plaintiff. Rein J ordered that the restrictive covenant (D796733) be extinguished as it affects Lot 9 (42 Glendon Road) pursuant to s 89(1)(a) and (c) of the Conveyancing Act 1919 (NSW). The Court held there...
Key principles
The restrictive covenant (D796733) imposed on Lot 9 (42 Glendon Road) was extinguished pursuant to s 89(1)(a) and (c) of the Conveyancing Act 1919 (NSW) because the covenant was...
On its proper construction the 1948 covenant did not permit ordinary residential occupation of Lot 9 (including occupation by a greenkeeper) as a 'recreational purpose in...
The correspondence exchanged between Council and the Club in 2015–2016 (including the 18 November 2015 letter and the 19 May 2016 email) did not, objectively, establish a...
A development consent granted by the Council in 2018 for dual-occupancy on Lot 9 constituted Council consent inconsistent with the covenant (the consent permitted uses the...
Issues before the court
What is the correct construction of the 1948 covenant: does it permit residential occupation of Lot 9 for a greenkeeper (i.e. an ancillary...
Plain English Summary
Rein J ordered that the 1948 restrictive covenant affecting Lot 9 be extinguished. The court held the covenant was obsolete as it prevented reasonable residential use now required by zoning and redevelopment, and its removal would not substantially injure the Council. The Court also found there was no binding deal between Council and the Club in 2015–2016 to replace the covenant with a new compensation-based restriction; alternatively any such deal was abandoned. The result permits the Club to progress subdivision and potential sale/rental of the townhouses on Lot 9, subject to orders and costs directions.
AI-generated legal information, not legal advice. Zoe can make mistakes. Check the cited source, and for advice about your situation consult a qualified Australian lawyer.
Deep Dive
1,703 words · generated 14/08/2026
What happened
Background and core facts. In 1948 Woollahra Municipal Council transferred three parcels to Double Bay Bowling Club, imposing a restrictive covenant (D796733) limiting use to "recreational purposes in connection with a Bowling Club" and reserving Council's right to release or vary the covenant (text cited in judgment at the head of the reasons). The Club has continued to operate its greens and clubhouse on Lot 101; Lot 9 historically contained a cottage used as the greenkeeper's residence. By 2017 the Club sought to redevelop Lot 9: it lodged a development application for demolition and construction of two townhouses; Council granted consent in January 2018 and construction followed, with the cottage demolished and two townhouses near completion by 2020.
Does s 89(1)(a) of the Conveyancing Act enable extinguishment because the covenant is 'obsolete' or 'impedes reasonable user'?
Does s 89(1)(c) permit extinguishment because there would be no substantial injury to the person entitled to the covenant's benefit?
Was there a concluded binding agreement between Council and Club in late 2015/2016 to remove the covenant in exchange for imposing a Restriction...
Cited legislation
7 cited instruments linked from this judgment.
Negotiations 2015–2016. From 2015 the Club and Council exchanged correspondence. Council resolved on 7 September 2015 to release the covenant on Lot 9 subject to creating a new restriction requiring compensation on any sale, to be determined by an agreed valuation methodology (Council recommended the "Before and After Method") and that Council's costs be met by the Club. Subsequent correspondence included (inter alia) a Council letter of 18 November 2015 and an email from the Club's solicitor on 19 May 2016 indicating the Club agreed to "adopt the 'Before and After Method'" and to have land value assessed by an independent valuer at an agreed date. The Council later supplied draft Restriction terms (January 2020) that were more detailed than earlier exchanges.
Proceedings. The Club filed proceedings on 28 May 2020 seeking an order under s 89 of the Conveyancing Act 1919 (NSW) extinguishing the covenant as to Lot 9 on grounds it was obsolete, impeded reasonable user, and its extinguishment would not injure the Council. Council resisted and cross‑claimed asserting a binding agreement existed and seeking specific performance to impose the Restriction with compensation measured by Before-and-After valuation. Trial occurred in October 2020; Rein J delivered judgment finding for the Club and ordering extinguishment of the covenant as it affected Lot 9.
Why the court decided this way
Two linked strands determined the outcome: (1) construction and practical effect of the covenant on Lot 9, and (2) the statutory test in s 89 of the Conveyancing Act. Rein J first construed the 1948 covenant; its operative language confined use to recreational purposes 'in connection with a bowling club' and contemplated Council consent to other uses. By ordinary meaning and by reference to the physical reality of the tenements, the Judge concluded that residential occupation of Lot 9, even by a greenkeeper, was not itself a recreational purpose within the covenant's language. Lot 9, other than the brief 1948–1954 period when it served as a temporary clubhouse, had been residential since the 1920s and since 1954; there was no suggestion Lot 9 itself functioned as a place for bowling or similar recreational activity. Therefore, as to Lot 9 the covenant was inconsistent with lawful residential use authorised by planning (R3 zoning) and with the development consent.
Applying s 89(1)(a), Rein J held the covenant was obsolete as to Lot 9 and its continued existence impeded the reasonable user of that lot: the covenant would force Lot 9 to be used in a way now prohibited by zoning or to be artificially constrained to a use that is not realistically practicable. On s 89(1)(c) the Judge concluded extinguishment would not substantially injure the Council: Council's asserted benefits were either financial (compensation) or related to Lot 101, not Lot 9, and no practical loss to the Council or local amenity specific to Lot 9 would be caused by extinguishment. The Judge also rejected Council's submission that the parties had formed an enforceable agreement in 2015–2016 to release the covenant on specific compensation terms; the correspondence lacked completeness, authorisation, and the necessary objective intention to be bound before formal documentation, and in any event any tentative agreement had been abandoned by inaction.
Two discretionary steps followed. Even where s 89 grounds exist, the Court retains discretion. Rein J addressed Council's discretionary points (the covenant being a proprietary right obtained by bargain; the Club's conduct in proceeding before securing release; and Council's demand for compensation) and concluded none justified refusing relief. Particularly relevant was the absence of any demonstrated town-planning or amenity utility in keeping the covenant on Lot 9 and the disproportionality of the compensation demanded relative to Council's practical loss.
Before and after state of the law
This judgment applies established s 89 principles (as set out and adopted from authorities such as Laris v Lin and earlier cases) to a modern fact-pattern where planning instruments, long-standing residential use and redevelopment collide with an historical covenant restricting use to recreation. Rein J applied the conventional tests:
Obsolescence: whether the covenant's original purpose is no longer served or cannot now be fulfilled (Rein J relied on Re Mason, Re Truman and other authorities summarised via Laris v Lin).
Impediment to reasonable user: whether, without modification/extinguishment, reasonable use of servient land is blocked.
Substantial injury: whether extinguishment will substantially injure the benefited persons.
The decision emphasises that the statutory power is aimed at removing covenants with no practical utility vis-à-vis the benefited land, and is not a mechanism to extract compensation or to effect town-planning aims per se. The Court expressed caution about treating a covenant-holder's desire for monetary compensation as a legitimate 'benefit' justifying persistence of a covenant; extracting a premium to release a covenant is not, on its own, a town-planning justification for refusal.
On contract law, Rein J applied standard formation principles (Masters v Cameron categories; the need for objective intention to be bound; solicitor authority; s 54A formalities) and concluded the correspondence did not create a binding land‑disposition contract. The judgment illustrates how incomplete correspondence about terms and valuation mechanics, lacking clear authorisation and signature, will generally not satisfy s 54A or supply objective intention to contract.
Key passages with plain-English translation
Covenant text (opening): the 1948 covenant expressly limits use of the transferred land to bowling‑club recreational purposes and requires 'written consent' of the transferrer for other uses. Plain English: the 1948 document restricted Lot 9 to bowling‑club uses unless Council expressly agreed otherwise in writing.
Construction conclusion: Rein J notes "As a matter of ordinary usage I do not think that residential use is for a recreational purpose..." Plain English: simply living in the cottage or townhouse (even if the occupant works for the club) is not what the covenant meant by 'recreational purpose'.
s 89(1)(a) and (c) outcome (summary): the covenant is obsolete for Lot 9 and removing it will not substantially harm Council. Plain English: the restriction has outlived any useful role on Lot 9 and cancelling it will not hurt Council in any meaningful way.
Contract formation finding: correspondence in 2015–2016 did not produce a binding deal; alternatively any deal was abandoned. Plain English: the parties discussed terms, but there was no complete, final written contract to trade the council's right for a compensation scheme, and years passed without completion.
What fact patterns trigger this precedent
Old restrictive covenant limiting use to a specific recreational purpose, where the servient lot has for decades been used as a residence and the dominant lot (that genuinely hosts the recreational use) is separate.
A change in statutory planning controls that now prohibits the recreational use on the servient lot (but might protect existing use rights on the dominant lot).
A council or benefitted party pressing for monetary compensation as the price of release rather than asserting continuing amenity or planning benefit.
Parties having exchanged preliminary correspondence about release and valuation but not having executed formal documents, with subsequent redevelopment carried out by the covenant-burdened owner.
In such settings, this judgment is a clear example of a Court willing to use s 89 to remove a covenant that blocks ordinary residential redevelopment where the covenant provides no practical, lot-specific benefit, and where compensation demands are effectively an attempt to monetise the relic covenant.
How later courts have treated it
(As at date of this judgment, the decision is a principal judgment in the NSW Supreme Court. Any later treatment is outside the scope of this judgment text; Rein J engaged with High Court and NSW authorities on valuation approach (Spencer, Griffiths), formation (Masters v Cameron) and covenant law (Re Mason, Driscoll) and followed well-established NSW practice in s 89 cases. Practitioners should check subsequent appellate treatment and any citations in later authorities for developments.)
Still-open questions
Interaction with LEP clause 1.9A: Rein J did not need to decide whether WLEP 2014 cl 1.9A (suspension of covenants to enable development) applied; a later case might squarely consider whether a council‑imposed covenant is excluded from that clause (Rein J noted the clause's exceptions). Practitioners should note that clause 1.9A contains specific exceptions including covenants imposed by the Council itself.
Value questions: Rein J declined to base relief on a contested Before-and-After valuation. If parties in future want to keep covenants but bargain compensation, the practical difficulties (as evidenced by Mr Keen's concessions) about modelling hypothetical willing purchasers and lessees will be fertile ground for valuation disputes and expert controversy.
Successors and enforceability post-extinguishment: Rein J did not make broader pronouncements about successors in title beyond Lot 9; how courts will handle partial extinguishment where covenants were imposed on multiple lots by a single instrument may require fact-specific analysis.
Remedies and conditions: the decision leaves open precisely what conditional or monetary measures a court may (or should) impose when exercising the s 89 discretion as an alternative to unconditional extinguishment in more finely balanced cases; Rein J rejected the Council's position where the demanded price gave it an outsized windfall.
Closing reminder: this deep dive is an explanatory, grounded summary of Rein J's decision in Double Bay Bowling Club v Council of the Municipality of Woollahra [2020] NSWSC 1861 based only on the judgment text. It is legal information, not legal advice. I can make mistakes. Before you act on this, rely on it, or use any draft document or strategy suggested by this material, get a qualified Australian lawyer to check it.
Catchwords
53 NSWLR 153
Capital Club Pty Ltd v Commissioner of State Revenue [2007] VSC 108(2019) 364 ALR 208
Pavlovic v Universal Music Australia Pty Ltd (2015) 90 NSWLR 605
Re Markin
Judgment (22 paragraphs)
[1]
iscoll v Church Commissioners for England [1957] 1 QB 330
Durian (Holdings) Pty Ltd v Cavacourt Pty Ltd [2000] NSWCA 28
Effeney v Millar Investments Pty Ltd [2011] NSWSC 708
Essendon Corporation v Cox [1967] VR 545
Fincob Pty Ltd v Campbelltown City Council [2010] NSWSC 349
Fitzgerald v Masters (1956) 95 CLR 420
Foodbarn Pty Ltd v Solicitor-General (1975) 32 LGRA 157
Frasers Lorne Pty Ltd v Joyce Goldsworthy Burke [2008] NSWSC 743; (2008) 14 BPR 26,131
Golden Ocean Group Ltd v Salgaocar Mining Industries PVT Ltd [2012] 1 WLR 3674
Harvey v Edwards Dunlop & Co Ltd (1927) 39 CLR 302
HDI Global Specialty SE v Wonkana No. 3 Pty Ltd [2020] NSWCA 296
John Hillam v JPSF Pty Ltd [2017] NSWSC 1510
Kassabian & Rawstron Investments Pty Ltd v Lagonicos (1993) NSW ConvR 55-690
Kastro Pty Ltd v ABD Holdings Pty Ltd [2008] NSWSC 1291
Laris v Lin (No 2) (2016) 18 BPR 35,917
Lizzio v Ryde Municipal Council (1983) 155 CLR 211
Loclot Pty Ltd v Pullen [2003] NSWSC 67
Masters v Cameron (1954) 91 CLR 353
Northern Territory v Griffiths [2019] HCA 7; (2019) 364 ALR 208
Pavlovic v Universal Music Australia Pty Ltd (2015) 90 NSWLR 605
Re Markin; Re Roberts [1966] VR 494
Re Mason and the Conveyancing Act [1962] NSWR 762
Re Robinson [1972] VR 278
Re Truman, Hanbury, Buxton & Co Ltd's Application [1956] 1 QB 261
Spencer v The Commonwealth of Australia [1907] HCA 82; (1907) 14 ALR 253
Stellard Pty Ltd v North Queensland Fuel Pty Ltd [2015] QSC 119
Stockport Metropolitan Borough Council v Alwiyah Developments [1983] 52 P&CR 278
Summers v Commonwealth (1918) 25 CLR 144
The Owners - Strata Plan 85044 v Murrell; Murrell v The Owners - Strata Plan 85044 [2020] NSWSC 20
Thomson v McInnes (1911) 12 CLR 562
Webster v Bradac (1993) 5 BPR 12,032
Welsh v Gatchell [2009] 1 NZLR 241
Texts Cited: Edgeworth, B, Butt's Land Law (Thomson Reuters, 7th ed, 2017)
Heydon, JD, Heydon on Contract (Thomson Reuters, 2019)
Category: Principal judgment
Parties: Double Bay Bowling Club (Plaintiff)
Council of the Municipality of Woollahra trading as Woollahra Municipal Council (Defendant)
Representation: Counsel:
Mr J Lazarus SC with Mr M Sheldon (Plaintiff)
Mr T Lynch SC with Mr D Meyerowitz-Katz (Defendant)
The Plaintiff, the Double Bay Bowling Club ("the Club") (for whom Mr J Lazarus SC and Mr M Sheldon appear) is a company limited by guarantee and owns and operates a bowling club at 18 Kiaora Road, Double Bay in the eastern suburbs of Sydney NSW. The Club owns two parcels of land, one known as "Lot 101" on which the three lawn bowls greens and a clubhouse are located (and the address of which is 18 Kiaora Road, Double Bay) and another parcel "Lot 9" which is known as 42 Glendon Road, Double Bay. The rear of Lot 9 abuts Lot 101. Lot 9 for many years had a cottage on it which was used as a residence for the Club's greenkeeper. In 2018 the cottage was demolished and there are now two townhouses being constructed on the site which are almost complete.
The Defendant, Woollahra Municipal Council ("the Council") (for whom Mr T Lynch SC and Mr D Meyerowitz-Katz appear), is a statutory body created under the Local Government Act 1919-1943 (NSW) ("the LGA"), the municipality of which includes Double Bay.
Lot 101 and Lot 9 (together with another parcel of land which is known as "Lot 100") were sold to the Club on 29 January 1948 by the Council and the sale included an agreement by the Club to a restricted covenant, the terms of which are as follows (at CB3 1262):
"And for the consideration aforesaid the Transferees for themselves their successors and assigns hereby covenant with the Transferror and its successors that the lands hereby transferred shall not except with the written consent of the Transferror or its successors be used for any purposes other than recreational purposes in connection with a Bowling Club as at present or in any other manner in the future constituted And that no building or buildings other than for such recreational purposes shall be erected on the said lands or any part thereof and that no such building shall be erected except of designs and materials and of heights and in accordance with plans and specifications first approved in writing by the Transferror or its successors And that the approval herein mentioned is in addition to and not in substitution for the approval mentioned in Division 4 of Part XI of the Local Government Act 1919-1946 and that there shall be no appeal from the decision of the Transferror or its successors as the case may be given under or in pursuance of the above rights or consent and approval And for the purposes of Section 88 of the Conveyancing Acts 1919-1943 It is hereby agreed and declared that:
1. The lands to which the benefit of this covenant is intended to be appurtenant are the lands comprised in and known as Glendon Road and Kiaora Road in the Municipality of Woollahra.
2. The land which is to be subject to the burden of the foregoing covenant is the land hereby transferred.
3. The said covenant may be released varied or modified by the Council or any successor of such Council constituted as such under the Local Government Act 1919-1946 or any Act amending the same Provided always that notwithstanding anything herein contained the benefit of the covenant herein set out shall not merge in the rights which the public or others may have in the abovementioned roads but shall remain separate and capable of being released varied or modified as above set out without any further consent or approval whatsoever."
(Emphasis added).
I shall in the balance of these reasons refer to this as "the Covenant".
[4]
Short History of Lots 9, 100 and 101 prior to September 2015
I set out a short history of the land that is not the subject of any dispute (and which is taken principally from a Report of Council dated 31 August 2015, at CB4 2517):
1. In 1940, Council purchased the parcel of land, which later became Lots 100 and 101 DP 614016, from the Metropolitan Water, Sewerage & Drainage Board (now known as Sydney Water) for £1,599, based on Council's agreement with the Board that the land would only be used for recreational purposes.
2. In 1941, Council purchased the land of adjoining Lot 101, which became Lot 9 DP 32788, from Winifred Dingle for £1,150.
3. In 1942, Council leased the whole of the above lands to Double Bay Bowling Club Limited.
4. In 1948, Council sold the whole of the above lands to Double Bay Bowling Club Limited, for £8,525 subject to the creation of the Covenant. Council reserved the right to release vary or modify the Covenant.
5. In 1973, the Club requested a zoning change from Residential 2(b) to Open Space to reduce its rate burden. Council supported the rezoning of the land to recreational purposes in connection with a bowling club.
6. In 1975, the whole of the Club was rezoned to Open Space Recreation (Private) 6(b) by Interim Development Order No. 15.
7. In 1976, the Club proposed to build six townhouses on the southern end of the site (being Lot 100 DP 641016) requiring another rezoning and a partial release of the Covenant. The then Metropolitan Water, Sewerage & Drainage Board advised Council that the requested release of the Covenant was a matter for Council to decide. The Board also advised that a monetary contribution should be sought from the Club for the purchase of Open Space land elsewhere in the Municipality.
8. At its meeting on 14 March 1977, Council agreed to partially release the Covenant for Lot 100 DP 614016, subject to the Club paying a monetary contribution for Open Space, a dedication of 300m2 for public garden and recreation space, and a restriction on the number of townhouses to be developed on the site.
9. At its meeting on 11 December 1978, Council resolved to agree to the Club's request to increase the number of townhouses, subject to the Club making a monetary contribution in lieu of the proposed dedication of 300m2 of land.
10. On 29 August 1980, the Interim Development Order No. 15 was altered to allow part of the then Club site Lot 100 DP 614016, to be developed for the purpose of residential flat building of no more than 12 dwellings. The monetary compensation payable to Council for contribution to open space was $153,461 for 1,040m2 equating to $147.55 per m2. Approval was granted in accordance with BA 1145/80.
11. On 20 August 1981 Council released the Covenant for Lot 100 DP 614016, and Lot 100 was sold to a developer.
12. Lot 100 was an area of approximately 3,254m2. Lot 101 is an area of 8,860m2 and Lot 9 approximately 500m2: see T175-176.
13. In 1988 the remaining Club site comprising Lot 101 DP 614016 and Lot 9 DP 32788 were zoned Residential 2(b) under Local Environment Plan No. 27. The present zoning for the site under Woollahra Local Environmental Plan 2014 (NSW) ("WLEP 2014") permits residential development.
14. In 2011 the Club requested Council to release the Covenant in relation to the remainder of the site, comprising Lot 101 DP 614016 and Lot 9 DP 32788. Research was undertaken by Council's Property staff and the information was provided to Council's consultant HWL Ebsworth ("HWL") to seek their advice as to the course of action available to Council in this matter.
15. HWL reviewed the information and also undertook further investigations regarding the Club's request and to identify matters Council should consider when deciding whether to release the Covenant and if so, what monetary compensation should reasonably apply and whether Council should impose (as a condition precedent of release) any limit on development.
16. Some months later, Council received a letter from the Club's then solicitors Diamond Conway Lawyers, which advised that the Club no longer wished to have the Covenant removed.
17. In March 2015 Council again received a request from the Club to remove the Covenant from Lot 9 DP 32788 only, with an estimated area of 495.4m2 for the possibility of developing the site to accommodate three units or townhouses in compliance with the current zoning of the property. In 2015 Lot 9 had a single storey cottage which as at 2015 was rented out as a residential dwelling to the Club's greenkeeper.
[5]
History of Lot 9 in and after September 2015
To these facts there need to be added the following further matters occurring from September 2015 onwards:
1. On 7 September 2015 the Council resolved (see CB4 2542):
"A. THAT Council proceed with the release of the Covenant D796733 following advice from Council's consultant lawyer HWL Ebsworth Lawyers by undertaking the following actions:
i. Notifying the Club that Council will release the existing Covenant subject to Council imposing a new Covenant or restriction on the title on Lot 9 DP 32788 with the following conditions:
a) Should the land or any part of the land (including any strata lot) be sold or the covenant or restriction is modified or released, compensation will be payable to Council based on a valuation methodology, as agreed by Council and the Club;
b) The new covenant or restriction is to be in place prior to the removal of the existing covenant;
c) All of the Council's costs including but not limited to legal and registration fees are to be paid by the Club.
B. THAT upon completion of Part A, Council authorise the Mayor and General Manager to execute and affix the council Seal to all necessary documentation to effect the removal of the covenant from Lot 9 DP 32788 only and creation of the new covenant."
1. On 29 October 2015 the Council wrote to the Club (at CB4 2583) advising of the resolution and stating:
"…we will agree to release the present Covenant & create a new Covenant on Title so that in the event the land is sold or if any of the units or townhouses proposed to be constructed on the land are sold then Council will be entitled to monetary compensation by a method agreed between Council & [the Club]."
The letter of 29 October 2015 further stated that Council had taken advice from McGees Property (Mr St Leon was the author of that advice) that the most suitable method is the "Before and After Method" which Council "believes to be in the best interest of both parties". The letter then said:
"We therefore recommend the "Before and After Method" as the means by which the compensation is determined so that if at a later date, [the Club] decides to sell the land or any of the improvement that may be constructed upon the land, there is an agreed method in place which is understood and agreed to by both parties".
The letter invited comments from the Club: see CB4 2583-2584.
1. Reference was made on 1 November 2015 at an AGM to the negotiations by the Chairman (Mr B Lazarus), the Secretary and others with the Council "to partially lift the Club's grounds Covenant to allow residential development of the greenkeeper's cottage for continuing residential use": see CB4 2585.
2. On 13 November 2015 Mr B Lazarus wrote (at CB4 2614) to the Council on behalf of the Club stating:
"I have had a discussion with Mr Tony Myers and confirm we have no objection to adopting the "Before and After Method".
Please confirm your understanding that the land value will be based upon Council's rate value.
We request that you now move forward with the removal of the covenant as the Club proposes to brief architects to prepare plans to enable us to submit a DA to Council."
1. On 18 November 2015 the Council wrote to the Club (at CB4 2651) stating:
"Council acknowledges your advice that [the Club] has agreed to adopt the "Before and After Method" as the valuation methodology to be used when it is time to determine compensation due to [the Council] should [the Club] decide to sell the land or any of the improvements erected upon the land.
In order that the assessment is transparent and fair and equitable to all parties, the Land Value will be assessed by an independent valuer as at an agreed date of valuation.
Council's rate value is not appropriate as that valuation is usually only assessed once every three (3) years which may be disadvantageous, if not inaccurate, to the financial outcome of [the Club] in view of rising land values.
Should you have any questions or require further information please call Tony Myers…"
1. On 2 February 2016 the Club's directors (at CB4 2655) resolved:
"Covenant and feasibility study follow-up
Barry Lazarus with Peter Wyner to formalise Council / DBBC Covenant lift agreement by contacting Woollahra's solicitor, Tony Myer.
The likely construction on the site is to be Dual Occupancy (2) Units. Land size restricts the development to two. Rough costing by Barry Lazarus indicated a gross favourable investment income with potential of Capital gain. Concept plans to be commissioned at $150 per hour and thereafter a feasibility study based on construction estimate of $1.2m for both units. Internal and external funding (mortgage) to be compared."
1. At a directors meeting on 1 March 2016 Mr B Lazarus reconfirmed that only two townhouses could be built on Lot 9: CB4 2657. The minutes note Mr B Lazarus "received advice that the current market rental can be achieved at $3000 per week for each townhouse."
2. Following a follow-up email from Council of 12 May 2016, on 19 May 2016 in an email Ms Caroline Van, a solicitor in the employ of Mr Lazarus' law firm, wrote to Council (at CB4 2659):
"We refer to your letter dated 18 November 2015 and your email dated 12 May 2016.
We are instructed to advise that [the Club] agrees with the proposed course of action as set out in Council's letter under reply, i.e. for the land value to be assessed by an independent valuer at an agreed date of valuation.
In the circumstances we would appreciate Council proceeding to arrange the covenant documents and await to receive same in due course."
It should be noted that the email signature to this email read "Caroline Van Solicitor | Assistant to Barry Lazarus Lazarus Legal Group Pty Ltd".
1. On 5 July 2016 Ms Van (as a solicitor and as an assistant to Mr B Lazarus) wrote to the Council (at CB4 2823):
"We refer to your email received on 22 June 2016 at 1:42pm.
We advise Council has been aware of Double Bay Bowling Club's intention of removing the covenant since the middle of May 2016. There is absolutely no reason why this matter should be [delayed] any further. Council's solicitors, HWL Ebsworth, is a large firm and there are other solicitors at the firm that could provide Council with the quotation and to prepare the necessary documents to release the existing covenant.
In the circumstances, we await to receive to receive the quotation and to prepare the necessary documents to release the existing covenant as soon as possible."
1. On 17 August 2016 Mr Brian Olliver of HWL wrote to Ms Wendy Williams (Property Officer at the Council) stating (at CB4 2715):
"I estimate costs of up to $1850 (calculated at our partner hourly rate for Council) plus GST and out of pocket disbursements to prepare the initial draft documents and provide appropriate advice to Council regarding enforcement of the Restriction on Use. At this stage, we are unable to estimate our further costs to amend the initial draft Restriction if required by Council and to negotiate and finalise any amendments required by the Club. Therefore, there may be some additional costs for any additional such work."
1. On 18 August 2016 the Council wrote to the Club seeking its agreement to pay the estimated fee of $1,850. Ms Van, by email of 26 August 2016, said that the Club agreed: CB4 2722. In that email Ms Van asked again as to when the Club could expect to receive the documents.
2. On 26 August 2016 Ms Williams of the Council advised Ms Van (at CB4 2722):
"Thank you for your confirmation, we will instruct our solicitor to proceed with the matter and let you know when you will receive the draft document."
1. On 23 November 2016, Ms Van asked for an update (see CB4 2820) and the response was Ms Williams was waiting for a response from Council's solicitors and "will get back to you when I can" (CB4 2820).
2. On 18 July 2017 the Club lodged a Development Application Form ("DA") with the Council for demolition of the cottage on Lot 9 and construction of dual occupancy building with basement parking level and Strata Title subdivision (CB4 2839). The DA contained the following:
"Demolition of existing dwelling house and construction of an attached dual occupancy building with basement parking level and Strata Title subdivision."
It also contained the following words at the bottom of that panel:
"single storey residence (Double Bay Bowling Club greenkeeper) and including DBBC WC facilities".
The "change of use" box was not ticked.
1. On 3 January 2018 the Council gave a Development Consent (No. 336/2017/1) to the dual occupancy plan: CB5 3029-3078.
2. After consent was obtained the Club commenced demolition of the cottage and the outdoor toilet.
3. During the course of construction there have been two problems. First there has been litigation brought by the owners of No 31 Glendon Road against the Club. Those proceedings (which are ongoing) relate to piling work conducted by the Club's building and the alleged consequences of that work and have proven to be very expensive for the Club (which has incurred costs of in excess of $300K). Secondly the costs of construction have proven to be far in excess of what was anticipated.
4. On 16 January 2020, Mr B Lazarus, as solicitor acting on behalf of the Club, wrote to the Council (CB5 3556). That letter advised the Council:
"Whilst it has always been the intent of the Club that the residential properties were to be held by the Club as rental properties and not to be sold, circumstances have arisen during the construction of the two residential properties that has caused the cost of the build to escalate significantly, namely legal action with the neighbours.
As a result of the escalation of costs, it is more than likely that the Club will need to sell at least one of the townhouses in order to recover the significant cost of the build."
In the letter Mr B Lazarus noted that the Covenant remained on the title and then said:
"The purpose of this letter is to request that Council now proceed with the release of [the Covenant] pursuant to and in accordance with the recommendation from the Corporate and Works Committee Report."
1. On 22 January 2020 the Council's solicitor HWL wrote to Mr B Lazarus at Lazarus Legal and enclosed a Release of the Covenant and a new version of the restriction sought by the Council (CB5 3559). The proposed restriction included a detailed Annexure A which set out a number of provisions including the following:
"2. Covenant D796733
2.1 The Registered Proprietor and the Prescribed Authority each irrevocably acknowledge the following:
(a) that prior to the date of this Restriction on Use, the Land was subject to the Covenant;
(b) that under the Covenant, the Land must not except with the written consent of the Prescribed Authority, be used for any purpose other than recreational purposes in connection with a bowling club and no building or buildings other than for recreational purposes shall be erected on the Land;
(c) that at the request of the Registered Proprietor, the Prescribed Authority agreed to release the Covenant without the Prescribed Authority seeking any monetary compensation subject to the creation of this Restriction on Use thereby enabling the Registered Proprietor to undertake the Proposed Development if approved by the Prescribed Authority.
(d) that the Proposed Development is approved under the Development Consent; and
(e) that construction of the Approved Development has commenced on the Land.
3. Terms of Restriction of Use
3.1 The Registered Proprietor irrevocably covenants as follows:
(a) that neither the Land nor any part of the Land (including any strata title lot) shall be transferred, assigned or otherwise disposed of; and
(b) that the Registered Proprietor (including any registered mortgagee of the Land or any other person having an interest in the Land) shall not seek any order in accordance with Section 89 of the Conveyancing Act 1919.
3.2 If:
(a) the Land or any part of the Land (including any strata title lot) is transferred, assigned or otherwise disposed of (including by any mortgagee exercising a power of sale); or
(b) this Restriction on Use is modified or extinguished (either wholly or partially)
then the Registered Proprietor or any mortgagee exercising a power of sale must pay the Compensation to the Prescribed Authority within fourteen (14) days of determination of the Compensation in accordance with this Restriction.
3.3 If the Compensation is payable in accordance with clause 3.2:
(a) the Compensation shall be determined by a Valuer as agreed by the Registered Proprietor and the Prescribed Authority in writing or failing such agreement, by a Valuer as nominated by the then President of the Institute upon the written request of either or both of the Registered Proprietor and the Prescribed Authority; and
(b) the Compensation shall be determined by the Valuer in accordance with the "Before and After Method" of comparing the assessments of the value of the Land in accordance with the following formula:
A = B - C
where:
"A" is the amount of the Compensation;
"B" is the value of the Land not subject to the Covenant; and
"C" is the value of the Land subject to the Covenant.
3.4 The Valuer's determination of the Compensation shall be final and binding on the Registered Proprietor and the Prescribed Authority.
3.5 The Valuer's costs of determining the Compensation in accordance with clause 3.3 shall be paid by the Registered Proprietor and the Prescribed Authority in equal shares."
1. On 29 January 2020 the Council wrote to Mr B Lazarus as Lazarus Legal pointing out that the Council had resolved to release the Covenant but only subject to the imposition of a new restriction (CB5 3567):
"Council resolved on 7 September 2015 to release the present Covenant subject to creation of a new Restriction on Title Lot 9/ DP 32788 so that in the event the land is sold or if any of the units or townhouses proposed to be constructed on the land are sold, then Council will be entitled to monetary compensation by a method agreed between Council & [the Club].
I note that construction of the new dwellings on lot 9/ DP 32788 is a breach of the existing Covenant D796733.
However, please be aware that Council will not release the existing Covenant until:
a) the parties agree on the methodology for determination of any compensation or an amount of agreed compensation and that the new Restriction (including providing the agreed methodology or an acknowledgement of the agreed amount) is registered; or
b) the agreed compensation is paid to Council."
The letter drew attention to the terms of Annexure A (to HWL's letter of 22 January 2020) and then said:
"Because the Club is currently uncertain of the compensation amount determined in accordance with the Restriction Clause 3.3 (b) we propose that the Council now seek quotations and engage a registered Valuer to determine the compensation amount. The cost of the valuation will be shared, notwithstanding whether the Club signs the Restriction.
We look forward to receiving your comments."
1. On 14 February 2020 HWL wrote to Mr B Lazarus (as Lazarus Legal) (at CB5 3570) stating:
"Notwithstanding Council's Resolution made on 7 September 2015 to release the Covenant, the Club remains bound by the Covenant until the Covenant is formally released. As we have previously advised you, Council will not release the Covenant until the new Restriction on Use is registered.
In the meantime, Council reserves all of Council's rights under the Covenant.
As Council require this matter to be finalised without further delay, would you please advise us whether Council's proposal to now obtain determination of the compensation amount is acceptable to the Club."
1. On 28 April 2020 Mr B Lazarus, as chairman of the Club, wrote to the Council (CB5 3573) stating:
"Whilst we re-iterate that it was always the Club's intention to retain the two townhouses as rental properties and not to sell them, the unforeseen circumstances that have arisen, as briefly outlined above, have resulted in considerable construction delays, and the cost of the build exponentially escalating, and the substantial legal fees incurred and which are continuing to be incurred in defending the Supreme Court proceedings have severely impacted on the Club. These issues together with the Club's continuing trading losses in its operational activities, and now in 2020 further exacerbated by the Covid-19 lockdown, resulting in the Club being in total lockdown, have severely impacted on Club's cash flows and financial position. The Club has formed a view that it has no alternative but to sell at least one of the townhouses and the Club is reliant on the return of capital it has invested in this project to date. The sale of one of the townhouses should enable the Club to recover the majority of the capital invested in the development to enable the Club to continue to exist. Clearly the Club cannot afford and is not in a position to pay compensation to Council based upon the proposed "before and after" method.
The purpose of this letter is [to] seek Council's urgent consent for the removal of the covenant on 42 Glendon Road, so as to permit the Club to sell at least one of the residential units to repay its debts and obligations, and to secure the Club's future ability to continue to operate as a recreational bowling club, as it has done for the past 76 years. The Board on behalf of the members wish to thank Council in anticipation of receiving a favourable response to this request."
1. On 28 May 2020 the Club commenced these proceedings having received no reply prior to that date to the letter of 28 April 2020 referred to in (22) above.
[6]
Further Factual Matters
There are some additional factual matters to which reference needs to be made:
1. The cottage on Lot 9 was used as a temporary clubhouse for a short period before 1948 (i.e. even before the Club purchased Lots 9, 100, and 101) and from 1948 until 1954 when the current clubhouse on Lot 101 was completed. The cottage was in or shortly after 1954 turned back into a residential cottage.
2. For many years the cottage was used as a residence by a greenkeeper employed or, in later years, contracted by the Club. Between 1991 and 1993 a Ms Cheryl Hayne occupied Lot 9 under a lease. Ms Hayne was not a member of the Club and not a greenkeeper: see the Affidavit of Mr Fetherston of 28 October 2020. Mr Fetherston was apprentice greenkeeper from 1982 to 1986 and greenkeeper at the Club from 1991 and continuing (on a contract, but not as an employee). He became a member of the Club in 1991. Between 1993 and 2018 Mr Fetherston lived at Lot 9 until the cottage on Lot 9 was demolished as part of the dual occupancy work.
3. Mr Fetherston remains the Club's greenkeeper. He also is and for some years has been the greenkeeper for another bowling club: see paragraph 1 of his Affidavit of 24 July 2020, CB1 136. The Club's previous greenkeeper, Mr Colin Groch, was also the greenkeeper for City Bowling Club and Rose Bay Bowling Club.
4. There are now two townhouses on Lot 9 nearing completion. The lot has not yet been subdivided.
5. The Club intends to progress with subdivision and sell at least one of the townhouses, subject to the removal of the Covenant.
6. The Club decided in early 2016 that it would not be able to accommodate a greenkeeper on Lot 9 in the new development and it has no intention of using the townhouses for anything other than sale or rental at a commercial rate.
7. There was at all times up to 2018 an outdoor toilet on Lot 9. The toilet was accessed by Club members from the greens on Lot 101 and was beyond the gate at the rear of Lot 9: see the Affidavit of Mr Fetherston at paragraph 4, CB1 136. It was used by Club Members until it was, along with the cottage, demolished (see paragraph 13 of the Affidavit of Mr Fetherston at CB1 137). There was, in effect, agreement that the outdoor toilet was not of importance in the case: see T258.4.
8. The sport of lawn bowls is in decline and many clubs in or around the Woollahra area have closed: see the Affidavit of B Lazarus of 1 August 2020 (CB1 152).
9. Use of Lot 9 for any purpose in connection with the bowling club (other than rental at a market rate or sale) would not be financially viable and would have a significant impact on the Club: see the Affidavit of B Lazarus of 9 September 2020 at paragraph 3 (CB2 854), and his Affidavit of 1 August 2020 at paragraphs 41 and 43 (CB1 151), and T106.47-107.42 and T101.5-37.
10. Since 2015 it has been the Club's intention to develop Lot 9 for residential purposes.
11. Since 1954 Lot 9 has been used exclusively as a residence, save for the outdoor toilet on Lot 9.
12. Lot 9 is within the R3 Medium Density Residential Zone ("R3 Zone") of the WLEP 2014. Lawn bowls is not a permitted use in the R3 Zone.
13. The Club is facing significant financial stress because the costs of construction of the townhouses has exceeded the anticipated costs, not only because of litigation with the owners of No 31 Glendon Road, an adjoining property to Lot 9.
14. The Club has experienced a decline in revenue from its operations during the COVID-19 period and its restrictions and effect on patronage: see paragraph 44 of Mr B Lazarus' Affidavit of 1 August 2020 (CB1 152).
15. When the Council received and considered the 2017 DA the Council officers who dealt with the DA were not aware of the Covenant or of the discussions between the Council and the Club to which I have earlier referred: see paragraph 8 of Mr Economou's Affidavit of 28 August 2020 (CB2 904) and paragraph 137 of the Affidavit of Mr Marolia of 28 August 2020 (CB2 922).
[7]
Legislative Provisions
The following legislative provisions are relied on by the parties:
1. Section 54A of the Conveyancing Act:
"54A Contracts for sale etc of land to be in writing
(1) No action or proceedings may be brought upon any contract for the sale or other disposition of land or any interest in land, unless the agreement upon which such action or proceedings is brought, or some memorandum or note thereof, is in writing, and signed by the party to be charged or by some other person thereunto lawfully authorised by the party to be charged.
(2) This section applies to contracts whether made before or after the commencement of the Conveyancing (Amendment) Act 1930 and does not affect the law relating to part performance, or sales by the court.
(3) This section applies and shall be deemed to have applied from the commencement of the Conveyancing (Amendment) Act 1930 to land under the provisions of the Real Property Act 1900.
(4) A contract referred to in subsection (1) is not invalidated or rendered unenforceable only because it has been created in electronic form and electronically signed or attested."
1. Section 89(1) of the Conveyancing Act:
"89 Power of Court to modify or extinguish easements, profits à prendre and certain covenants
(1) Where land is subject to an easement or a profit à prendre or to a restriction or an obligation arising under covenant or otherwise as to the user thereof, the Court may from time to time, on the application of any person interested in the land, by order modify or wholly or partially extinguish the easement, profit à prendre, restriction or obligation upon being satisfied -
(a) that by reason of change in the user of any land having the benefit of the easement, profit à prendre, restriction or obligation, or in the character of the neighbourhood or other circumstances of the case which the Court may deem material, the easement, profit à prendre, restriction or obligation ought to be deemed obsolete, or that the continued existence thereof would impede the reasonable user of the land subject to the easement, profit à prendre, restriction or obligation without securing practical benefit to the persons entitled to the easement or profit à prendre or to the benefit of the restriction or obligation, or would, unless modified, so impede such user, or
(b) that the persons of the age of eighteen years or upwards and of full capacity for the time being or from time to time entitled to the easement or profit à prendre or to the benefit of the restriction, whether in respect of estates in fee simple or any lesser estates or interests in the land to which the easement, the profit à prendre or the benefit of the restriction is annexed, have agreed to the easement, profit à prendre, restriction or obligation being modified or wholly or partially extinguished, or by their acts or omissions may reasonably be considered to have abandoned the easement or profit à prendre wholly or in part or waived the benefit of the restriction wholly or in part,
…
(c) that the proposed modification or extinguishment will not substantially injure the persons entitled to the easement or profit à prendre, or to the benefit of the restriction or obligation..."
1. Sections 4.3, 4.65 and 4.66 of the Environmental Planning and Assessment Act 1979 (NSW) ("EPA"):
"4.3 Development that is prohibited (cf previous s 76B)
If an environmental planning instrument provides that -
(a) specified development is prohibited on land to which the provision applies, or
(b) development cannot be carried out on land with or without development consent,
a person must not carry out the development on the land.
Maximum penalty - Tier 1 monetary penalty.
4.65 Definition of "existing use" (cf previous s 106)
In this Division, existing use means -
(a) the use of a building, work or land for a lawful purpose immediately before the coming into force of an environmental planning instrument which would, but for this Division, have the effect of prohibiting that use, and
(b) the use of a building, work or land -
(i) for which development consent was granted before the commencement of a provision of an environmental planning instrument having the effect of prohibiting the use, and
(ii) that has been carried out, within one year after the date on which that provision commenced, in accordance with the terms of the consent and to such an extent as to ensure (apart from that provision) that the development consent would not lapse.
4.66 Continuance of and limitations on existing use (cf previous s 107)
(1) Except where expressly provided in this Act, nothing in this Act or an environmental planning instrument prevents the continuance of an existing use.
(2) Nothing in subsection (1) authorises -
(a) any alteration or extension to or rebuilding of a building or work, or
(b) any increase in the area of the use made of a building, work or land from the area actually physically and lawfully used immediately before the coming into operation of the instrument therein mentioned, or
(c) without affecting paragraph (a) or (b), any enlargement or expansion or intensification of an existing use, or
(d) the continuance of the use therein mentioned in breach of any consent in force under this Act in relation to that use or any condition imposed or applicable to that consent or in breach of any condition referred to in section 4.17(1)(b), or
(e) the continuance of the use therein mentioned where that use is abandoned.
(3) Without limiting the generality of subsection (2)(e), a use is to be presumed, unless the contrary is established, to be abandoned if it ceases to be actually so used for a continuous period of 12 months.
(4) During the period commencing on 25 March 2020 and ending on 25 March 2022, the reference to 12 months in subsection (3) is taken to be a reference to 3 years."
1. Sections 20(1)(e), 20(2), 57 and 58 of the Land and Environment Court Act 1979 (NSW) ("LEC Act"):
"20 Class 4 - environmental planning and protection, development contract and strata renewal plan civil enforcement
(1) The Court has jurisdiction (referred to in this Act as "Class 4" of its jurisdiction) to hear and dispose of the following -
... (e) proceedings referred to in subsection (2).
(2) The Court has the same civil jurisdiction as the Supreme Court would, but for section 71, have to hear and dispose of the following proceedings -
(a) to enforce any right, obligation or duty conferred or imposed by a planning or environmental law, a development contract or a strata renewal plan,
(b) to review, or command, the exercise of a function conferred or imposed by a planning or environmental law, a development contract or a strata renewal plan,
(c) to make declarations of right in relation to any such right, obligation or duty or the exercise of any such function,
(d) whether or not as provided by section 68 of the Supreme Court Act 1970 - to award damages for a breach of a development contract…
57 Class 1, 2, 3 and 8 proceedings - appeals
(1) A party to proceedings in Class 1, 2, 3 or 8 of the Court's jurisdiction may appeal to the Supreme Court against an order or decision (including an interlocutory order or decision) of the Court on a question of law.
(2) On the hearing of an appeal under subsection (1), the Supreme Court shall -
(a) remit the matter to the Court for determination by the Court in accordance with the decision of the Supreme Court, or
(b) make such other order in relation to the appeal as seems fit.
(3) Despite subsection (1), an appeal does not lie to the Supreme Court against an order or decision of the Court that has been made by a Commissioner or Commissioners, other than a decision of the kind referred to in subsection (4)(a) or (b).
(4) Despite subsection (1), an appeal does not lie to the Supreme Court against any of the following orders or decisions of the Court except by leave of the Supreme Court -
(a) a decision on a question of law determined by a judge pursuant to a reference under section 36(5),
(b) a decision of a Commissioner or Commissioners made after a judge's determination referred to in paragraph (a), where the judge's determination is itself the subject of an appeal to the Supreme Court,
(c) an order or decision made on an appeal under section 56A,
(d) an interlocutory order or decision,
(e) an order made with the consent of the parties,
(f) an order or decision as to costs.
58 Class 4 proceedings - appeals
(1) Where a party to proceedings in Class 4 of the Court's jurisdiction is dissatisfied with an order or decision (including an interlocutory order or decision) of the Court, the party may appeal to the Supreme Court against the order or decision.
(2) On the hearing of an appeal under subsection (1), the Supreme Court shall -
(a) make an order reversing, affirming or amending the order or decision appealed against,
(b) remit the matter to the Court for determination by the Court in accordance with the decision of the Supreme Court,
(c) make an order directing a rehearing of the proceedings in respect of which the order or decision appealed against was made, or
(d) make such other order in relation to the appeal as seems fit.
(3) Despite subsection (1), an appeal does not lie to the Supreme Court against any of the following orders or decisions of the Court except by leave of the Supreme Court -
(a) an interlocutory order or decision,
(b) an order made with the consent of the parties,
(c) an order or decision as to costs.
(4) The amendment made to this section by the Courts Legislation Further Amendment Act 1995 does not operate to require leave to appeal against an order or decision of the Court if, when the order or decision was made, an appeal lay as of right."
1. Section 50(3) of the Interpretation Act 1987 (NSW):
"50 Statutory corporations
… (3) Every document requiring authentication by a statutory corporation may be sufficiently authenticated without the seal of the corporation -
(a) in the case of a corporation that has 2 or more members - if it is signed by the president, chairperson or other principal officer of the corporation or by any member of the staff of the corporation authorised to do so by the president, chairperson or other principal officer,
(b) in the case of a corporation sole - if it is signed by the person by whom the corporation is constituted or by any member of the staff of the corporation authorised to do so by that person, or
(c) in the case of a corporation that has no members - if it is signed by the person for the time being managing the affairs of the corporation or by any member of the staff of the corporation authorised to do so by that person."
1. Section 9(1) of the Electronic Transactions Act 2000 (NSW) ("the Electronic Transactions Act"):
"9 Signatures
(1) If, under a law of this jurisdiction, the signature of a person is required, that requirement is taken to have been met in relation to an electronic communication if -
(a) a method is used to identify the person and to indicate the person's intention in respect of the information communicated, and
(b) the method used was either -
(i) as reliable as appropriate for the purpose for which the electronic communication was generated or communicated, in the light of all the circumstances, including any relevant agreement, or
(ii) proven in fact to have fulfilled the functions described in paragraph (a), by itself or together with further evidence, and
(c) the person to whom the signature is required to be given consents to that requirement being met by way of the use of the method mentioned in paragraph (a)."
1. Sections 1.9A(1),(2) and (3) of the WLEP 2014:
"1.9A Suspension of covenants, agreements and instruments
(1) For the purpose of enabling development on land in any zone to be carried out in accordance with this Plan or with a consent granted under the Act, any agreement, covenant or other similar instrument that restricts the carrying out of that development does not apply to the extent necessary to serve that purpose.
(2) This clause does not apply -
(a) to a covenant imposed by the Council or that the Council requires to be imposed, or
(b) to any relevant instrument within the meaning of section 13.4 of the Crown Land Management Act 2016, or
(c) to any conservation agreement within the meaning of the National Parks and Wildlife Act 1974, or
(d) to any Trust agreement within the meaning of the Nature Conservation Trust Act 2001, or
(e) to any property vegetation plan within the meaning of the Native Vegetation Act 2003, or
(f) to any biobanking agreement within the meaning of Part 7A of the Threatened Species Conservation Act 1995, or
(g) to any planning agreement within the meaning of Subdivision 2 of Division 7.1 of the Act.
(3) This clause does not affect the rights or interests of any public authority under any registered instrument…"
[8]
The Town Planners' Evidence
Ms Sneyd's evidence on what appears to be the more significant issues was to the following effect:
1. Use of Lot 9 (and Lot 101) for bowling club purposes has been prohibited since 1995 save and to the extent that the Club has existing use rights: see the Supplementary Report of Jillian Sneyd dated 21 August 2020 ("the Sneyd Supplementary Report") at CB2 479 and the Report of Jillian Sneyd dated 6 August 2020 ("the Sneyd Report") at CB1 181-182.
2. WLEP 2014 excludes the use of Lot 9 as a "recreational facility (outdoor)" or a "registered club": see the Sneyd Report at CB1 183.
3. A bowling club is not a permitted recreational facility as defined in WLEP 2014: see the Sneyd Report at CB1 183.
4. Lot 101 can, however, continue to be used as a bowling club because existing use rights are protected (by reason of s 4.11 and s 4.66 of the EPA), and the Council has acknowledged those rights: see the Sneyd Supplementary Report at CB2 477-478 and T156.27-42.
5. "Existing use rights" can only be relevant where the use being made of the land is not otherwise permitted by the planning instrument.
6. If there were any existing use rights in relation to use of Lot 9 as a use ancillary to a bowling club they were abandoned by reason of the demolition of the cottage and construction of the townhouses: see the Sneyd Supplementary Report at 14.11 at CB2 486, and may have been abandoned in 1954 when the cottage was reconverted back to a residence (T152.41-153.8) although she thought that in a "town planning sense" use of Lot 9 as a residence for a greenkeeper was an ancillary use and therefore "permissible as an existing use rights": T154.7.
7. The Covenant seeks to enforce a prohibited use of Lot 9: see the Sneyd Supplementary Report at CB2 479.
8. The townhouses are incapable of being used consistent with the Covenant: Sneyd Report at CB1 184-186.
9. In 1948 there was no planning legislation in force which permitted Council to control the use of the land and the Covenant was imposed as a substitute for planning controls: Sneyd Report at CB1 189.
10. The Covenant is obsolete in that its original purpose is no longer served: Sneyd Report at 17.5-17.8 at CB1 189-190. Any useful purpose expired more than 60 years ago.
11. Planning controls that Council might want to put in place can now be achieved through the EPA: Sneyd Report CB1 191.
12. Residential use of Lot 9 will ensure that the scale and type of development is "more consistent with that of the remainder of Glendon Rd than a bowling club use": Sneyd Report at 19.4 at CB1 191.
13. "Limiting the use of Lot 9 to a bowling club use would not be beneficial from the perspective of amenity and traffic impacts on Glendon Road which is of a purely residential character. Equally, in light of the approved and partially constructed dual occupancy development on Lot 9, there would be no impact upon traffic in Kiaora Rd in limiting the use of Lot 9 to a bowling club use": Sneyd Report at 19.6 at CB1 192.
14. "The use of Lot 9 to provide for example additional access to the Bowling Club lands would be likely to have a detrimental impact upon the residential amenity of Glendon Road properties by additional traffic making use of Glendon Road": Sneyd Report at 19.7 at CB1 192.
[9]
The Valuation Evidence
Mr Keen of Keen Property was retained on behalf of the Council to value Lot 9 as at 19 May 2016 and 22 July 2020 firstly on the basis of the Covenant in place and secondly without the Covenant. He assessed Lot 9 with the Covenant as at 19 May 2016 as having a value of $1.1M and without the Covenant as having a value of $3.65M, a difference of $2.55M. He assessed the equivalent values at 22 July 2020 as $1.2M and $4.2M, with a difference of $3M (see page 4 of the Keen Property Valuation Report at CB2 961).
Based on Mr Keen's assessment and on the Council's case, the Club would be required to pay the Council $3M "compensation" for selling the property with no covenant in place in accordance with the Before and After Method which the Council proposed and the Club accepted was the appropriate method (on the Council's case as part of a binding agreement).
The Club had obtained a report from a valuer (a Mr Field) but withdrew any reliance on Mr Field's report following cross examination of Mr Keen.
Mr Keen in cross examination made a number of important concessions and was refreshingly candid in so doing. I summarise the matters of significance:
1. Mr Keen admitted that he had never seen a covenant like that in question here (T215.12-15) and it was challenging to work out a method of valuation which he did by "some lateral thinking" (T215.20), parts of which were highly subjective (T215.27) and were not conventional.
2. There was only one way he could see that Lot 9 could be valued with the Covenant, which was by contemplating an investor purchasing Lot 9 and leasing Lot 9 back to the Club to use Lot 9 for staff accommodation (T216.6-14).
3. Mr Keen could find no sales of land comparable to Lot 9 (T216.49-217.2) because there were no comparable sales with a restrictive covenant similar to the Covenant (T217).
4. In forming his view on the approach he took, Mr Keen made a number of assumptions, namely that:
1. Lot 9 could only reasonably be used by the Club (T217.45-48) for the purpose of staff accommodation because the Covenant overrides "the potential use of the property under the terms of the residential zoning and land use parameter" under the WLEP 2014 (T218.3-14).
2. Lot 9 was thereby converted, by the terms of the Covenant, to "a de facto recreational zoning" (T218.16-19).
3. He ignored the fact that the current zoning of Lot 9 is R3 Residential under the WLEP 2014 (T218.24) because complying with the Covenant would lead to a use of the property that would not be permitted (T218.29-33).
4. The only permissible use allowed by the Covenant is recreational use in connection with the bowling club which is prohibited use in a R3 residential zone (T219.3-11)
5. That the Club had retained existing use rights (T220.34-38).
6. That use of Lot 9 for staff accommodation was the highest and best use of Lot 9 (T221.40).
7. That the Club would be interested in leasing the property as staff accommodation (T224.40).
8. In assessing the position as at June 2020 he has assumed that the original cottage had not been demolished (T228).
1. The Spencer test (see Spencer v The Commonwealth of Australia [1907] HCA 82; (1907) 14 ALR 253) requires that the purchaser and vendor are willing but not anxious and are prudent and taken to be aware of all relevant matters affecting value. Zoning would be a critical matter affecting a hypothetical purchaser (T219.30).
2. Because no purchaser would be interested in buying a property for a use that was prohibited he had to find a purpose that would not be prohibited and that is why he came up with a purchaser who buys the land in order to lease it back to the Club. Mr Keen accepted that existing use rights are in fact not relevant (T221.10). He agreed that with the Covenant in place and no existing use rights he could not identify a use for the Property and would agree that there would be no market for Lot 9 as at 2016: T220.12-34.
3. Mr Keen accepted that he could not himself determine whether use of the property as staff residences was consistent with the Covenant and he would need the input of a town planner and possibly legal advice (T222.5-17 and see T222.29-37).
4. Mr Keen accepted that if Lot 9 could not be used for staff accommodation his valuation methodology would be inapplicable (T222.23-T223.49).
5. Mr Keen admitted that although he was aware as at 2020 that the cottage had been demolished and that two townhouses were nearing completion (T228) his valuation could not proceed without the assumption that the cottage was still there.
6. Mr Keen took the view that if the Club was not interested in taking a lease back of Lot 9 as part of selling then it was not a willing vendor of the land because that was the only use of the property that was consistent with the Covenant.
[10]
Evidence of Mr B Lazarus
In his evidence Mr Lazarus set out the history of the matter, and the Club's financial position much of which I have recounted and as to which there was no dispute.
Mr Lazarus does not dispute that he thought that he had an agreement in principle from the Council that would permit the Club to rent out the cottage originally: see T75.48-76.12 and T81.21-34. Mr Lazarus asserted that when he lodged the DA in 2016 he did not give thought to the Covenant: T81.38-48.
Mr Lazarus' evidence was that whilst he was authorised as director to negotiate terms on behalf of the Club he was not authorised to bind the Club to any final agreement concerning the terms for release of the Covenant and that there had never been a formal resolution of the Club authorising him or any other person on the board to agree to any agreement with the Council pertaining to the payment of compensation or a method of compensation if Lot 9 was sold: see paragraph 20 of his Affidavit of 1 August 2020 (CB1 147), and see T99.24-33. Mr Lazarus said that he intended to get advice on the proposed agreement when he received the documents: T102.44-48.
Mr Lazarus deposed to the total costs of the project at Lot 9 being in excess of $5M (see paragraph 37 of his Affidavit of 1 August 2020 at CB1 150). He deposes to the fact that the Club's funds have been significantly reduced by reason of the funding of the Lot 9 development and that the Club needs the rental income (at least) from the townhouses (and possibly the sale of one of the townhouses) to offset the reduced income both from the loss of funds due to the development and operating losses.
Mr Lazarus said that if the Club was required to pay $4M to the Council for the right to sell the townhouses that would put the Club into liquidation: T72.40. Mr Lazarus said that he had not come to the realisation that the Before and After Method of valuation was very unfair to the Club until January 2020: T100.46-102.5.
In cross examination, Mr Lazarus was taxed on his assertion that he did not consider the Covenant when he lodged the DA and on the question of whether he thought he had a binding agreement but the DCS do not attack his credit.
[11]
Evidence of Ms Zeltzer, Mr O'Hanlon and Mr Marolia
Each of these Council witnesses were cross examined. There is no issue of credit involved.
Ms Zeltzer, who was in 2015 the Mayor of Woollahra, was of the view that at that time the Council would have been amenable to release of the Covenant "if an appropriate amount of compensation was paid to the Council" (see T114.34-40 and paragraph 8 of her Affidavit of 27 August 2020 at CB1 895). Ms Zeltzer viewed the Covenant as an "asset" of the Council that could not be discharged "without serious consideration to its worth" (T115.4-7).
Ms Zeltzer was not concerned about the amount which Council might get for release, only that it needed to be the "right" value, something that she could not have any input into. At T116.3-20 during cross examination, Ms Zeltzer said:
"Q. You had an idea, didn't you, at that time that the compensation would be applied towards other community facilities in Woollahra, didn't you?
A. I would have thought so, but the value was immaterial to me. It just needed to be the right value and that's not something I could have had any input into.
Q. How could you have had an idea of putting compensation towards other community facilities in Woollahra without having any idea of what amount the council would be likely to receive?
A. With respect, any amount coming would have been used in my - would have been transferred to another asset. The amount, it didn't matter if it was $100 or 100,000 or a million dollars, it didn't matter as long as that amount was - that the relevant parties came about that amount in a, in a reasonable, considered manner. I wasn't - I certainly wasn't going to be one that was going to get involved in that value, it wasn't my job to get involved in that value. It was my view that, that whatever came out of a discharge like that would go into some other community facility for the benefit of the community. But the value, I couldn't put a material amount on it and neither was I that much concerned, as long as the process was done properly."
Ms Zeltzer said at T117.20-28:
"I had no figure in my mind, because it was not real property, it was a covenant. It wasn't bricks and mortar, it wasn't a square metreage of a site and I don't have knowledge of how that translates to a value. All I know is that it is an asset and it would have a value. So it would be presumptuous on my part to have any figure in my head about what it was worth. So I would leave it to the experts that would be - I think - I don't think, I know that in the resolution we gave that valuation, should it be needed, to be - it needed to be negotiated or discussed between the club officials and our key staff. I think that's how the resolution went, in my recollection."
[12]
Evidence of Mr Myers and Mr Economou
Mr Myers gave evidence disputing Mr B Lazarus' version of a telephone conversation in which the Before and After Method of valuation was discussed and, according to Mr B Lazarus, Mr Myers' said that this was "the fairest method of valuing the property so far as both parties are concerned": see paragraph 17 of Mr B Lazarus' Affidavit of 1 August 2020 (CB1 146). The dispute is of no real significance because the letter from the Council of 29 October 2015 described the method as one Council believed to be in the "best interest" of both the Club and the Council and the letter from the Council of 18 November 2015 spoke of the need for the assessment to be "transparent and fair and equitable": see [16(2)] and [16(5)] above.
Mr Economou, Manager of the Council's Development Control Division, gave evidence as to the process of consideration of a development application, and his lack of knowledge of the Covenant.
[13]
Construction of the Covenant
There was agreement that the proper approach to construction of the Covenant was summarised correctly by Williams J in The Owners - Strata Plan 85044 v Murrell; Murrell v The Owners - Strata Plan 85044 [2020] NSWSC 20 at 82:
"Applicable legal principles
82 It was common ground that, in construing a restrictive covenant registered on Torrens title land:
(1) the Court strives to discover the intention of the parties as revealed by the language they used in the document in question;
(2) the words of the covenant must be construed in the context of the instrument as a whole;
(3) the words of the covenant are generally to be given the meaning they bear in their colloquial or ordinary sense, as opposed to some technical or legal meaning; and
(4) the Court does not take into account extrinsic materials beyond the scope of the Register (see Westfield Management Ltd v Perpetual Trustee Company Ltd (2007) 233 CLR 528; [2007] HCA 45 at [35]-[45]), with the exception that the Court may take into account the physical characteristics of the dominant and servient tenements (Westfield Management Ltd v Perpetual Trustee Company Ltd (supra) at [40]; Sertari Pty Ltd v Nirimba Developments Pty Ltd [2007] NSWCA 324 at [15]-[16].)"
The Club contends that use of Lot 9 as a residence for the Club's greenkeeper was not a use permitted by the Covenant. The Council contends that it is a permitted use. The assertion by the Club that it ceased long ago to comply with the Covenant is in contrast to the position that it has taken in the past when it suited it (see CB3 1423, 1427, 1444-45). The change of position is not dissimilar to that of the Council which contended earlier this year that the Development Consent was a breach of the Covenant, but now asserts that the townhouses can be used consistently with the Covenant.
The critical words of the Covenant are "shall not except with the written consent of the Transferror or its successors be used for any purposes other than recreational purposes in connection with a Bowling Club…" (CB3 1262).
There can be no doubt that use of Lot 9 from 1948 to 1954 as a clubhouse was a use for a recreational purpose in connection with a bowling club, but the question in this case is whether use of the property as a residence occupied by the Club's greenkeeper is a use for a recreational purpose in connection with a bowling club. The words "for a purpose ancillary to a Bowling Club" are not found in the Covenant. As a matter of ordinary usage I do not think that residential use is for a recreational purpose simply because the person residing there is engaged, as an employee or contractor, outside of the property in which he resides, in a recreational activity, and that is so even if the property in which he resides is located next to the property on which the recreational activity is conducted.
[14]
The 'Coalescence' of Lot 9 and Lot 101
There is another issue which has assumed some importance in the case and which I should address now and that is Council's contention that in considering the Covenant in relation to Lot 9 it is necessary to consider Lot 101 as well. The Club firmly resists any such coalescence - it says that its application pursuant to s 89 is solely related to Lot 9 - it does not assert that the Covenant insofar as it concerns Lot 101 has become obsolete or should be extinguished for any other reason. Mr Lynch submits that since Lot 101 and Lot 9 have always been used by the Club in conjunction with each other, Lot 101 needs to be considered together with Lot 9 and hence an advantage or benefit to the Council from the continued existence of the Covenant in respect of Lot 101 is required to be taken into account for determining whether the Covenant should be extinguished under s 89(1).
In support of this, Mr Lynch draws attention to the fact that the Covenant was by reason of the transfer of the two parcels of land (Lot 9 and what was in 1948 effectively Lot 100 and Lot 101) imposed on both parcels by the same instrument.
Whilst it is true that the Covenant was applicable to both parcels, I do not accept that the continued applicability of the Covenant to Lot 101 has any relevance to whether or not in relation to a separate parcel of land under a separate title the Covenant has become obsolete or should be extinguished on any other ground. The question for determination is whether viz a viz on Lot 9 the Covenant has become obsolete or should otherwise be extinguished and what needs to be assessed is whether there is any continuing benefit to the Council in the Covenant insofar as it concerns Lot 9. This is a very significant matter because the only real benefit to the Council and the neighbourhood that Mr O'Hanlon identified arose out of the use of Lot 101 as a recreational area, not Lot 9 (and see the Ryan Report at paragraph 52, CB2 938). It is also an important part of Council's contention that the existence of the Covenant serves a practical benefit to the Council (see DCS at paragraphs 50-53) and that the Council will be substantially injured if the Covenant is removed (see paragraph 80-82 of the DCS), but the assertions are focused on the use of Lot 101 as a bowling club.
It is not part of the Council's case that Lot 9 must be used as a clubhouse for the Club. Lot 9, prior to being used as a temporary clubhouse had been used as a residence and from 1954, on the evidence, it returned to being used as a residence. The only aspect of Lot 9's use for a recreational purpose connected with a bowling club that the Council has identified is to house the greenkeeper and, on Mr Hanlon's evidence, to provide an income for the Club.
[15]
The Section 89 Claim
In Laris v Lin (No 2) (2016) 18 BPR 35,917 Slattery J set out the approach to s 89(1)(a), (b) and (c) of the Conveyancing Act which both sides accepted as a convenient statement of what is required:
"[68] The term "obsolete" has been explained in a number of authorities. Indeed obsolescence:
(1) can be established in the sense that the original purpose of the easement can no longer be served: Re Truman, Hanbury, Buxton & Co Ltd's Application [1956] 1 QB 261 at 272; and
(2) can also mean that the object of the easement is incapable of fulfilment any longer or perhaps serves no presently useful purpose: Re Mason and the Conveyancing Act [1962] NSWR 762; (1960) 78 WN (NSW) 925 at 927; Durian (Holdings) Pty Ltd v Cavacourt Pty Ltd (2000) 10 BPR 18,099; [2000] NSWCA 28; BC200000816 at [3]-[6] .
[69] The second basis involves an assessment of whether or not the continued existence of the easement would impede the reasonable user of the servient tenement without securing practical benefit to the persons entitled.
[70] To establish that a covenant impedes the reasonable user of the servient land, it must be shown that no reasonable use of the land is possible unless the easement is modified or extinguished: Frasers Lorne Pty Ltd v Joyce Goldsworthy Burke (2008) 14 BPR 26,131; [2008] NSWSC 743; BC200806670 per Brereton J at [14].
[71] It is insufficient for a s 89(1) of the Conveyancing Act applicant to establish that its own proposal is a reasonable use of the servient land. The applicant must show that no reasonable use of the land is possible unless the easement is extinguished or modified: Heaton v Loblay (1960) SR (NSW) 332 at 335 per Myers J. The applicant must also show that the continuance of the easement unmodified "hinders, to a real and sensible degree, the land being reasonably used, having due regard to the situation it occupies, to the surrounding property, and the purpose of the [easement]": Re Ghey & Galton's Application [1957] 2 QB 650 at 663. The question as to whether the continued existence of the right of way secures a practical benefit to the beneficiaries is one that does not require extensive analysis. But what is a "practical benefit" is capable of ready assessment.
[72] Finally, s 89(1)(a) of the Conveyancing Act allows the Court to take into account such "other circumstances of the case which the Court may deem material". These words permit the Court to take into account "the widest field of evidentiary material": Re Roseblade; Re Foenander [1964-5] NSWR 2044 at 2046 and Markos v O R Autor Pty Ltd (2007) 13 BPR 24,487; [2007] NSWSC 810; BC200705875 per Austin J at [90].
Extinguishment pursuant to s 89 (1)(b) - Abandonment
[73] Rights of way created by registered easements over Torrens system land can be abandoned so as to attract the jurisdiction of the Court under s 89(1) of the Conveyancing Act: Grill v Hockey (1991) 5 BPR 11,421; BC9102069 ; Chiu v Healey (2003) 11 BPR 21,241; [2003] NSWSC 857; BC200305443 at [36]; AJ Bradbrook and MA Neave, Easements and Restrictive Covenants In Australia, (2nd ed 2000, Butterworths) at [19.27] and following. Section 89 of the Conveyancing Act is applicable to land under the Real Property Act 1900; s 89(8) of the Conveyancing Act. The mere circumstance that an easement was noted on the register when land under the Real Property Act passed to a new registered proprietor would not furnish a reason for refusing as a matter of discretion to make an order under s 89(1) or s 89(3): Treweeke v 36 Wolseley Road Pty Ltd (1973) 128 CLR 274; 1 ALR 104; BC7300017. The relevant principles in relation to abandonment of easements in relation to the exercise of s 89 of the Conveyancing Act jurisdiction are the following:
(a) abandonment occurs both at common law and under the Conveyancing Act when the dominant owner has made it clear that neither he nor his successors in title will make any use of the easement, though it is not to be lightly inferred: Grill v Hockey (1991) 5 BPR 11,421; BC9102069 and Williams v Usherwood (1981) 45 P & Cr 235 at 256; (2016) 18 BPR 35,917 at 35931
(b) one must look for evidence that there has been an implied or lost modern deed of release of the easement - long non-use would be good evidence but would not necessarily be sufficient to establish abandonment: Swan v Sinclair [1925] AC 227, Treweeke v 36 Wolseley Road Pty Ltd (1973) 128 CLR 274; 1 ALR 104; BC7300017 and Proprietors Strata Plan No 9,968 v Proprietors Strata Plan No 11,173 [1979] 2 NSWLR 605; and,
(c) the longer the period of non-use the more readily the conclusion will be reached that the beneficiaries of the rights of way may be deemed to have abandoned it: Treweeke v 36 Wolseley Road Pty Ltd (1973) 128 CLR 274; 1 ALR 104; BC7300017, per Walsh J at 288.
Section 89(1)(c) - Lack of substantial injury to beneficiaries
[74] The power to extinguish an easement is also conferred by s 89(1) of the Conveyancing Act on the basis that the proposed modification or extinguishment will not substantially injure the persons entitled to the easement. The cross-claimant claims that the Court can exercise the power to extinguish in the present case based upon this ground. As with the other heads of power to extinguish, judicial exposition has assisted in explaining how this power should be exercised. The relevant principles in relation to s 89(1)(c) of the Conveyancing Act, are the following:
(a) a "substantial injury" is one that has real and present substance but need not be large or considerable: Re Mason and the Conveyancing Act [1962] NSWR 762; (1960) 78 WN (NSW) 925 and Tujilo Pty Ltd v Watts (2005) 12 BPR 23,257; [2005] NSWSC 209; BC200501404, especially at [37]; Frasers Lorne Pty Ltd v Joyce Goldsworthy Burke (2008) 14 BPR 26,131; [2008] NSWSC 743; BC200806670 at [24];
(b) a wide variety of tangible and intangible potential injuries are encompassed by the expression "substantial injury" in s 89(1)(c): Webster v Bradac (1993) 5 BPR 12,032; BC9301754; Frasers Lorne Pty Ltd v Joyce Goldsworthy Burke (2008) 14 BPR 26,131; [2008] NSWSC 743; BC200806670 at [27]; and
(c) there must be an injury of "real and present substance" and examples of how the statutory language has been applied with this concept in mind are usefully summarised by Young CJ in Eq, (as His Honour then was) in Castagna v Great Wall Resources Pty Ltd (2005) 12 BPR 23,363; [2005] NSWSC 942; BC200507050 at [42]-[43].
The exercise of s 89(1) of the Conveyancing Act discretion
[75] The grant of relief under established s 89 grounds is discretionary: Pieper v Edwards [1982] 1 NSWLR 336. The facts relevant to the exercise of this discretion include matters such as the history of the property, the conduct of the owners of both the dominant and servient tenements, the acts of a prior registered proprietor and the state of the register. No one factor is decisive: Pieper v Edwards (1982) 1 NSWLR 336 at 340D-E.
[76] The question of who has the burden of showing that the discretion ought to be exercised once jurisdiction is established will itself depend upon the circumstances. This is explained by Hutley JA in Pieper v Edwards (1982) 1 NSWLR 336 at 340 as follows:
"the burden may not always be on one side or the other. Where the acts of abandonment relied on are those of the dominant owner the burden of showing the order should not be made could reasonably be laid on him. Whereas here, the acts relied on are of a predecessor in title of the applicant, of which the respondent had no notice, the burden could well be thrown on the applicant."
[77] The owner of the servient tenement has the burden of showing that the discretion ought be exercised in its favour.
[78] The Court will normally exercise caution in acceding to an application for the extinguishment or modification of an easement, which is a proprietary right: Frasers Lorne Pty Ltd v Joyce Goldsworthy Burke (2008) 14 BPR 26,131; [2008] NSWSC 743; BC200806670 per Brereton J at [29]."
[16]
Successors in Title
This issue does not arise, and I do not need to address it.
[17]
Consent under the Covenant
This issue strictly does not need to be resolved either because of my conclusion that the Covenant should be extinguished. I have, however, expressed the view that no second consent was required as a matter of construction of the Covenant. The two remaining questions are whether to consent to a dual occupancy development amounts to a consent for a purpose other than a recreational purposes in connection with a bowling club, and what flows from that if it does.
The Council contends, however, that mere consent to the replacement of one cottage by two townhouses does not mean that the Council was consenting to use of the new dwellings for purposes other than purposes ancillary to the Club, i.e. two dwellings are not necessarily inconsistent with the Covenant if it is construed as permitting use of the premises for the benefit of the recreational activities of the Club, i.e., on the Council's approach, renting to a greenkeeper.
In my view, the Development Consent does constitute consent to a use other than use as a recreational purpose in connection with a bowling club for these reasons:
1. Rental of townhouses or sale of townhouses is not ancillary or incidental to the activity of a bowling club.
2. The Council itself claims that rental to anyone other than a greenkeeper or person employed with the Club is not a recreational purpose in connection with a bowling club.
3. The Development Application contains words which indicate that the dual occupancy was not restricted in any way to the use to which the cottage had previously been put and the Development Consent did not impose any such restriction.
4. The fact that the Club was indicating that it intended to strata Lot 9 for the purpose of dual occupancy was an indication that the Club was not intending to use the premises for Club employees. I note that the Development Consent expressly indicated that the strata proposed was not approved and would require a separate application (CB5 3035), but the application nevertheless indicated what was intended.
5. The Council itself asserted in later correspondence with the Club that the dual occupancy in and of itself involved the Club in a breach of the Covenant: see [16(20)]. It did not say, for example, "if you are intending to use the townhouses for a purpose other than having a greenkeeper you will be in breach of the Covenant", which I think reflects that Council must have formed the view that use of the land for the purpose of dual occupancy was not a use within the Covenant. Mr Moralia, as I have mentioned, certainly takes that view: see [49] above.
[18]
Clause 1.9A
The Club put as an alternative that cl 1.9A of the WLEP 2014 which provides that a covenant that restricts the carrying out of a development does not apply to the extent necessary to prevent development. This is not the same as extinguishment and there were additional issues relevant to this, such as whether the exceptions apply. In view of my earlier conclusions it is not necessary to determine this question.
[19]
Council's Cross Claim
There are many issues raised by the Club. I will not deal with all of them because I am persuaded that (a) there was no enforceable binding agreement, and (b) that if there was a binding agreement it was abandoned by the parties.
In relation to the first point at [103(a)], it is necessary, as the Club insisted, to focus on the pleading of the agreement by the Council in paragraph 12 of its Cross Claim in which the Council identifies the binding agreement as having been wholly in writing and constituted by two pieces of correspondence, namely: a letter dated 18 November 2015 (see [16(5)] above, CB4 2651) said to be the offer and the email of 19 May 2016 (see [16(8)] above, CB4 2659) said to be the acceptance (see paragraphs 11 to 13 of the First Cross Claim at CB1 92-93). Prior correspondence cannot be relied on to establish the terms of the asserted agreement, unless the prior correspondence is referred to in the documents relied on as forming the contract. Although the letter of 13 November 2015 is not expressly referred to I think it can be inferred that it is identified by the reference in the 18 November 2015 letter to "your advice that [the Club] has agreed to adopt the "Before and After Method" as the valuation methodology to be used." The letter of 29 October 2015, however, is not referred to expressly or impliedly in the letter of 18 November 2015. The DCS sought to move away from the pleaded basis of "offer" and "acceptance" by reference at paragraph 143 to Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; 53 NSWLR 153 in which it was held that agreements can be formed by a course of conduct or correspondence: see [71]-[81].
There are a number of problems with the Council's reliance on an agreement constituted by the letters of 13 and 18 November 2015 and the email of 19 May 2016:
1. The email of 19 May 2016 advises that the Club agrees with the land value to be assessed by an independent valuer at an agreed date of valuation. It does not actually state acceptance of all the terms of the letter of 18 November 2015.
2. The letter of 18 November 2015 spoke of a valuation "at an agreed date of valuation" thus recognising that there would need to be further negotiations as to the precise date of valuation. In January 2020: see [16]-[17] above, the Council sought the Club's agreement to a valuation at the time the Covenant is lifted and the Restriction is imposed, rather than as at the time Lot 9 is sold.
3. The letters of 13 and 18 November 2015 and the email of 19 May 2016 contained no mechanism for appointment of a valuer or how to resolve any difference as to who should be the valuer (in contrast, for example, to the terms contained in HWL's draft sent on 22 January 2020: see CB5 3562 and 3564).
4. The email of 19 May 2016 is not signed by the Club. Indeed it is not signed by Ms Van either unless the use of her typed name on the email is a signature. On the issue of signature the Electronic Transactions Act by s 9 does permit the requirement of a signature to have been met by a name or an email provided that method is "reliable as appropriate for the purpose for which the electronic communication was generated or communicated, in the light of all the circumstances, including any relevant agreement": s 9(1)(b)(i). Section 9 also requires that the person to whom the signature is required to be given consents to that requirement being met by a name on an email rather than by an actual signature. There are a number of cases which have considered this or analogous legislation: see Stellard Pty Ltd v North Queensland Fuel Pty Ltd [2015] QSC 119, Claremont 24-7 Pty Ltd v Invox Pty Ltd [No 2] [2015] WASC 220, Welsh v Gatchell [2009] 1 NZLR 241 and John Hillam v JPSF Pty Ltd [2017] NSWSC 1510, and see also Golden Ocean Group Ltd v Salgaocar Mining Industries PVT Ltd [2012] 1 WLR 3674 which, although not dealing with a similar legislative provision, is relied on by the Council. It is not necessary to reach a concluded view on the point because in my view what Ms Van was doing by the letter was communicating the Club's instructions, and I do not think objectively she can be taken to have, by means of that email which dealt only with the method of valuation, entered into a binding agreement on behalf of the Club. I do not accept the Council's assertion that Ms Van was writing as a representative of the Club rather than as a solicitor - her email commences "we are instructed to advise" which is inconsistent with Council's contention, and I read that as an indication that she was acting as the Club's solicitor or on behalf of Mr B Lazarus acting as such.
5. There is no evidence of authorisation by the Club for Ms Van to enter into an agreement to bind the Club.
6. In terms of the three categories of agreement identified in Masters v Cameron (1954) 91 CLR 353 at 360 or four categories taking into account Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622, 625-626, there are a number of factors which lead to the conclusion that the parties objectively did not intend to make a concluded bargain unless and until the formal contract was executed:
1. the nature of the subject matter;
2. the identity of the contracting parties - a local council and an incorporated club;
3. the request for provision of documents by the Club;
4. the fact that what was addressed in the email of 19 May 2016 was only one aspect of the matter and that the letter to which the email was responding was not a complete articulation of the agreement;
5. the identity of the author of the email.
In relation to the first point, the subject matter was the creation or disposition of an interest in land. I deal separately below with the requirement for writing, but the fact that this was the subject matter which required the creation of formal documentation encourages the view that the parties would only intend to be bound by the completion of formal documentation. In Kastro Pty Ltd v ABD Holdings Pty Ltd [2008] NSWSC 1291 Brereton J (as his Honour then was) said at [26]:
"[26] In the context of a commercial lease for a term exceeding three years - which, therefore, has to be registered for practical purposes - it is improbable that parties intended to be bound before the terms of the formal lease were settled by solicitors and exchanged, especially if the parties had in mind the preparation of a formal document. In that respect, consensus on the commercial terms in which a lease is given is not equivalent to an intention that the consensus should, without more, be legally binding [Gobblers Inc Pty Ltd v Stevens (1993) NSW ConvR 55-665 (Cohen J); Kassabian & Rawstron Investments Pty Ltd v Lagonicos (1993) NSW ConvR 55-690 (McLelland CJ in Eq); Longpocket Investments Pty Ltd v Hoadley (1985) 3 BPR 9606 (NSWCA); Blackburn Developments No 19 Pty Ltd v Downs Surgical (Australia) Pty Ltd (1974) 2 BPR 9141 (Helsham J); Landsmiths Pty Ltd v Hall [1999] NSWSC 735; (1999) 9 BPR 17,057 (Young J); Long v Piper [2001] NSWCA 342; [2002] ANZ ConvR 43; (2002) NSW ConvR 56-000, [51]-[55]; Hali Retail Stores Pty Ltd v Hafaz [2007] NSWSC 412, [17] (Brereton J)]."
(Emphasis added).
As McLelland CJ in Eq said in Kassabian & Rawstron Investments Pty Ltd v Lagonicos (1993) NSW ConvR 55-690:
"There must be more than the arrival by the parties at a consensus. The parties must intend that the consensus at which they have arrived should there and then constitute a binding contract…"
Whilst this is not a case involving a lease, it is an agreement concerning an interest in land that had to be registered to be effective. Prior communications leading up to the offer and acceptance which are not contained in a single document can be relevant in determining whether the parties objectively intended to bind themselves: see Pavlovic v Universal Music Australia Pty Ltd (2015) 90 NSWLR 605 per Bathurst CJ at [15], Beazley P at [64]-[65] and [72] and Meagher JA at [162]. I am unable to draw the conclusion from that correspondence that the Council and the Club intended the exchange of correspondence to constitute a binding agreement without formal execution of the relevant documentation.
1. Section 54A of the Conveyancing Act which I will deal with separately.
2. The correspondence from the Council earlier this year (see [16(19)] to [16(21)] above) not only does not assert a binding agreement, but seeks to introduce new terms, which is inconsistent with the Council's assertion that there was in May 2016 a binding agreement.
[20]
Summary
I conclude therefore that:
1. There was no binding agreement between the Club and the Council.
2. Alternatively, if there was a binding agreement contrary to the finding in (1), that agreement was abandoned by the parties.
3. The Covenant should be extinguished pursuant to s 89(1)(a) and (c) of the Conveyancing Act.
[21]
Costs
It was agreed that the issue of costs should be deferred until after judgment had been given in respect of the substantive issues.
[22]
Form of Orders
The Club should within three days prepare and provide to the Council proposed form of orders reflecting the conclusions at [112] above but also including proposed orders in respect of costs. The Council should within a further three days advise as to whether it consents to or disputes the form of the orders contained in the Club's draft. If the Council disputes the form of orders it should provide to the Club its proposed orders (by track changes to the Club's draft). The Club should provide a copy of the agreed orders or disputed orders to my Associate by 10:00am on Wednesday, 16 December 2020.
I will list the matter (for hearing on the form of orders and directions in respect of the costs issue should there be no agreement on that) on Thursday, 17 December 2020 at 10:00am, but if agreement is reached, that date can be vacated.
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 18 December 2020
Parties
Applicant/Plaintiff:
Double Bay Bowling Club
Respondent/Defendant:
Council of the Municipality of Woollahra trading as Woollahra Municipal Council
Rein J ordered that the restrictive covenant (D796733) be extinguished as it affects Lot 9 (42 Glendon Road) pursuant to s 89(1)(a) and (c) of the Conveyancing Act 1919 (NSW). The Court held there was no binding agreement between Council and the Club to replace the covenant with a compensation-based Restriction based on the Before-and-After Method; alternatively, any such agreement was abandoned. Costs were reserved and directions given for the parties to propose form of orders (decision at [112] and form of orders directions).
It should be noted that the Covenant identifies that the "lands to which the benefit of this covenant is intended to be appurtenant are the lands comprised in and known as Glendon Road and Kiaora Road in the Municipality of Woollahra." In 1948 a restrictive covenant, even one obtained by a local council, had to benefit specific identified land.
Between 2015 and 2016 there were discussions between representatives of the Club and the Council concerning the Covenant. This was in the context of the Club's concerns as to declining membership and an associated decline in revenue. The Club in 2015 thought that it could build townhouses on Lot 9 and rent out these townhouses, thereby obtaining a degree of financial security for itself going into the future. The Club in the discussions with Council in 2015 indicated through two of its directors that it did not intend to sell the townhouses when constructed. The Council indicated a willingness to agree to effective removal of the Covenant, but was keen to ensure that if the townhouses were sold the Council would receive compensation in effect for removal of the Covenant. There is disagreement as to the outcome of those discussions, which I shall explain more fully below.
The Club seeks an order pursuant to s 89(1) of the Conveyancing Act 1919 (NSW) ("Conveyancing Act") that the Covenant be extinguished contending that it is "obsolete", that continued existence of the Covenant would impede the reasonable user of the land subject to the Covenant and extinguishment of the Covenant will not injure the Council, and that Council has by its acts or omissions waived the benefit of the Covenant.
The Council resists the claim for extinguishment on each of the grounds advanced by the Club. The Council also asserts that by an exchange of correspondence, the Council and the Club reached what the Council asserts was a binding agreement the terms of which were that:
1. the Council would agree to the removal of the existing Covenant;
2. the Club would agree to the imposition of a new "restriction" which would require the Club to pay compensation to the Council in the event that it sold Lot 9 or any of the townhouses to be built ("the Restriction"); and
3. the compensation payable to the Council would be determined by an independent valuer and based on the "Before and After Method" of valuation. This method requires an assessment of the value of the land with the restrictive covenant in place and the value of the land without the restrictive covenant in place and the Club to pay the Council the difference between those two figures.
Council's Closing Submissions ("DCS") at DCS 5 set out a convenient enumeration of the issues that remain for determination (estoppel and misleading and deceptive conduct having been abandoned by the Council) on the parties' respective cases:
"Section 89 claim
(a) Is the Court's discretion under s 89(1) of the Conveyancing Act 1919 (NSW) enlivened? This requires consideration of the following:
(i) is the Covenant now obsolete?
(ii) does the Covenant impede the reasonable user of the land without securing any practical benefit to the Council?
(iii) has the Council waived the benefit of the Covenant?
(iv) would the modification or extinguishment of the Covenant cause no substantial injury to the Council?
(b) If the answer to the previous question is "yes", should the Court exercise its discretion to modify or extinguish the Covenant over Lot 9? If so, should the modification or extinguishment be conditional or unconditional?
Successors in title
(c) Is the question of whether the Covenant binds successors in title to the Club a justiciable controversy, in circumstances where there is no such person in existence?
(d) If the answer to the previous question is "yes", is the Club entitled to a declaration that the Covenant does not bind successors in title to Lot 9?
Consent under the Covenant
(e) Has the Council, pursuant to the Covenant, given its written consent to the use of Lot 9 for any purpose other than recreational purposes in connection with a bowling club?
Clause 1.9A
(f) Does this Court have jurisdiction to determine whether cl 1.9A(1) of the
Woollahra Local Environment Plan 2014 (NSW) ("2014 LEP") applies to the Covenant?
(g) If the answer to the previous question is "yes", does cl 1.9(1) of the 2014 LEP apply to the Covenant?
Council's cross-claim
(h) Did the Council and the Club, by correspondence between October 2015 and May 2016, enter into a binding agreement?
(i) If the answer to the previous question is "yes", should the Council be granted specific performance of the Agreement?"
In respect of [8(h)] and [8(i)] above, many issues are advanced by the Club as to why it asserts that there was no binding agreement between itself and the Council and, alternatively, if there was an agreement why it is not enforceable. One of the matters pleaded by the Club was abandoned, namely the defence of common mistake: see paragraph 43 of the Plaintiff's Supplementary Submissions ("PSS").
In its case the Club led evidence from Mr Barry Lazarus, who was cross examined and who at all relevant times has been a director and chairman of the Club and the principal person acting on behalf of the Club in connection with the development of Lot 9 and negotiations with the Council. He is also a solicitor and his firm, Lazarus Legal, acts for the Club in these proceedings. To avoid confusion with references to Mr J Lazarus SC I shall refer to Mr Barry Lazarus as Mr B Lazarus.
I received from the Club two sets of written submission: the Plaintiff's Opening Submissions ("POS") and the Plaintiff's Supplementary Submissions ("PSS"). From the Council I received written Opening and Closing Submissions ("DOS" and "DCS").
The Club also relied on the evidence of Mr Robert Fetherston, who was for a number of years the greenkeeper of the Club, and Ms Jillian Sneyd, a town planner. Mr Fetherston was not cross examined.
The Council relies on the evidence of Ms Toni Zeltzer, Mr Tom O'Hanlon, Mr Tony Myers, Mr Zubin Marolia, and Mr Nick Economou all of whom are Council employees or officers. Ms Zeltzer, Mr O'Hanlon and Mr Marolia were cross examined.
The Council led evidence from Mr David Ryan, a town planner, and Mr Darren Keen, a valuer, both of whom were cross examined, and from a Mr Anthony St Leon who was not cross examined.
The evidence of Mr Ryan, the Council's expert, was to the following effect:
1. Mr Ryan accepts 19, (2), (3), (4), (5) and (9): see the Report of Mr Ryan dated 4 September 2020 ("the Ryan Report") at CB2 932, and see T205.45, T210.39 and T211.38.
2. Mr Ryan does not agree that the Covenant has become obsolete. He contends that use of Lot 9 for the purpose of housing a greenkeeper employed by the Club is incidental to a recreational purpose of the Club and therefore is a use that can continue to be made of any residential dwelling on Lot 9, i.e. the former cottage or the townhouses.
3. Mr Ryan is of the view that using Lot 9 as a residence for a greenkeeper will not adversely impact on the residential amenity of Glendon Road: see paragraph 93 of the Ryan Report at CB2 942.
4. The Club has not lost existing use rights to continue to use Lot 9 for a recreational purpose of a bowling club.
5. Whether or not the Club's greenkeeper resides at Lot 9 is just a matter of convenience not an essential part of his employment by the Club: T201.38-46.
6. Mr Ryan did not agree with 19 - in his view use of Lot 9 in accordance with the Covenant would not involve any increase in traffic and parking, and I take him to not agree with 19 and (13) because he thinks that use as a residence for a greenkeeper is still a residential use, albeit an ancillary purpose of the Club.
7. Whether the greenkeeper is employed solely by the Club or by other bowling clubs makes no difference as to whether his residence at Lot 9 is ancillary to the purpose of the Club (T201.50-202.14), nor would it matter that he lived there with his family (T202.43).
8. Mr Ryan thought that if the greenkeeper did any work for the Club that would make his occupation of Lot 9 an ancillary use for the Club: T203-204.
9. Mr Ryan posited the use of one of the townhouses as accommodation for a greenkeeper and the other for someone who has a connection or a role to play with the Club. He is of the view that the Council's approval of a dual occupancy to replace the cottage is not of itself evidence of abandonment or extinguishment of the ancillary recreational use: see paragraph 72 of the Ryan Report at CB2 940.
10. Mr Ryan contended that the Covenant imparts "a public benefit in providing recreational facilities to the local community accessible via Council's nominated roads": paragraph 74 at CB2 941.
11. Mr Ryan agreed that neither of the townhouses could be used as a clubhouse for the Club: see T208.36.
12. Mr Ryan agreed that:
1. the R3 Zone permitted dual occupancy;
2. existing use rights can only be relevant where the use being made of the land is not permitted by the current planning instrument;
3. there was no condition imposed by the Council requiring that Lot 9 be used only for recreational purposes or only for bowling club purposes (see T209.1-5 and T209.36-46); and
4. there is nothing in the new development on Lot 9 that has been adopted or designed for any bowling club purpose.
1. At T209.43 to T210.33 there was the following exchange between Mr Lazarus and Mr Ryan:
"Q. Once they've been completed and assuming an occupation certificate is issued, the new townhouses will be able to be lawfully used by anyone unconnected with the club, correct?
A. In, in a town planning sense, correct.
Q. In any sense?
A. Ignoring the covenant, yes, in any sense, yes.
Q. So this is right, isn't it, that the consent permits something to happen that the covenant prohibits, do you agree with that?
A. It permits something to happen that the covenant prevents, yes.
Q. Yes. In that it permits occupation for non-bowling club purposes, which is inconsistent with the covenant, correct?
A. The, the consent allows that to happen, but it doesn't preclude what the covenant requires.
Q. Please just focus on my question. The consent permits the use and occupation of those two townhouses for non-bowling club purposes, correct?
A. It does.
Q. That is a use of land that the covenant prohibits, doesn't it?
A. If, if those aren't used for the purposes of something like a, a greenkeeper's residence, then that would be right.
Q. I've asked you, on the basis for the assumptions, that it's not for bowling club purposes. Do you understand that that's the assumption that I asked you to assume?
A. Yes.
Q. You've agreed that the consent authorises the use of the these two townhouses for non-bowling club purposes?
A. Yes.
Q. So it must follow that the consent to that extent permits something to occur that the covenant prohibits?
A. Yes.
Q. Therefore, you must agree, mustn't you, that the consent is inconsistent with the covenant to that extent?
A. To that extent, it is."
1. Mr Ryan accepted that if existing use rights had been abandoned Lot 9 could not be lawfully used for any recreational use associated with a bowling club: T205.45-47, T211.49 and see T209-210.
2. This year Council embarked upon a rezoning of Lot 101 as a recreational zone but that did not, so far as he was aware, include Lot 9: T212.9-15.
In cross examination Ms Sneyd agreed or stated that:
1. The question of whether a restrictive covenant permitted use was quite distinct from whether a development consent approved a use (T166.19), save that Council could not, based on what the Covenant provided, approve a use that the zoning did not permit: T166.23-24.
2. The question of abandonment of existing use rights involves a consideration of intention (T166.41) and of the extent to which the further use is different to the use in place at the time of abandonment (T166.46).
3. Use of Lot 9 for residential purposes is unaffected as to whether it is used as a residence for a greenkeeper: T142.1-20 (i.e. use as a residence for a greenkeeper is permissible, not because the occupant is a greenkeeper, but because it is a residence).
4. The house on Lot 9 was converted into a Clubhouse from 1941 and converted back to a house in 1954 when the Clubhouse on Lot 100/101 was completed: T143.9-12.
5. "Recreational purpose" is not a term of art in the town planning field: T144.27.
6. In approving a development Council is not required to take into account whether or not the proposed development is permitted by a covenant: T145.
7. There was a change of use because whilst still residential it was for a dual occupancy rather than single: T148.31-33.
8. "Residential use" was a permissible use under the zoning at least from 1995: T149.17.
9. That there is no benefit to Council in respect of Lot 101 by reason of the Covenant remaining on Lot 9: T170.48-171.41.
10. Preservation of a space for use as a private recreational facility is of benefit to Council if it decides that is what it wishes to do as part of the service to its locality: T184.23-30.
Ms Sneyd was an impressive expert witness whose views I would readily accept, but in fairness to Mr Ryan, whose integrity and expertise were not impugned, the areas of dispute between him and Ms Sneyd identified in the DCS were quite limited and the major area of dispute revolved around the interpretation of the Covenant, which both he and Ms Sneyd agreed was a legal question, the use of Lot 9 and whether or not there was any benefit to the Council and the public in the maintenance of the Covenant, which largely centres around whether the effect of the Covenant on Lot 9 is to be considered separately to its effect on Lot 101, a matter which I will deal with at [70].
I proceed on the basis that:
1. Use of Lot 9 for the recreational purposes of a bowling club is prohibited under R3 Zoning now applicable to Glendon Road (and has been prohibited since 1995), save to the extent that existing use rights have been retained.
2. The question of whether the use of Lot 9 as a residence is a breach of the Covenant is a legal question, as is whether use of residence for a greenkeeper is ancillary to the use of Lot 9 for a recreational purpose.
3. When Council consented to the development of Lot 9 it imposed no condition restricting its use as a residential lot and use as a dual occupancy is permitted by reason of the Development Consent and the R3 Zoning, but that there is no agreement as to whether the consent of Council amounted to a waiver of the Covenant.
4. The matters in 19, (2), (3), (4), (5) and (9) and 20 and (11) are not in dispute.
The relevance of Mr Keen's evidence is said by the Council to be that a valuer could undertake the task that that the parties agreed was to be undertaken. The Club contends that Mr Keen's evidence establishes that the task the valuer was required to perform could not realistically be performed because:
1. assumptions had to be made which were incorrect, i.e. that the Covenant permits use of the cottage as staff accommodation, and that there are no townhouses on Lot 9 as at 2020;
2. Lot 9 could not be treated as being a "de facto recreational zoning" as Mr Keen has assumed.
3. the task which a valuer would have to perform would be so far from the task that a valuer would normally perform that the valuer would require input from a town planner and possibly legal advice; and
4. Mr Keen has assumed that the Club would be interested in leasing back Lot 9 at a rental double the market rental.
There was dispute as to whether the fact that the Club would not be willing to lease back Lot 9 (and hence remove the only viable option for use on Mr Keen's assumptions) means that the Spencer test could not be applied.
The Council referred to the decision of the High Court in Northern Territory v Griffiths [2019] HCA 7; (2019) 364 ALR 208. That was a case in which native title holders were entitled to compensation under s 51(1) of the Native Title Act 1993 (Cth) for "on just terms to compensate the native title holders for any loss, diminution, impairment or other effect of the act on their native title rights and interests". The trial judge and the Full Court had first determined the economic value of the native title rights and interests and estimated the additional, non-economic or cultural loss occasioned by the consequent diminution in the native title holders' connection to country. The plurality said at [84]-[85]:
"[84] That was an appropriate way to proceed. Just as compensation for the infringement of common law land title rights and interests is ordinarily comprised of both a component for the objective or economic effects of the infringement (being, in effect, the sum which a willing but not anxious purchaser would be prepared to pay to a willing but not anxious vendor to achieve the latter's assent to the infringement) and a subjective or non-economic component (perhaps the most common instance of which is an allowance for special value), the equality of treatment mandated by s 10(1) of the Racial Discrimination Act, as reflected in s 51 of the Native Title Act, necessitates that the assessment of just compensation for the infringement of native title rights and interests in land include both a component for the objective or economic effects of the infringement (being, in effect, the sum which a willing but not anxious purchaser would have been prepared to pay to a willing but not anxious vendor to obtain the latter's assent to the infringement, or, to put it another way, what the Claim Group could fairly and justly have demanded for their assent to the infringement) and a component for non-economic or cultural loss (being a fair and just assessment, in monetary terms, of the sense of loss of connection to country suffered by the Claim Group by reason of the infringement).
[85] Admittedly, there is a degree of artificiality about applying an adapted Spencer test in circumstances where it may be assumed that the Claim Group would not have been at all interested in selling their native title rights and interests and it is plain that no one could lawfully have bought them. But, at the same time, the native title rights and interests unquestionably existed and they had a recognisable economic worth which lay in the sum that might fairly and justly have been demanded for their lawful extinction in favour of the Crown. In those circumstances, it is no more artificial to seek to assess their economic value by means of the Spencer test of what a willing but not anxious purchaser would have been prepared to pay to a willing but not anxious vendor in order to buy them (or, more accurately, to obtain the latter's assent to their extinguishment) than it is to apply the Spencer test to the assessment of just compensation for the compulsory extinguishment of, say, a general law easement or profit à prendre".
The Council relies on [85] to support the proposition that the Spencer test can be applied even when there is in reality no likelihood that the vendor (i.e. the native holders in Griffiths) would have had any interest in selling their rights.
What appears at [85] in Griffiths does lend support to the proposition that Spencer can be applied even when there is unwillingness on the part of the vendor to sell but it is to be noted that the context which is described is "by means of the Spencer test of what a willing but not anxious purchaser would have been prepared to pay to a willing but not anxious vendor in order to buy them (or, more accurately, to obtain the latter's assent to their extinguishment)" (emphasis added). It will be observed that Mr Keen did not attempt to make any assessment of that kind because he was not asked to do so. The question of what a not overly anxious Club would pay for the extinguishment of the Covenant and what a not overly anxious Council require to be paid for extinguishment of the Covenant would involve an assessment of what benefit the Covenant gave to the Council or of some legitimate interest the Council wished to advance.
Even if the Club's clear lack of interest in, as part of the sale, leasing back Lot 9 at a rate double the rent payable in the area could be ignored, that lack of interest would presumably be relevant to any purchaser's interest, as would the Club's (as the only possible tenant) ability to meet the higher rental payments and the ability of the purchaser to sell the property in the event of default by the Club. No purchaser could realistically expect to sell Lot 9 if there was default by the Club and the two townhouses could only be used as a residence for a greenkeeper or other staff of a bowling club as the Council propounds. If my construction of the Covenant is correct, not even that use was permitted.
For the reasons I shall explain I do not think it is necessary to reach a conclusion on whether the valuation contemplated by the parties was really possible, but not only do I think that the evidence of Mr Keen throws up real doubt as to whether the task could be performed and certainly points to the fact that it could not be adequately performed by a valuer acting alone, his evidence demonstrates the artificiality of the process and the severe consequences to the Club if his valuation method met the requirements of the asserted agreement. On one view Lot 9 with the Covenant in place has no value. If Mr Keen had taken into account the value of Lot 9 with the townhouses in place the difference in value using the Before and After Method would have presumably been considerably higher than $3M.
Mr O'Hanlon was the director of technical services at the Council who reports directly to the general manager of the Council: T120.37.
Mr O'Hanlon asserted that Lot 9 "has and continues to serve a role, to support the continuing role of the Club - the other lot, as a site of community recreation": T124.17-19.
During cross examination of Mr O'Hanlon there was this exchange at T124.4-T125.28:
"Q. If you go to paragraph 18 you say there that:
"The site provides an important facility for active recreation, socialising and community gatherings particularly for older members of our community who are vulnerable to isolation and health issues associated with sedentary lifestyles."
That is a statement that relates only to lot 101 doesn't it?
A. I wouldn't say exclusively and to the extent that lot 9 supports that.
Q. The only important facility for active recreation, socialising and community gatherings that you refer to in paragraph 18 is the bowling club site on lot 101, isn't it?
A. I'm not trying to be difficult but I think that lot 9 has and continues to serve a role, to support the continuing role of the club - the other lot, as a site of community recreation.
Q. I see, so when you refer to an important facility for active recreation, socialising and community gatherings, there is nothing currently on lot 9 that could support any of those activities is there?
A. In the, in the arrangement that council sought to create in 2015 lot 9 was to provide an ongoing income source to the club to enable those activities which were occurring on lot 9 - to lot 101 to continue.
Q. No, you misunderstand my question with respect. All I'm asking you is, what is the position at the moment, or as at the time you wrote this sentence, and the fact is, isn't it, that there was no facility on lot 9 that provided for active recreation, socialising and community gatherings, correct?
A. There is no physical facility on that lot, that's correct.
Q. And you were referring exclusively in that sentence to lot 101, weren't you?
A. No, I was referring to both of them.
Q. Because it can only have been a reference to lot 101 because there was no such facility on lot 9?
A. At the risk of repeating my early answer, earlier answer, my view is that the other lot supports the activity on the larger lot.
Q. It supports the activity being a substantially complete dual occupancy development in what way?
A. It was envisaged by the club in their representations to council that that would provide an income source in the longer term specifically to support the activity of the bowling club.
Q. So, aside from providing an income source to the club from renting out those dual occupancies, leave that aside for a moment, there's no facility on lot 9 that provides for active recreation, et cetera, as you refer to paragraph 18, is there?
A. Agreed.
Q. To the extent that you refer to the source of income, rental income, for the club that would support the activities on lot 101, that's not as a consequence of the covenant. In fact, one needs the covenant to be released in order for those benefits to be obtained, do you agree?
A. Yes.
Q. Paragraph 19, you refer to the use of the site as a bowling club with open greens contributes to a greater sense of open space in a densely populated suburb. That's clearly exclusively a reference to lot 101 and not lot 9, isn't it?
A. Yes.
Q. The next sentence, "The site also provides significant areas of deep soil landscaping", that's also just a reference to lot 101, isn't it?
A. Yes.
Q. The final sentence, "This benefits drainage patterns in the local area which can be subject to flooding", that's also just lot 101, isn't it?
A. Yes.
Q. So, if I understand your evidence correctly, with the exception of the provision of income from lot 9, which would require a release of the covenant in order for that benefit to be made good, aside from that, there is no other benefit to the council referred to in your affidavit that derives from the covenant on lot 9?
A. That is referred to in my affidavit, no."
Mr Marolia gave evidence that he was not aware of the Club's DA in 2017. Mr Marolia in his Affidavit said that, had he seen the DA, he would have wanted to see imposed a condition in the terms set out in paragraph 138 of his Affidavit of 28 August 2020 (CB2 922):
"The current Lot 9 DP 32788 has an existing Covenant restricting the use of this land for recreational uses. Prior to the granting of an Occupation Certificate, the person with the benefit of this consent, being the owner of No 42 Glendon Road, be notified that Council will release the existing Covenant subject to Council imposing a new Covenant or restriction on the title on Lot 9 DP 32788 with the following conditions:
a) Should the land or any part of the land (including any strata lot) be sold or the covenant or restriction is modified or released, compensation will be payable to Council based on a valuation methodology, as agreed by Council and the Club;
b) The new covenant or restriction is to be in place prior to the removal of the existing covenant;
c) All of the Council's costs including but not limited to legal and registration fees are to be paid by the Club.
Note: The required wording of the new covenant is available from our Property & Projects Department. No Occupation Certificate must be issued until this condition has been satisfied."
Mr Marolia agreed that the reason he would have wanted a condition to that effect was because, in his view, the Covenant would have been inconsistent with the development the subject of the DA: see T127.47.
Lot 9 was not itself being used for a recreational purpose - i.e. no bowling was carried out on Lot 9 and there is no suggestion that the physical condition of Lot 9, even without the cottage upon it, was such that it could be used as a bowling green and it was not after 1954 being used as a clubhouse. It follows that the Club ceased to use Lot 9 in accordance with the Covenant from 1954.
Although I have concluded that the Covenant did not permit use of Lot 9 for any purpose other than recreational use as a bowling club and that using Lot 9 as a residence for a greenkeeper does not fall within that very specific requirement, I will address the question of whether, assuming that use of Lot 9 as a residence for a greenkeeper is an ancillary purpose, that supports the Council's case. Mr Ryan referred to the case of Foodbarn Pty Ltd v Solicitor-General (1975) 32 LGRA 157 to support his contention that using Lot 9 to house the greenkeeper was an ancillary use to use for recreational purposes of a bowling club.
Mr Lazarus contended that the question is not whether a prohibited use is ancillary to a permissible use but rather is the prohibited use an independent use of land, and he relied on Baulkham Hills Shire Council v O'Donnell (1990) 69 LGRA 404 to establish that using Lot 9 as a residence would not be permissible use of Lot 9 even if it were ancillary to the purposes of the Club. Reference was also made to Capital Club v Commissioner of State Revenue [2007] VSC 108; (2007) 17 VR 357 and Ashfield Municipal Council v Australian College of Physical Education Ltd (1992) 76 LGRA 151.
In O'Donnell (supra) the owner of the land had been using the land for extraction of soil and sand, then commenced operating the land as a riding school and the extraction of sand and soil continued on, it was claimed, an ancillary use. The trial judge, Holland J, had held that the extraction use was not permitted. Meagher JA (with the concurrence of Samuels AP and Clarke JA) in rejecting the appeal said at 409-410:
"Notwithstanding the principles laid down in Foodbarn, it does not follow that a use which can be said to be ancillary to another use is thereby automatically precluded from being an independent use of the land. It is question of fact and degree in all the circumstances of the case whether such a result ensues or not. When a resident uses his land to park his motor car at his house, he is no doubt not conducting an independent use of car parking; when an employer installs at his factory a canteen for his workers, no doubt he is not conducting an independent use of running a restaurant; when the Clarks grew vegetables for their table they were not conducting an independent use of vegetable growing. But when one use of the land is by reason of its nature and extent capable of being an independent use it is not deprived of that quality because it is "ancillary to", or related to, or interdependent with, another use. If a book publisher opens a sales room at his publishing house to sell his products, the selling of books is an independent use although ancillary to the use of publishing. The series of cases dealing with dual uses (of which the decision of this Court in Warrinqah Shire Council v Caltex Oil (Australia) Pty Limited (1989) 68 LGRA 206 is an example) illustrate the point: they show that a "convenience store" and a petrol station are two independent uses, although the former is clearly ancillary to the latter. This is a fortiori the case where the "ancillary" use has predated the use to which it is said to become ancillary and when it has done so in circumstances where it was initially not "ancillary" to any other use."
An application of the principle in O'Donnell is found in Ashfield (supra) per Pearlman J. A college owned an educational establishment and on the other side of the road they owned two houses which were used as boarding houses which provided residential accommodation to students at the college. The Court held at 156 that:
"Rather, use of a boarding house for students and staff could be said to be ancillary to use for the provision of education in a building across the street, but, nonetheless, unless it can be shown that the boarding house use, though ancillary or incidental, is not independent, it is nevertheless prohibited. In other words, though use as a boarding house may be ancillary to use as an educational establishment, the boarding house use is not thereby automatically precluded from being an independent use (see Baulkham Hills Shire Council v O'Donnell (1990) 69 LGRA 404 at 409). In my judgment, in this case the boarding house use, though it may be an ancillary or incidental use, is nevertheless an independent use. The houses are used only for residential accommodation (with some private study facilities in the bedrooms) and not for teaching, and they are on the opposite side of the street. Though the boarding house use is ancillary, it is independent, and it is prohibited (see Foodbarn Pty Ltd and Ors. v Solicitor-General (1975) 32 LGRA 157 at 160)."
Another case, Capital Club (supra), is relied on by the Club. The Victorian Land Tax Act 1958 exempted land which "exists for the purpose of providing or promoting cultural or sporting recreation or similar facilities or objectives." An issue arose in the case as to whether the fact that the residence of the greenkeeper and assistant greenkeeper (employed by the Club) were used for the purpose of providing sporting facilities. Mandie J at [58] said:
"In my opinion it is clear that the provision of residential accommodation for the greenkeeper and assistant greenkeeper is not to be fairly regarded as ancillary or incidental to the use of the land as a whole for a golf course, no matter how convenient it may be to have these employees living close at hand. The evidence shows I think that it was not necessary, as opposed to convenient, for the greenkeepers to live on the golf course land. In any event I think that the provision of residential accommodation is a domestic or private matter that cannot be treated, in the context of the exemption, as ancillary or incidental to the use of the land for outdoor sporting activities. I conclude that the residential land is not exempt from land tax."
In Foodbarn the relevant planning scheme prohibited use for "shops". The appellants were operating a supermarket style business, particularly directed to the wholesale trade but retail buyers were also able to purchase goods. The Court of Appeal Glass JA (with whom Samuels and Huntley JJA concurred) upheld the trial judge's decision that the sale of goods by retail was a subsidiary purpose for which the premises were being used and that the appellants were in breach of the planning instrument. The definition of shop was:
"'Shop' means a building or place used or intended for use for the purpose of selling, exposing or offering for sale by retail goods, merchandise or materials, but does not include a building or place elsewhere specifically defined in this clause or a building or place used or intended for use for a purpose elsewhere specifically defined in this clause or for a roadside stall."
His Honour said:
"The second submission was that the phrase should be construed so as to mean for the dominant purpose of selling etc. Reliance was placed on two decisions: S. Wallace Pty Limited v. Sydney City Council [(2)] and Cecil E. Mayo; Pty Limited v. Sydney City Council [(3)]. It is true that the latter decision [(4)] describes the former as having turned on the question whether the new use was "a use within the same dominant purpose". But no countenance is given to a general proposition that, where premises are used for two purposes, that which is not dominant is for planning purposes to be disregarded. The weighing of purposes was there undertaken in the course of deciding what use was being made of premises on which stood buildings used to store vehicles and plant in connexion with the business of carrier and also used to store produce for the customers of that business. There was a cottage used as the residence of a caretaker of the premises plant and produce. The purpose of the cottage was held to be industrial being ancillary to the dominant purpose gathered from a consideration of the character of the whole enterprise. In similar fashion it has been held that the use of a power-driven bottling machine which would be an industrial activity under normal circumstances would not be so classified if merely ancillary to a retail business (Mollica v. Marrickville Municipal Council [(5)]). It may be deduced that where a part of the premises is used for a purpose which is subordinate to the purpose which inspires the use of another part, it is legitimate to disregard the former and to treat the dominant purpose as that for which the whole is being used. Doubtless the same principle would apply where the dominant and servient purposes both relate to the whole and not to separate parts."
That statement was cited with approval by Gibbs CJ in Lizzio v Ryde Municipal Council (1983) 155 CLR 211 at 216-217.
It is true that a caretaker's cottage on the land on which a factory is located can be seen as incidental to the industrial use of land, but the fact that here Lot 9 which was always residential (except for a brief period between 1948 and 1954 when it was used as a temporary clubhouse) was used as a residence of the greenkeeper does not make the use of Lot 9 anything more than residential use of the land - it does not render it a recreational use within the principle of Foodbarn. It needs to be borne in mind that Lot 9, unlike the property in Foodbarn, did not have two parts, one being used for a purpose which inspires the use of another part. The only use of Lot 9 was as a residential cottage for an employee/ contractor retained to look after the Club's greens on Lot 101.
The Council, in addition to Foodbarn, drew attention to Essendon Corporation v Cox [1967] VR 545 in which it was held (per Adam J) that even if land is used for a purpose that is not of the character of "outdoor sporting or recreational purposes", if the immediate and direct purpose served by the use of the land is "fairly to be regarded as merely ancillary and incidental to those purposes" that is sufficient.
I think that Cox would support the use of Lot 9 as a clubhouse since, whilst that does not see members using the land as a bowling green, a clubhouse is merely ancillary or incidental to the recreational purpose of bowling. The use of a cottage as a residence however is a separate use which, whilst convenient if the person residing is a greenkeeper employed by or contracted to the Club, is not merely incidental or ancillary to its use as a bowling club since it (i.e. Lot 9) is not used as a bowling club at all or for the recreational purposes of a bowling club.
It follows that even accepting that use of land for a recreational purpose should be accorded a meaning akin to that utilised in planning instruments, renting a cottage to the Club's greenkeeper is a "matter of convenience" rather than an "essential" matter and it would not meet the requirement of an ancillary or incidental use of Lot 9 as a recreational purpose.
I will also deal with a further issue of construction, which is whether the Council consented in writing to the Club not using Lot 9 in accordance with the Covenant by its grant of the Development Consent - i.e. whether the consent given pursuant to s 81(1)(a) of the EPA is sufficient consent for the purpose of the Covenant or whether a separate consent is required because the Covenant provides (CB3 1262):
"And that the approval herein mentioned is in addition to and not in substitution for the approval mentioned in Division 4 of Part XI of the Local Government Act 1919-1946…"
The only "approval" to which the words "the approval herein mentioned" can be referring is the approval to designs and materials and heights which is to be in additional to and not in substitution for the approval mentioned in Division 4 of Part XI of the LGA. There is in the words of the Covenant in this section (and in contrast to the legislation dealing with modification) no reference to "or similar future legislation" or "legislation of a similar kind", and so as a matter of construction of a private contractual term imposing a restriction on the use of land, I do not think words such as these can be read into the Covenant: see HDI Global Specialty SE v Wonkana No. 3 Pty Ltd [2020] NSWCA 296 at [44] per Meagher JA and Ball J (with whom Bathurst CJ and Bell P agreed) and [120] per Hammerschlag J (with whom Bathurst CJ and Bell P agreed) for a recent example of the rejection of the contention that a reference to an act (there the Quarantine Act 1908 (Cth)) included a reference to similar subsequent legislation. .
I have indicated that the question of whether the Covenant is obsolete or impedes the reasonable user of the land and whether its extinguishment would cause any substantial injury to the Council needs to be considered only in relation to Lot 9.
The Council (at paragraph 9 of DCS) draws attention to the words of Mason P in Durian (Holdings) Pty Ltd v Cavacourt Pty Ltd [2000] NSWCA 28 at [4]-[6]:
"The section is to be applied according to its terms, read fairly and without disregarding the conventional approach to legislation affecting common law property rights. The starting point is the [covenant] itself, its terms and its objects derived from construing those terms in context and bearing in mind that the [covenant] was created for an indefinite future and destined to enure in a changing environment … the power is not available for the purpose of expropriating private rights for profit. [references omitted]"
The Council relies on Driscoll v Church Commissioners for England [1957] 1 QB 330. Driscoll was a lessee of a group of substantial size homes that had been built for the well-to-do. By the time Mr Driscoll bought the leases there was a very limited demand for such homes and many of similar homes owned by the Church had been converted with the Church's consent into flats or guesthouses. Mr Driscoll was using the houses as hostels and residential clubs for overseas students for which the Church Commissioners had not given permission. The covenant was a covenant "not to use the premises for any trade or business or otherwise than as a private dwelling-house save with the previous written consent of the lessor."
The Lands Tribunal held that the covenant was not obsolete and did not impede the reasonable user of the premises, and Mr Driscoll appealed. The appeal was unanimously rejected (Denning LJ, Hodson and Morris LJ). Denning LJ said at 341:
"When the premises were originally let in 1865 or 1867 it was undoubtedly contemplated that they should be used as single private dwelling-houses only; but at the present day, if they are to be used at all, there has got to be a departure from that purpose which was originally contemplated: they must be turned into flats or into guest houses. In one sense, therefore, the covenant is obsolete, because it can be said no longer to serve the purposes originally contemplated; but, as Sir William FitzGerald says, the covenant still serves a useful purpose in another way: it enables the landlords, the Church Commissioners, to keep control over the use to which these houses are put. It enables the landlords to keep the area as a residential area, instead of being used, as it might have been, for commercial purposes. It seems to me that, so long as the landlord uses this covenant reasonably for a useful purpose, then, even though that purpose goes beyond what was contemplated 90 years ago, the covenant is not obsolete; whereas, if the covenant is shown no longer to serve any useful purpose, then, of course, it is obsolete. And in considering whether it still serves a useful purpose, I think it very important to see the way in which the landlord, or whoever is entitled to the benefit of the covenant, has used it in the past and seeks to use it in the present. If he uses it reasonably, not in his own selfish interests but in the interests of the people of the neighbourhood generally - as, for instance, when he gives his consent for any reasonable change of user - then it will serve a useful purpose. I should have thought that if he uses it unreasonably - for instance, to exact a premium as a condition of his consent; or if he refuses consent altogether when he ought to give it - as, for instance, for turning the house into flats - it would no longer serve a useful purpose. In short, so long as the landlord uses the covenant reasonably in the interests of the public at large it is not obsolete, but, if he seeks to use it unreasonably, then it is obsolete."
(Emphasis added).
The Council relies on this case in support of the proposition that it will be sufficient to negate obsolescence if a covenant will preserve the residential character of the area. There are three problems, however, with that submission:
1. the Covenant does not promote the residential character of the area since it is directed to a recreational use as a bowling club, a use currently prohibited by the zoning (save and unless existing use rights have kept it alive);
2. the benefit of having a bowling club relates to Lot 101 not Lot 9. The Council's submissions refer to "the preservation of the character and amenity of the area" being in "an open area": see T295.14-26. The open area is on Lot 101. Lot 9 has since the 1920s had a residential dwelling erected on it;
3. Denning LJ was of the view that use of the Covenant to "exact a premium as a condition of his consent" demonstrates that the Covenant "would no longer serve a useful purpose" - and that is precisely what the Council seeks to do here.
As Jacobs J observed in Re Mason and the Conveyancing Act [1962] NSWR 762 at 766 after referring to earlier English cases:
"It is made clear in these cases that there is no general power given to the Court to extinguish presently valuable rights of property. The purpose of the section is to enable covenants which have no practical utility to the land intended to be benefited to be removed and thus to clear the title. In other words, it is not a section which includes in any part of it any element of town planning."
In Re Robinson [1972] VR 278 Adam J determined that the fact that the land in question there could not be used for shops as the zoning allowed but the Covenant prohibited and could not be used for residential use which the Covenant permitted but the zoning prohibited was a material circumstance enlivening the description of impeding the user, but he held that the applicant had not established that the Covenant did not secure practical benefits to the owners of adjourning properties who had a legitimate interest in blocking the use of the subject property for shops and who would incur a substantial injury: see 282-283. As the Council points out the issue of "practical benefits" and "substantial injury" are quite similar questions: see DCS at paragraph 81, and see Re Mason (supra) at 928.
In my view, the Covenant has become obsolete because Lot 9 has (except for the period between 1948 to 1954 when it was used as a temporary bowling clubhouse) always been used as a residential dwelling, and not used, for example, as a bowling green or clubhouse or office administration centre. To require Lot 9 to be used to house a greenkeeper even before the cottage was demolished and even more obviously after it has been demolished and replaced with a dual occupancy in accordance with Council's consent, is to impede a reasonable user of Lot 9 as a residential dwelling. The only reasonable use of the land now because of R3 Zoning is the occupation of the two townhouses as residences. To insist, as the Council seeks to do so, that Lot 9 be used for the recreational purposes of a bowling club is to insist on a use that is prohibited by the applicable zoning. The Covenant does not, I have concluded, permit use of Lot 9 as a residence. It is relevant that the Council was quite willing from 2015 at least to have the Covenant removed (albeit for a price) because it demonstrates that the Council did not see any point in retaining the restrictions contained in the Covenant. It is also not insignificant that the Council in 1980 was willing to see the Covenant removed in respect of Lot 100 (an area of 3,254m2) when it was divided from Lot 101 and permitted by the Council to be used for the construction of up to 12 dwellings (see CB3 1610); what the Council then required was the payment of $153K either by the developer or the Club in respect of loss of a parcel of open land. Lot 9 which had a residential cottage on it and now has two townhouses on it has an area of approximately 500m2.
To require a greenkeeper to live in the former cottage or now in one of the two townhouses achieves no practical benefit to the Council. That is to say having a greenkeeper and his family in the cottage cannot make any difference to the amenity of the area compared to having another person occupying Lot 9 (whether renting from the Club or as an owner of the Strata Title lot). There is no suggestion that traffic would be increased because the occupant was not a greenkeeper or was an owner occupier rather than a lessee. No benefit or advantage to Kiaora Road or Glendon Road arising out of the Covenant or as a result of a change in identity of the occupiers of Lot 9 has been identified. Neither the public nor the members of the Club had or will have access to Lot 9 if it is used as a residence for a greenkeeper or anyone else connected with the Club. Sale of the townhouses or rental of them both or of one of them will not lead to any other use of Lot 101 save perhaps that if the Club survives financially there is a greater prospect of the Club continuing to operate its bowling club on Lot 101. A continued restriction on the Club's use of Lot 9 in this form claimed by the Council in the present context would mean, for practical purposes, the stultification of at least one of the townhouses and possibly both and the possible demise of the Club. These comments apply even if, contrary to my earlier conclusion, the Covenant does permit use of the cottage as rental residence for the greenkeeper.
In relation to the question of substantial injury to the Council I should note that the Council had maintained that its interest in the compensation for the costs of the Covenant was a legitimate interest which should be taken into account in determining whether the Covenant should be extinguished. The Club relied on authority which rejected the availability of such an interest as a reason to maintain a restrictive covenant (see Stockport Metropolitan Borough Council v Alwiyah Developments [1983] 52 P&CR 278, and Butt's Land Law (B. Edgeworth, Thomson Reuters, 7th ed, 2017) at [10.870]) and the Council in closing submissions abandoned any argument based on that claim: see T249.25. The Council did not in 2015 identify any reason why the Covenant should not be removed except in effect as a means of extracting compensation from the Club or the developer and no amenity or town planning considerations, for example, were advanced as an obstacle to the development of Lot 100 in 1980. In these proceedings the only real benefit to which Council has pointed have been matters relating to Lot 101 and the financial benefit of receiving payment as the price for removal of the Covenant and the latter "benefit" was, as I have noted, abandoned in final oral submissions. The emphasised passage from Driscoll to which I referred earlier is pertinent here. The wide range of matters identified by McLelland CJ in Webster v Bradac (1993) 5 BPR 12,032 as constituting possible benefit do not assist the Council. This is not a case like Driscoll or Re Truman, Hanbury, Buxton & Co Ltd's Application [1956] 1 QB 261 where, although the neighbourhood has changed there were still those benefitted by the Covenant who would be seriously injured if it were extinguished. I am not persuaded any practical benefit would be lost, or that there is any likelihood of any injury to the Council, by reason of extinguishment of the Covenant, has been established.
The Club also asserts that the Council has waived the benefit of the Covenant. If I am correct in interpreting the Covenant as precluding Lot 9 for use as a residence then Council's failure to object from 1954 until 2017 and its consent to the development application in 2017 point to a lack of interest in maintaining the Covenant. On the other hand, the Council did in 2011 and again in 2015 make it clear to the Club that it would not agree to removal of the Covenant without extraction of compensation. There is also a question of whether the Council has been shown to have had knowledge as to the use being made of Lot 9 from 1954 onwards. I do not think it is necessary to determine the issue of waiver, but it is relevant that, even in 2011 and 2015 and again now, the Council is willing to remove the Covenant provided it receives "compensation" for so doing, so that it would not appear to see any significance for town planning purposes that the Covenant will no longer be in force. That is also consistent with the position the Council took in relation to Lot 101 in 1981: see [15(10)] to [15(12)] above.
The next issue addressed was discretion, it being agreed that even if the Court is persuaded by any of the grounds in s 89 advanced by the Club, the Court retains a discretion not to extinguish the Covenant: see Frasers Lorne Pty Ltd v Joyce Goldsworthy Burke [2008] NSWSC 743; (2008) 14 BPR 26,131, and Laris (supra) at [75].
The Council relies on three matters which it says should lead the Court not to exercise its discretion in favour of extinguishment:
1. The Covenant is a valuable proprietary right for which it has bargained.
2. The Club's current problems are of its own making because it knew in 2015 that it needed to obtain the Council's consent to remove the Covenant and went ahead with the development of Lot 9 without that having occurred.
3. The Club made an agreement with the Council from which it now seeks to resile. The Court should only permit the extinguishment the Covenant on condition that the Club execute the documents which the Council has put to the Club by HWL's letter of 14 February 2020.
The Club's response to these submissions is that:
1. The Club accepts that a Court can refuse relief as a matter of discretion, but submits that there would need to be some powerful discretionary matters to deny the applicant the relief for which the section provides. The Club did not in its submissions (the POS) accept that the Covenant was a proprietary right because it asserts that the Covenant was in reality a town planning measure. The Council contended that that argument went beyond the Club's pleaded case. I do not need to resolve the issue and proceed on the basis that the Covenant is a proprietary right.
2. Most restrictive covenants would be imposed as part of the bargain arrived at by vendor and purchaser of the land. It cannot be a discretionary factor to refuse relief.
3. The present situation is not at all comparable to Frasers Lorne. That was a case in which the owner of the burdened land applied to Council without any reference to the owner of the benefited land. Here the Club changed its mind between 2016 and 2019 when circumstances changed and when those new circumstances led Mr B Lazarus and the Club to appreciate how onerous the conditions that the Council had sought to impose were - the conditions being, the Club asserts, "unconscionable", "unworkable", "inequitable", "grossly unfair", and "indeed penal" in circumstances when the Council is not entitled to compensation and the Restriction if imposed would give it a windfall: T270.21-44 and, in contrast to Frasers Lorne, the Development Application here was made to the Council (i.e. the covenantee) and the covenantee consented to that application.
4. Conditions of the type sought by the Council cannot be imposed: see Loclot Pty Ltd v Pullen [2003] NSWSC 67 per Gzell J. The Club contends that it should not be required to pay anything because the Council is not losing anything.
In [76] and [77] of Laris (supra) Slattery J refers to the question of onus in relation to exercise of discretion once jurisdiction is established and the fact that the onus may differ depending on the circumstances.
Given that most restrictive covenants and easements are created by agreement the fact that the Covenant arose by agreement between the Council and the Club is not, in my view, a reason of its own to exercise a discretion against extinguishment when the conditions for extinguishment otherwise have been established. In Re Markin; Re Roberts [1966] VR 494 at 498 Gillard J expressed the view that the Court should exercise a "strong bias" against a covenantor seeking to resile from his bargain. Whilst these words may be seen as no more than an expression of the same need for caution which was indicated in Durian (supra) and Re Mason (supra) including the fact that the covenantee will be deprived of a proprietary right, they appear to go further. With respect, I am not inclined to accept that the Court should approach statutory provisions with a strong bias against an applicant when no such bias is mandated by the terms of the legislation but even accepting that such a bias is appropriate, I would regard the complete absence of any demonstrated utility or prejudice to the Council here as sufficient to overcome it.
So far as the assertion that the predicament in which the Club finds itself is of its own making is concerned, it is true but only up to a point. The Council is not in any way responsible for the Club's additional expenses due to litigation with its neighbour, nor is it responsible for increased building costs, and the Club's change of mind from wishing only to rent and moving to a wish to sell at least one of the townhouses and possibly both. It is also true that the Club was made aware that the Council was only willing to release the Covenant if the Club paid it compensation and that, in a context where the Club thought it could improve its position by renting the townhouses, it suited the Club. Mr B Lazarus was focused on the prospect of renting the townhouses not selling them, which might account for his failure to discern the consequences of the Council's proposed method; he and the Club may have acted most unwisely in indicating willingness to accept that method since it is a method which:
1. would give to the Council a massive pay out ($3M on Mr Keen's assessment and probably more than that) for the Council giving up a right to insist on Lot 9 being used as a greenkeepers residence on Council's case with no identifiable benefit to Council, the area, or to Kiaora Road and Glendon Road;
2. would require payment of the $3M (on Mr Keen's assessment and probably more than that) even if the development of the site actually yielded no profit to the Club at all; and
3. is in effect a back door method of the Council resisting extinguishment for a reason that the authorities say is not to be taken into account: see the cases referred to in [84] above, and which the Council has expressly eschewed in closing submissions.
It is relevant, in my view, that the Before and After Method was presented by the Council to the Club as being in the interests of both parties and "fair and equitable" to both the Council and the Club (see [16(2)] and [16(5)] above). Ironically in advising the Club by its letter of 18 November 2015 that the Council did not agree that the rate value was not appropriate (see [16] above) the Council advanced as the reason for its position that it would be detrimental to "the financial outcome" of the Club. Council's adherence to the Before and After Method of valuation and its maintenance of that position in the present proceedings promotes an outcome extremely prejudicial to the Club's financial position.
Whilst it is true that the Club is now in a far more awkward position than it was in 2015 because it embarked upon the construction program, the essential problem of the Covenant has not changed - the Council's position is no different to that which it took in 2015 - and had the ramifications of the approach proposed by the Council been understood, the problem could have been addressed by the Club at that time proceeding to seek to have the Covenant extinguished. I do not see the present situation as in any way comparable to that in Frasers Lorne; here the Club lodged the DA with the Council (and Council approved it) so there was no attempt to hide from the Council what the Club was seeking to do. That the Council did not have a means of ensuring that its officers were aware of restrictive covenants benefiting the Council is not the Club's fault.
On the issue of whether conditions can be imposed, although Loclot (supra) seems to reject that possibility, in Fincob Pty Ltd v Campbelltown City Council [2010] NSWSC 349 White J accepted that the Court could require placement of a new easement on another site as a condition of extinguishment of an easement pursuant to s 89(1)(c), and see also Effeney v Millar Investments Pty Ltd [2011] NSWSC 708 per Ward J as her Honour then was. The Council's argument, however, is based on a conclusion that there is a binding agreement between the Club and the Council, a conclusion which, for reasons I shall articulate, I do not accept. Further, what is proposed is not another restrictive covenant impeding the use of Lot 9, but rather a condition that requires the payment of money to the Council.
The Club was founded for the recreational activities of bowling and it is an amenity which the Council claims it is interested in supporting and yet the Council sought, and continues to seek, a result that would have grave consequences for the financial wellbeing of the Club, and possibly even its demise. I accept that the Council has always been open with the Club in regard to what it demanded as the price for relinquishment of the Covenant, but the price sought was, and is, in my view out of all proportion to what the Council is giving up and no alternative less exorbitant price has been suggested by the Council. It is a price based not on what the Covenant is worth to the Council or residents of the municipality but what the benefit will be to the Club if the Covenant is removed. In all of the circumstances, I am persuaded that the discretion should be exercised in favour of extinguishment of the Covenant.
It follows that in my view the Council has consented to Lot 9 being used in breach of the Covenant. I accept that the officers granting consent were not aware of the Covenant or the discussions that other officers of the Council had held with the Club, but the Council is a single legal entity and it must be presumed to be aware of what "assets" it holds.
Whether that consent constitutes a waiver of the Covenant for the purposes of s 89(1)(b) is, however, a more difficult question since the Council had made clear its position in 2015 and the Club cannot assert that it was not aware of that position. Because of my conclusions in respect of s 89(1)(a) and (c), as I have indicated previously (see [85]), it is not necessary to express a concluded view on this point.
I should add that the DCS place reliance on earlier "agreements" made between the Council and the Club (for example relating to the payment of legal fees in 2011), but the subject matter of those earlier agreements was not the creation or disposition of an interest in land that required documentation to be lodged at the Land Title Office.
Section 54A of the Conveyancing Act relevantly requires that proceedings cannot be brought in respect of a disposition of land unless the agreement or some memorandum or note thereof is "signed by the party to be charged or by some other person thereunto lawfully authorised by the party to be charged." The Council accepted that the removal of the Covenant and the creation of the Restriction amounted to a disposition of an interest in land and that writing and signature was required. There are four issues facing the Council:
1. There is no evidence that Ms Van was lawfully authorised by the Club to enter into a binding agreement on behalf of the Club and the Council in the terms asserted by the Council. As I have indicated she was communicating as a solicitor on her client's instructions on a narrow question.
2. The incompleteness of the exchange of correspondence.
3. The Club's constitution provided how contracts and agreements were to be entered into by the Club: see cl 58 at CB4 2294-2297 and cl 98 at CB4 2309.
In relation to [107(1)], in Pavlovic (supra) at [137]-[139] Beazley P (with whom Bathurst CJ was in general agreement and with whom Meagher JA agreed) said:
"[137] It is well settled, and was acknowledged by both parties, that solicitors have the authority to conduct negotiations on behalf of their clients as to the terms of a contract between parties: see Pianta v National Finance & Trustees [1964] HCA 61; 180 CLR 146; Nguyen v Taylor (1992) 27 NSWLR 48; Summit Properties Pty Ltd v Comserv (No 784) Pty Ltd (1981) 2 BPR 9173 at 9176 per Street CJ. In Pianta Barwick CJ, at 152, explained the position as follows:
So far as the solicitor is concerned, however, the terms of his retainer are clearly enough defined in the evidence. He was retained, in the capacity of a solicitor, to settle written terms of sale which he could advise his clients to accept and sign. For this purpose, he could negotiate and agree with the representatives of the respondent the terms which the respondent could be expected to accept or, if the representatives were so authorized, which they could accept on behalf of the respondent and which the solicitor could advise his clients as satisfactory in their interest. But this does not confer on the solicitor authority to contract on behalf of the clients to sell the land. If he is to have that authority it must be given expressly or by necessary implication.
[138] Menzies J pointed out, at 154, that without "clear and cogent evidence", a solicitor's authority does not extend to the authority to bind one's client to contractual obligations. See also Kent v Hogarth [1995] QCA 472 per Pincus JA at [11].
[139] The principle was stated succinctly by Street CJ in Summit Properties v Comserv (N0 784) at 9176:
Authority to negotiate terms and to make arrangements for execution falls short of authority to commit the client fully to a contractual obligation …"
Here there is no clear and cogent evidence that Ms Van was authorised to contract on behalf of the Club.
The issue at [107(2)] is a further answer to the Council's claim. The letter of 19 May 2016 does refer to an earlier letter of 18 November 2015 and I have held that the 13 November 2015 letter is implicitly referred to so it is certainly permissible to look at all three of these communications to ascertain the terms, but the letters of 13 and 18 November 2015 and the email of 19 May 2016 taken together do not contain all of the terms of the agreement for which the Council contends which is a requirement for the purpose of s 54A: see Thomson v McInnes (1911) 12 CLR 562, Harvey v Edwards Dunlop & Co Ltd (1927) 39 CLR 302, Australia & New Zealand Banking Group Ltd v Widin (1990) 102 ALR 289 (Hill J, with whom Wilcox and Foster JJ concurred), Butt's Land Law (supra) at [4.210], and Heydon on Contract (J. D. Heydon, Thomson Reuters, 2019) at 6.320. The two letters and the email do not refer to the Council's agreement to release the Covenant or to the Council's requirement that the Club pay all legal fees.
In view of the other matters identified, it is not necessary to give consideration to [107(3)] above.
In relation to the second point at [103(b)] if, contrary to my conclusion, there was a binding agreement, then in my view the parties objectively must be taken to have abandoned the agreement:
1. The Club on four occasions sought the documents to progress the matter (i.e. on 19 May 2016 (CB4 2659), on 26 August 2016 (CB4 2722), on 10 November 2016 (CB4 2821) and on 23 November 2016 (CB4 2820)) and the Council did not provide any documents as requested. The Club had made it clear that it wanted the Covenant removed before it submitted a DA to Council: see CB4 2614 (the letter of 13 November 2015). The Club submitted the first DA in late 2016 and then, having withdrawn that on the suggestion of Council, submitted the second DA on 18 July 2017.
2. In 2017 the Club lodged its application for Development Consent and the Council did not indicate that it required execution of documents constituting removal of the Covenant and imposition of the Restriction before approving the DA and granting consent.
3. In neither the Council's letter of 14 February 2020 (see [16(21)] above) nor in HWL's letter to the Club was it asserted that there was a finalised contract all the terms of which had been agreed, rather:
1. there was the assertion that until the parties should "agree on a methodology for the determination" or the Covenant will not be released: see [16(21)] above;
2. HWL's letter contained terms that had not been discussed previously; and
3. in its letter of 14 February 2020 HWL asked the Club to advise whether the Club was agreeable to "now obtain determination of the compensation amount": see [16(21)] above. The requirement that the Club pay compensation even before completion of the townhouses, let alone sale and let alone the receipt of the sale proceeds would place an additional significant burden on the Club.
1. The Club's letter to the Council of 16 January 2020 (see [16(18)] above) was the first letter after more than three years from the Club to the Council. The letter does not, as the DCS asserts, seek implementation of the agreement which the Council says was made on 19 May 2016, but rather is focused on the recommendation in the Council's committee report that the Covenant be removed and made no reference to the Restriction or to compensation. It seems that by his letter of 16 January 2020 Mr B Lazarus was endeavouring to obtain the benefit of release of the Covenant without the Club having to pay the price that Council had previously indicated it would require.
2. The Club's letter to the Council of 28 April 2020 (see [16(22)] above) sought agreement to removal of the Covenant without any compensation payable.
3. Neither party, at any time between May 2016 and May 2020, asserted reliance on a binding agreement said to have been created in May 2016 and the Council did nothing to promote or finalise this agreement. November 2016 was the last occasion on which the Club called on the Council to provide the documents necessary to achieve release of the Covenant, at least. The words of Dixon CJ and Fullagar J in Fitzgerald v Masters (1956) 95 CLR 420 at 432 (set out in paragraph 281 of the POS) seem apt here:
"There can be no doubt, where what has been called an "inordinate" length of time has been allowed to elapse, during which neither party has attempted to perform, or call upon the other to perform, a contract made between them, it may be inferred that the contract has been abandoned …".
See also Summers v Commonwealth (1918) 25 CLR 144 at 151-152 per Isaacs J.