Sandhurst Trustees Ltd v Australian Country Cinemas Pty Ltd

Sandhurst Trustees Limited sued Australian Country Cinemas Pty Ltd in the Supreme Court of New South Wales, contending that it was not bound by a restrictive covenant assigned to the defendant. The defendant had taken up an assignment of a lease and, at the same time, executed a deed of covenant with the original lessor. This deed granted the defendant a right of first refusal to purchase the premises. The plaintiff, as custodian of a property trust, had acquired the reversion of the land in question and sought a declaration that it was not required to offer the defendant the right to purchase the leased premises before offering to sell the land to another party. The defendant counterclaimed for an order enforcing the right of pre-emption contained in the deed of covenant.

The court was required to determine whether the plaintiff was bound by the right of pre-emption contained in the deed of covenant and whether this right touched and concerned the land. The key issue was whether the covenant was annexed to the land such that it bound the plaintiff, as the new owner of the reversion. The court considered whether the covenant had the necessary legal characteristics to bind successors in title and whether it was intended to run with the land.

The court found that the plaintiff was not bound by the right of pre-emption contained in the deed of covenant. The court held that the covenant did not touch and concern the land in a way that would bind the plaintiff. The court noted that the deed of covenant was not annexed to the land at the time the plaintiff acquired the reversion, and therefore, the covenant did not run with the land. The court also found that the covenant was not intended to be a condition of the lease but was a separate agreement between the original lessor and the assignee. Consequently, the court dismissed the defendant’s counterclaim.

The court made a declaration that the plaintiff was not required to offer the defendant the right to purchase the leased premises before offering to sell the land to another. The defendant’s counterclaim was dismissed, and no orders were made in favour of the defendant.