Hosking & Anor v Haas & Anor

Hosking & Anor v Haas & Anor - [2009] NSWSC 1328 - NSWSC 2009 case summary — Zoe

[11]

Further evidence and submissions 2 After the first judgment was delivered on 3 July 2009 the matter was adjourned to facilitate the giving of notice of the plaintiffs' claim in respect of a Scheme to the relevant Council and other registered proprietors of Lots in the Estate. The regime for that notice included the provision of the following options to the Lot owners: (1) to make application to become a party to the proceedings; and/or (2) to make submissions in the proceedings; and/or (3) to prepare and file an affidavit or otherwise call evidence in these proceedings. The regime also allowed the plaintiffs' solicitor to file an affidavit dealing with any communications with the other Lot owners in the Estate. 3 The matter was listed for further directions on 28 September 2009. On that occasion it was noted that: (1) the plaintiffs relied upon the affidavits of their solicitor, James Anthony Cosgriff, sworn 26 August 2009 and 9 September 2009; and (2) the defendants relied upon the affidavits of the first defendant, Peter Haas, affirmed on 22 August 2009 and that of Lindsay Vagg (the co-owner of Lot 14) affirmed on 3 August 2009. Directions were given for the parties to exchange written submissions by no later than 6 October 2009 and to file those submissions with my Associate by no later than 9 October 2009. There was then provision for judgment to be reserved from 9 October 2009. 4 The defendants filed their submissions dated 8 October 2009. The plaintiffs did not file any submissions. However on 22 October 2009 the plaintiffs' solicitors notified the Court that due to a failure in an email transmission, they only received the plaintiffs' counsel's submissions dated 9 October 2009 on that day. They then sought leave to file those submissions out of time. On 6 November 2009, after further correspondence between the parties and the Court, orders were made granting leave to the plaintiffs to file their submissions by no later than 10 November 2009 and for the defendants to file further submissions in reply by no later than 30 November 2009. The plaintiffs then filed the submissions dated 9 October 2009 and the defendants filed submissions in reply dated 30 November 2009. 5 Neither the plaintiffs nor the defendants sought to cross-examine the deponents to the further affidavits. There was no application by any of the Lot owners to take up options (1) or (2) referred to above. However a number of the Lot owners provided letters to the plaintiffs' solicitors, either directly or through their lawyers, in response to the notice of the plaintiffs' claim. One of the Lot owners (Lot 18) wrote directly to the Court. 6 The affidavit of the first defendant affirmed on 22 August 2009 suggests that the plaintiffs' solicitors may have provided a pro-forma letter to some of the Lot owners (par 12). Mr Cosgriff did not deal with this suggestion in his affidavits, however he annexed what he claimed to be the correspondence that he had with the Lot owners. That does not include a pro-forma letter. In any event, it is clear from the correspondence received from the Lot owners which is annexed to Mr Cosgriff's affidavit, that they addressed matters pertinent to their own property rather than simply submitting the terms of a pro-forma letter. However a number of those letters used the expression "common building standard". 7 Counsel for the defendants took no objection to the admission into evidence of the correspondence and his submissions of 8 October 2009 refer to the affidavits of Mr Cosgriff of 26 August 2009 and 9 September 2009 and deal specifically with the letters from the Lot owners in paragraphs [14] to [33]. 8 Twelve of the Lot owners claim that they purchased their properties in the belief that there was a common building standard to be maintained throughout the Estate (Lots 1 to 4, 6 to 11 and 20). The owners of Lot 18 claim that they purchased their property with a covenant but on the proviso that there was no common building scheme. The owners of Lot 14 (in reliance on Mr Vagg's affidavit) claim that although at the time they purchased their property they were aware of the covenant, they were not advised that there was a Scheme affecting the property. Two of the Lot owners (Lots 5 and 17) did not wish to put any views forward and three of the Lot owners (Lots 16, 19 and 21) have not made any response. The owners of Lot 13 responded through their lawyer that they wished "things stay as they are". The Council's position could reasonably be described as neutral. Background 9 It is convenient to set out some of the background contained in the first judgment that is relevant to this aspect of the case: 1 The properties, the subject of these proceedings, form part of the River Park Estate (the Estate), a residential sub-division, with a one-kilometre frontage to a public reserve and the Murray River (the River) in southern New South Wales about 2.5 kilometres from the town centre of Moama. On 5 June 1995, a company known as North Mitmac Pty Ltd (Mitmac), the original vendor, sub-divided the land comprising the Estate that was previously contained in two lots into Lots numbered 1 to 21 in Deposited Plan 849935 (the Deposited Plan). Some of the properties in the Estate, Lots 7 to 16, back onto the public reserve and the River. 2 The information brochure produced by Mitmac described the Estate as a place of "tranquility, security, covenant protection" and included the following: THE ESTATE COVENANTS A comprehensive range of protective covenants are in place for this subdivision. They incorporate the broad areas of residential status (i.e. single dwelling only, non commercial use) building quality, environmental protection and normal aesthetic features covering visual, sound standards to help maintain community harmony. 3 The Deposited Plan (Ex A) makes no mention of any covenants as described in the information brochure. It does disclose: (a) the intention to create Lot 22 (between the rear boundaries of Lots 7 to 16 and the River) as a public reserve; (b) the intention to dedicate McMahon Drive and River Park Drive (the two roads accessing the Lots in the Estate) as public roads; and (c) the intention to create easements under the Conveyancing Act 1919 for utilities.

[18]

The aforesaid covenant may be released varied or modified by or with the consent of the registered proprietor or proprietors for the time being of ALL THOSE pieces of land being Lots 1 to 21 (both inclusive) in Deposited Plan No. 849935. 6 On 5 December 1997 Mitmac transferred the defendants' property to the defendants by Registered Transfer No. 3710644R. The defendants covenanted with Mitmac in terms identical to the terms of the Beehags' covenant, except that the defendants' covenant did not include those parts that are italicised in the above extract. 7 On about 23 December 2003 by Registered Transfer No. 9253003D the Beehags transferred their property to the plaintiffs. There is no mention in that Transfer of any covenant, however it is agreed that covenant 0910580 (the Beehags' covenant) remains recorded in the Folio of the Register under the Real Property Act 1900 relating to the plaintiffs' property. The Covenants 10 The first judgment set out the detail of the covenants as follows: 24. The Property Searches and Transfers establish that there are no covenants registered on the titles of Lots 3, 4, 13 and 20 of the Estate. Three of those four lots (Lots 3, 4 and 20) do not back onto the public reserve. Lot 13 backs onto the public reserve with access to the River. 25 All covenants have a restriction as to the type of materials to be used in the construction of the dwelling house. There are two lots in which a "garden shed" is permitted, Lots 14 and 15. There is no restriction as to location of such a shed on Lot 15 (other than it must be hidden from road access view), however in Lot 14 the shed must be positioned beyond the building line of the main building. Lot 15 is also permitted a "carport" hidden from road access view. 26 Each of the covenants permits the construction of a garage proximate to the main dwelling. The covenants in respect of Lots 2, 6, 7, 8, 10, 11, 12, 15 and 21 require the garage to be not more than 5 metres from the main dwelling. The covenants in relation to Lots 1, 9, 18 and 19 require the garage to be not more than 20 metres from the main dwelling. The covenant on Lot 17 requires the garage to be not more than 8 metres from the main building. Although there is permission for a detached garage in Lot 14, the covenant does not restrict the distance from which such garage is to be from the main dwelling. 27 The covenants provide that Mitmac was entitled to sell any lot without the covenant and if it did so such sale did not release the covenantors from any of the conditions or covenants imposed on their Lots. Each of the covenants could not be released, varied or modified without the consent of the registered proprietors of all the Lots, purportedly including those Lots that were not restricted by any covenant. 28 The Lots in respect of which Transfers are in evidence (Lots 1, 2, 6 to 12, 14 to 19 and 21) were originally sold during the period 1995 to 1999; Lots 6, 15 and 17 in 1995; Lots 8 and 16 in 1996; Lot 12 in 1997; Lots 1 and 11 in 1998; and Lots 2, 7, 9, 10, 14, 18, 19 and 21 in 1999. The Property Searches in respect of the Lots in respect of which there is no Transfer in evidence (Lots 3, 4, 5, 13 and 20) establish that only Lot 5 is burdened with a covenant. Those searches do not disclose the date on which these Lots were transferred.

[19]

Building Scheme 11 The first judgment included the following: 36 … The plaintiffs relied upon the evidence of the Property Searches and the Transfers in support of their reliance upon the equitable doctrine of the scheme of development, also known as a common building scheme or a building scheme (a Scheme). This doctrine was developed to accommodate certain circumstances where it was intended that parties be bound by and have the benefit of restrictive covenants but by reason of certain circumstances such as the timing of their purchase such benefit did not enure. 37 If a Scheme exists, the benefit of a covenant can be annexed to all land in the Scheme, even land that Mitmac had disposed of at the time it contracted with the later purchaser. The requirements for establishing the existence of a Scheme were said by Parker J in Elliston v Reacher [1908] 2 Ch 374 at 384-385 to be: … (1.) that both the plaintiffs and defendants derive title under a common vendor; (2.) that previously to selling the lands to which the plaintiffs and defendants are respectively entitled the vendor laid out his estate, or a defined portion thereof (including the lands purchased by the plaintiffs and defendants respectively), for sale in lots subject to restrictions intended to be imposed on all the lots, and which, though varying in details as to particular lots, are consistent and consistent only with some general scheme of development; (3.) that these restrictions were intended by the common vendor to be and were for the benefit of all the lots intended to be sold, whether or not they were also intended to be and were for the benefit of other land retained by the vendor; and (4.) that both the plaintiffs and the defendants, or their predecessors in title, purchased their lots from the common vendor upon the footing that the restrictions subject to which the purchases were made were to enure for the benefit of the other lots included in the general scheme whether or not they were also to enure for the benefit of other lands retained by the vendors. If these four points be established, I think that the plaintiffs would in equity be entitled to enforce the restrictive covenants entered into by the defendants. 38 Parker J concluded that if these four points are established, "the community of interest imports in equity the reciprocity of obligation which is in fact contemplated by each at the time of his own purchase": at 385. 12 A most helpful analysis of the modern relaxation of the requirements in Elliston v Reacher is found in Professor Peter Butt's Land Law, Fifth Edition, (2006) Lawbook Co as follows (omitting footnotes):

[29]

Equity, it is true, extended that law to comprehend building schemes where legal requirements as to the form of instrument had not been complied with. I see nothing in s. 88(3) which enables the notification upon the register of anything other than an instrument which complies with the law, even though the intrinsic validity of the instrument depends upon an equitable doctrine. 20 The defendants submitted that although Re Louis, and a line of first instance judgments allowed building schemes in relation to Torrens title land, I should prefer the decision in Re Martyn. The indefeasibility of title may seem to militate against the accommodation of building schemes in the Torrens title system, however in the present case, in line with the decision in Re Louis, I am going to proceed on the basis that such schemes may apply to Torrens title land. First requirement of Elliston v Reacher 21 Although the plaintiffs derived their title through the Beehags, it is common ground that the first requirement in Elliston v Reacher has been satisfied, that is, that the plaintiffs and the defendants "derived" their title from a common vendor, Mitmac. Second requirement of Elliston 22 The second requirement in Elliston v Reacher is that the vendor "laid out his estate" for sale in lots "subject to restrictions intended to be imposed on all" lots that were "consistent and consistent only with some general scheme of development". 23 The defendants submitted that the covenants are not "consistent", nor are they consistent only with some general scheme of development. It was submitted that the plaintiffs have been unable to show that the Lot owners in the Estate purchased their properties on the basis that the restrictions would apply equally to all Lots. The defendants also submitted that given the variations in the restrictive covenants, it would be difficult to discern any Scheme that was actually common to all Lots in the Estate. It was further submitted that the reservation in the covenants of Mitmac's right to vary covenants or otherwise not impose covenants is not "consistent only with some general scheme of development". I will deal with this last submission when dealing with the third requirement in Elliston v Reacher. 24 The plaintiffs submitted the second element in Elliston v Reacher is satisfied because Deposited Plan No 849935 lays out the twenty one Lots (and Lot 22, the Public Reserve) and the terms of the restrictive covenants establish the communal interests in prohibiting the construction of buildings (or buildings of a certain size) in the area towards the River. The plaintiffs submitted that in any event, the failure to establish the second element is not fatal to the claim of the existence of a Scheme: Baxter v Four Oaks Properties Ltd [1965] Ch 816 at 828.

[40]

I have reached the conclusion that, even assuming there is power under the Act to notify as encumbrances on a certificate of title restrictions arising under a building scheme, such a notification will not be effective to bind transferees of the land unless not only the existence of the scheme and the nature of the restrictions imposed thereunder, but the lands affected by the scheme (both as to the benefit and the burden of the restriction) are indicated in the notification, either directly or by reference to some instrument or other document to which a person searching the register has access. In the present case these requirements are not satisfied. The covenants contained in the instrument of transfer notified as an encumbrance, though they certainly set out the restrictions, give no indication that they arose under a building scheme, nor of the land to which the benefit thereof was intended to be annexed, under such a scheme. The applicant, therefore, had no notice of the existence of the scheme or of the restrictions imposed thereby. 35 In Sutton v Shoppee Else-Mitchell J referred to the fact that a number of the lots had been sold between 1904 and 1911, being Lots 1 to 12, of which Lots 1 to 3 had no restrictions on their title. Lots 13 to 33 were conveyed in the period 1920 to 1927. That included Lots 15 to 17 which had no restrictions on that title. His Honour's conclusion in relation to the existence of a valid building scheme in respect of those lots that were the subject of the restrictive covenants needs to be viewed in the light of both the chronology of the sales and the explanation given (by Sugerman J) that the six lots that were free of covenants were in quite a different category to the other lots in the subdivision, in that those lots were for use as golf links. 36 In the present case the title of all Lots in the Estate (except Lots 3, 4, 13 and 20) include covenants with the "registered proprietor or proprietors for the time being of all those pieces of land being Lot 1 to 21 (inclusive) on Deposited Plan No. 849935" that they would not without the previous written consent of the transferor, erect a "detached outbuilding whatsoever". Each of the covenants include the provision that the benefit of the covenants "shall be appurtenant to the land being Lots 1-21" in the Deposited Plan. They also include the provision that the covenant may be "released varied or modified by or with the consent of the registered proprietor or proprietors for the time being of ALL THOSE pieces of land being Lots 1 to 21" in the Deposited Plan. Each of the covenants also include the following provision: AND the Transferor reserves the right to sell lease or otherwise deal with any lot on the plan either subject to the conditions, stipulations and restrictive covenants hereinbefore set out or any one of them or not and subject to any waiver, modification, alteration or amendment or full release thereof as the Transferor thinks fit. The exercise of this right by the Transferor in relation to any lot shall not release the owner of any other lot from any of the conditions stipulations or covenants effected or imposed upon such other lots or lot or give to the owner of any lot any right or action against the Transferor any other person or persons. 37 The plaintiffs submitted that the nature and scope of the restrictions are perfectly apparent from the terms of the restrictive covenants: for example, a restriction on more than one dwelling; a further restriction on any further sub-division; a restriction on the erection of front fences or walls; a restriction on cutting down trees; and a restriction on the size and location of garages or storage areas. All owners of Lots that contain covenants would have been aware from a reading of their covenant, that they covenanted with all the other Lot owners in the Estate. In addition, each of those Lot owners would have been aware from a reading of the covenant that it provided that the benefit of the covenant was for each of the other Lots in the Estate and that it could only be released, varied or modified with the consent of all of the other Lot owners. 38 In my view reciprocity of obligation was clearly intended for this Estate. The fact that there are some differences in some of the covenants, as described in paragraphs [24] to [28] of the first judgment, does not negative the existence of or destroy a Scheme. Similarly the fact that four of the Lots were sold without covenants does not negative the existence of or destroy a Scheme. I will deal further with this latter matter when dealing with the fourth requirement in Elliston v Reacher. 39 Although there were some differences in the covenants as described in the first judgment, I am satisfied that the covenants are consistent and consistent only with the establishment of a Scheme.

At a glance

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Judgment (48 paragraphs)

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