne AsJ in 196 Hawthorn is compelling, as is its application by Derham AsJ in Lahanis. Preventing any development without approval means that the land is sterilised where it is impossible to obtain consent, which is what has happened here.
There are no discretionary factors which tell against making the declarations sought. In this regard, I agree with the Plaintiff’s submissions as to the Objectors’ proposition that the ‘more appropriate course’ would be for the Plaintiff to apply for the modification of the Covenants by putting its proposed development before the Court, as set out in paragraphs 48 to 50 above.
There is one other matter I should mention for the sake of completeness. I note the Plaintiff’s contention that the Cost Requirement only applies to buildings caught by the Approval Requirement. If that is the case, then it is caught by the discharge of the Covenants upon the death of Ms Lipscomb. The Plaintiff did not address the issue of the Cost Requirement if that was not the case, but I do not consider that to be of any great importance. A cost requirement of a minimum of 200 pounds for a building on the Subject Land is clearly obsolete, and so there is no reason not to discharge the Covenants in the manner sought by the Plaintiff simply because of the Cost Requirement.
Conclusion
Accordingly, the Court declares that, upon its true construction:
(a) the Covenant contained in Instrument of Transfer No. 763976 was discharged upon the death of Ms Elizabeth Annie Lipscomb, is not enforceable by any person, and Ms Lipscomb’s approval is not required prior to the development for the land described in Certificate of Title Volume 04596 Folio 151;
(b) the Covenant contained in Instrument of Transfer No. 815801 was discharged upon the death of Ms Elizabeth Annie Lipscomb, is not enforceable by any person, and Ms Lipscomb’s approval is not required prior to the development for the land described in Certificate of Title Volume 04013 Folio 524; and
(c) the Covenant contained in Instrument of Transfer No. 931502 was discharged upon the death of Ms Elizabeth Annie Lipscomb, is not enforceable by any person, and Ms Lipscomb’s approval is not required prior to the development for the land described in Certificate of Title Volume 04457 Folio 364.
Orders in this regard will be made when handing down this judgment.
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