Plaintiffs v Defendant

2 The title shows an encumbrance on the land identified as Covenant O6444466. That is a restrictive covenant given under a registered transfer of land dated 4 March 1911 from Frank Edward Godden, art dealer, to Herbert Harry Burton, livery stable proprietor. It purports to be a single dwelling and building materials covenant. It says where relevant -**

The said Herbert Harry Burton doth herby for himself his executors administrators and transferees covenant with the said Frank Edward Godden and his transferees that he or they will not erect more than one dwelling house on the land hereby transferred without the previous consent or waiver in writing of the said Frank Edward Godden and that such house shall be of brick or stone and it is intended that this covenant shall be set out as an encumbrance on the Certificate of Title to be issued herein and shall run with the land. [1]

**3 The problem with the covenant is apparent. It does not identify the land intended to be benefited, not even in general terms. The lack of identification expressly or by implication, together with the fact that no other transfer in a 23 lot subdivision had any covenant, is the basis of the plaintiffs' application under section 84(2) of the Property Law Act for a declaration of the covenant is unenforceable because there was no express or implied annexation. That is, the plaintiffs contend the covenant was on its proper construction only for the personal benefit of the original covenantee Godden and is not attached to any benefitted land.

4 For the reasons that follow, I think the application is well founded. I propose making a declaration under the Act. But it must be recorded here that the Court is has acted without hearing from any contradictor. The originating motion seeks as primary relief a declaration about enforceability under s 84(2). But in the alternative, that is, in the event that the covenant is not unenforceable, the logically deferred application is the typical one for a discharge or modification of the covenant under s 84(1) based on changes in the character of the property or the neighbourhood or other circumstances. On the first return date of the proceeding on 18 March 2013 the Court concerned itself with the usual procedural directions in applications of this nature, including service of process directly on the landowners who have apparently the benefit of the restrictive covenant. However, so I am told, orders of that sort were accepted by the Court as being unnecessary because of the plaintiff's contention on the primary application that the covenant did not identify any land having the benefit of the covenant ― hence, by hypothesis, the invalidity. Instead and in those circumstances, an Associate Judge ordered that in addition to an order requiring advertisement of the application in The Age and The Moreland Leader, the plaintiffs had to display a public notice on their property to attract attention, akin to eye catching notices as required in planning permit applications. The Court's order said:**

By 25 March 2013 the plaintiff shall display a copy of the notice of this application in this proceeding in the form of the schedule to this order enlarged to size A3 and encased in weatherproof covers by affixing it in a conspicuous position on the property at 833 Park Street, Brunswick in the State of Victoria facing Park Street and such notice shall remain so displayed until 15 April 2013.

**5 The contents of that notice largely replicate the contents of the newspaper advertisements. It stated clearly that the plaintiffs sought a declaration to remove the restriction on the number of houses to be built on the land and to remove any requirement for any house to be of brick or stone. That was, I think, a useful order ― do citizens in the electronic age read small print public notices in newspapers? ― designed to give conspicuous notice to nearby residents who could then make enquiries and take advice about the proceeding and decide whether they had grounds for contending that the covenant was for their benefit and was enforceable. This is a high density housing area in inner Melbourne with a variety of homes and flats.

6 The plaintiffs have complied with those procedural orders. No person has appeared on the application to contend they are beneficiaries of the covenant. As I will describe later, those transferees who took transfers of land within the same subdivision and from the same vendor after the original covenantor Burton (they being the relevant transferees for present purposes) are very close to the subject land. Whilst I have been apprehensive about proceeding without a contradictor, there is nothing unusual for cognate applications for discharge or modification of a restrictive covenant to proceed undefended particularly in areas where multi-unit development has occurred to an extent that it may be regarded as part of the character of the neighbourhood. The Court was told that lots 4 and 5 have had subdivisions on which a 30 unit development has been built.

7 But in any case, the public notice was thought to be, and I think is, conspicuous enough to attract the attention of possible opponents and I see no injustice in proceeding with what was presented as a straightforward case anyway. In that regard, I cannot resist adding the following observation. One of the perplexing features of this case, in favour of the plaintiffs, is the absence of any covenant on any of the lots in the subdivision. It is not possible to discern why the Pollards' lot was singled out in this way over 100 years ago. I venture to suppose that would of itself be an influential basis for making an alternative case for discharge of the covenant under s 84(1) anyway.**

**8 The commencement point is the parent title, to be found in certificate of title volume 1207 folio 241236, dated 12 October 1880. That was a Crown allotment of three lots of land (12, 13 and 14) between Park Street West and Brunswick Road West. Frank Edward Godden became registered proprietor of the land by transfer on 12 February 1908. In evidence was a Titles Office Record of Subdivision of that title which shows a subdivision of the three allotments into Lots numbered 1 to 23. A second and more legible edition (2009) of the lodged plan 5131 is attached to this judgment. There were then a number of transfers including a transfer of Lot 2 on the plan of subdivision (the subject land) to Herbert Harry Burton on 14 March 1911 which contained the restrictive covenant.

9 There were 12 other transfers of lots in the subdivision, six of which occurred before the transfer to Burton and six of which occurred after.[2] The six "pre" transfers were:**

(a) Lots 20 and 21 to Crump by transfer dated 27 January 1910;

(b) Lots 14 and 15 to Poole dated 8 August 1910;

(c) Lots 16 and 17 to Birch dated 8 August 1910;

(d) Lots 18 and 19 to Brown dated 1 June 1910;

(e) Lot 7 to Gardiner dated 16 December 1910; and

(f) Lot 1 to Temple on 8 October 1910.

10 There were six "post" transfers of other lots in the subdivision, which are the relevant transfers for present purposes:

(a) Lots 22 and 23 to Thompson by transfer dated 27 May 1911;

(b) Lots 8, 9, 12 and 13 to Short dated 17 July 1913;

(c) Lots 10 and 11 to Levy transfer dated 20 June 1912;

(d) Lots 6 and part of Lot 5 to Coles dated 6 October 1913;

(e) Lots 4 and 5 to Sinclair dated 7 April 1914; and

(f) Lots 3 and part of Lot 4 to the same Sinclair dated 5 May 1911.

**11 As I have said, it is highly pertinent and in favour of this application is that none of these transfers within the subdivision contain any restrictive covenant at all. Only the Pollards' land, Lot 2, does. This intensifies the search for some objective reason, apparent from dealings on the register, why the original covenantee might have intended to impose a covenant affecting this land for the possible benefit of some other (unidentified) land where the same vendor did not impose a covenant on any other lots in the same plan of subdivision. There is simply no reason evident. As I observed in Court, the transfer to Burton, unlike the others, had a handwritten insertion of his occupation as livery stable proprietor. It may be there was something about the purchaser's occupation and the possible erection of horse stables as an intended use of the land that made for an exception. But the Court cannot speculate on such matters.

12 Eventually the Pollards became registered proprietors on 29 May 1984.

13 This case does not call for a disquisition of the principles at common law and in equity governing the enforceability of covenants over freehold land; that is, enforceability of the covenant by a successor to the original covenantee as against successors of the original covenantor. It is an area well covered in seminal works such as Bradbrook and MacCallum, Easements and Restrictive Covenants[3] and Butt, Land Law.[4] For this application, the plaintiffs relied entirely on the judgment of Gillard J in Fitt v Luxury Developments Pty Ltd[5] as a convenient source of the applicable principles. Drawing from each of those sources, the following principles may be stated.

14 There are three ways in a person not being the original covenantee can have the right to enforce a restrictive covenant: (a) by showing the covenant has been annexed to his land, expressly or impliedly; (b) by showing the benefit of the covenant has been assigned to him in respect of the land; and (c) that both he and the defendant own land which was part of a building scheme that imposed reciprocal rights and obligations.

15 To show annexation requires a clear expression of intention in the instrument creating the covenant that it should run with the land. The principle is:[6]**

The words must indicate that the purpose of the covenant was to benefit the land, not merely the covenantee. Although no particular form of words is required to achieve this effect, two formulae are commonly used. Either the covenant is expressed to be made for the benefit of specified land, or the covenant is expressed to be made with the covenantee, and the covenantee's heirs and assigns, in the covenantee's capacity as owner of the land. ... If the covenant is simply made with the covenantee and his or her heirs and assigns, and the document contains no indication that the covenant is intended to benefit the property, as distinct from its owners, the traditional view is that benefit of a covenant will not pass by express annexation, although in certain circumstances it may be expressly assigned..., or may pass because the burdened and benefitted land are part of a scheme of development. The orthodox view has been that where there is no express annexation the courts regard the covenant as imposed simply to protect the covenantee while he or she holds the land, or to enable the covenantee to dispose of the land together with an express assignment of the benefit of the covenant, more advantageously: [citation omitted].

16 In the absence of sufficiently clear words for express annexation of the benefit of a covenant, annexation may be implied from proof of the surrounding circumstances existing at the time the covenant was created. Those circumstances must show that the parties intended to benefit the covenantee's land.[7] In Fitt it was stated thus:[8]

Whether or not the benefit of the covenant is annexed to some land is a question depending upon the common intention of the original parties to the covenant. It is necessary to construe the words of the covenant in their natural and ordinary meaning to determine the intention of the parties and whether they intended that the covenant was to be annexed to some land and run with it. In carrying out this exercise the Court may take into account the surrounding circumstances objectively known to the parties at the time.

**17 But even then, care must be taken in the assessment because circumstances alone cannot create an annexure of the benefit of the covenant of the land. As a primary step in the analysis, the instrument containing the covenant must itself contain words of annexure before extrinsic evidence can be used to construe those words especially on the question of identification of the land.

18 Moreover, in the context of dealings with land under the Torrens system, based as it is upon a central public register showing interests in land, the ambit of extrinsic evidence (the so called factual matrix) is not as wide as might be permitted under the law of the construction of contracts in general. Enquiries are confined information shown on the register. The High Court in Westfield Management Ltd v Perpetual Trustee Co Ltd[9] held that the rules of evidence assisting the construction of contracts did not apply in that case to the construction of an easement, and that establishing the intention or contemplation of the parties to a registered easement by reference to material extrinsic was contrary to the principles of the Torrens system.[10] In Prowse v Johnstone[11] Cavanough J considered that the reasoning in Westfield was not confined to easements under the Torrens legislations but was based upon the Court's fundamental considerations concerning the operation of the Torrens system of title by registration, being considerations which "the maintenance of a publicly accessible register containing the terms of the dealings with land under that system".[12]

19 This case is concerned with the absence of an identification of the benefitted land expressly or by necessary implication. Ideally, the transfer containing the covenant would define the land by reference to the certificate of title. In the case of a transfer of lots from land subdivided from a parent title, reference would be made to the parent title. In Fitt for example the words of identification, common enough, were:

"...COVENANT with me the said [vendor] my heirs executors administrators and transferees the registered proprietor or proprietors for the time being of so much of the land described in [the parent title by volume and folio number] as is represented by the Lots on the said Plan of Subdivision other than the land herby transferred."[13]

Absent that specificity, it may be that a description of the land in general or known terms can be sufficient with the aid of extrinsic evidence to clarify the identity of the land that was intended to be benefitted.

20 It was submitted, correctly I think, that the covenant does not refer to or identify any land either specifically or by general description as having had the benefit of the covenant. The absence of any description means there is no occasion for the impression of surrounding circumstances to construe the covenant to ascertain the identity of the land intended to be benefitted. The judicial task of construction cannot be used to recompose the contents of a document. It is confined to construing the words as they appear. Although that can sometimes include the insertion of words, that mode of construction nevertheless requires something within the language of the covenant itself which justifies a necessary implication.

21 But in this case, there is no basis for any implication. As was submitted, the covenant is described as being for the benefit of the covenantee and his transferees. The reference to transferees of the covenantee can only be a reference to the immediate transferees of the covenantee as any subsequent transferee would not be a transferee of the covenantee. And there is simply no reference to any land having the benefit of the covenant. The outcome, as was submitted, is that this was on a proper construction a covenant for the personal benefit of the covenantee.

22 I had to consider for myself the question whether it may be assumed or reasonably supposed that the vendor here was intending to annex the covenant to any land to be transferred out of the plan of subdivision after the date of the transfer to Burton. But as there is no reference even in general terms to the land in the covenant, it is impermissible I think to look extrinsically to the plan of subdivision to explain the omission within the words of the covenant and assume that the covenantee meant, but mistakenly omitted to refer to, the remaining lots untransferred from the plan of subdivision. Thus, in the construction exercise, the existing words give nothing for the Court to construe.

23 To the contrary all indications are that this covenant truly was intended to be personal to the covenantee. There were already six transfers of lots within the plan of subdivision and none of those transfers contained any covenant at all. The six subsequent transfers likewise contain no covenant at all. One wonders about the utility of only imposing a covenant on one lot unless it was to be purely personal. It suggests strongly there was no general intention to benefit all the lots. There appears to be no rationale for isolating Lot 2 and imposing a single covenant dwelling amidst 23 lots in the same subdivision. What also supports the view that this was a personal proviso in the restrictive covenant that the prohibition only existed "without the previous consent or waiver in writing by the said Frank Edward Godden ... ". That tends to support the view that it fell within the vendor's personal power to excuse the purchaser from being bound by the covenant.

24 A question arose in the course of submissions about the possible application of any provisions of the Property Law Act. The Court in Fitt made reference "for completeness" to the provisions of s 78 of the Property Law Act which make it unnecessary to establish by express words that the covenant is made with the covenantee and his successors in title and the persons deriving title under him.[14] In that case, the covenant was made in 1927 which predated the commencement of the Property Law Act 1929.[15] Thus, Gillard J treated the Act as having no application.

25 Mr Jones' research has shown that s 78 of the Property Law Act 1929 contains a reference to s 64 of the Conveyancing Act 1915, and that provision appears to have been in existence before the commencement of s 78. By timing, it would apply to the covenant in this case. Section 64 states -**

(1) A covenant relating to land of inheritance or devolving on the heir as special occupant shall be deemed to be made with the covenantee his heirs and the assigns and shall have the effect as if heirs and assigns were expressed.

(2) A covenant relating to land not of inheritance or not devolving on the heir as special occupant shall be deemed to be made with the covenantee his executors administrators and assigns and shall have effect as if executors administrators and assigns were expressed.

**26 It is obvious that s 64(1) has no application. This is not land of inheritance. And I accept the submission that the words of s 64(2) are limited in that they deem the to be made only with the covenantee's immediate successors namely his heirs and assigns in relation to s 64(1) and his executors administrators and assigns in relation to s 64(2). There is no reference to successors in title or persons deriving title under the covenantee. Yet s 78 of the Property Law Act 1929 (inapplicable in this case) provides that "the covenant shall be deemed to be made with the covenantee and his successors in title and the persons deriving title under him or them and shall have effect as if such successors and other persons were expressed."

27 The covenant here does not say that it is given to the covenantee Burton and his successors in title and persons deriving under him. Nor does it seem that s 64 of the Conveyancing Act 1915 imports those words. The dispositive issue to my mind is the absence of identification of the benefitted land in the covenant.**

Was there a building scheme, or scheme of development?

28 The concept of the scheme of development enables a benefit of a covenant to pass where it had been neither annexed nor expressly assigned. This is a separate and distinct method to establish the right to the benefit of a covenant. The concept is explained this way:

When an owner of land decides to subdivide it and sell off a part, restrictive covenants may be imposed for the benefit of the land, retained by the owner. Land developers who buy land for the purposes of subdivision and resale at a profit may also include restrictive covenants in transfers. Sometimes the purpose of such covenants is simply to preserve the value of the land retained by the subdivider during the time that he or she retains an interest in it. Alternatively, the purpose of the covenants may be to impose a kind of "local law" over the whole area so that the covenants will be enforceable among all the purchasers of the lots, and their assigns, even after the vendor has disposed of the whole of the subdivided area. The fact that the land is sold subject to restrictive covenants designed to preserve aesthetic standards may make it more attractive to purchasers. To achieve this result it will be necessary to make the covenants to be reciprocally enforceable between all the purchasers and their successors in title. [16]

29 As stated in Fitt, in order to establish a scheme of development the plaintiff must prove:

(a) the plaintiff and defendant have derived title from a common vendor;

(b) prior to the sale, that is, the original sale, the vendor must have laid out the estate in lots subject to restrictions which were intended to be imposed on all of them and were consistent only with some general scheme of development;

(c) the common vendor must have intended the restrictions to be for the benefit of all lots sold;

(d) the plaintiff's and defendant's lots must both have been bought from the common vendor on the footing that the restrictions were for the benefit of other lots; and

(e) the area to which the scheme extends must be defined.

Where a scheme was established many, many years ago often there is no extrinsic evidence available to establish it. Hence in those circumstances one is left with the conveyancing documents and the like produced at the time and the court must do its best on that evidence. ...

Nevertheless the court can draw the inference from the documentation and will readily do so where it is proven that there was a large subdivision of building blocks and which were sold over a relatively short period. [17]

31 The facts in this case are plain. The title for the parent title shows that there were 13 transfers from it, including the land sold to the plaintiff's predecessors in title. None of the transfers contain a covenant other than the covenant which is the subject of this application. Thus it appears to be correct that on the evidence of the original title documents and the transfers this covenant was an isolated restriction that applied only to Lot 2 on the plan of subdivision, and was not a part of the building scheme. The facts are:

(a) prior to the original sale the vendor did not lay out the estate in lots subject to restrictions which were intended to be imposed on all of them. To the contrary the evidence shows that no restrictions were imposed on all of the lots in the plan of subdivision, but only on Lot 2;

(b) the common vendor did not intend the restrictions to be for the benefit of all lots, as there was only one lot subject to restriction, namely Lot 2;

(c) the plaintiffs and defendant's lots were not bought from a common vendor on the footing that any restrictions were for the benefit of the other lots as there was only one lot, namely Lot 2, subject to the restriction; and

(d) the area to which any scheme extends is not defined as there was only one lot subject to a restriction.

32 I think the matter warrants no greater elaboration. For reasons that are not apparent on the face of the public documents, the only lot which was subject to restriction was Lot 2 and even then, as I have found on the principal question, it seemed to be something more in the nature of a personal covenant.

33 This matter can be dealt without any difficulty. There is no evidence that the benefit of the covenant has been assigned by the original covenantee, Frank Godden to any person in respect of Lot 2. Evidence of such an assignment could not be expected to be adduced by the plaintiffs, and no party has come forward as assignee.

34 Counsel accepted that a number of the alternative forms of declaration in the originating motion were unnecessary. I propose making a declaration in the following terms:

Pursuant to s 84(2)(b) of the Property Law Act 1958 (Vic), the land in certificate of title volume 11362 folio 353 being the land known as 833 Park Street Brunswick in Victoria is not affected by the encumbrance identified as Covenant 0644446; that is, the covenant stated in the Transfer of Land dated 4 March 1911 registered in dealing number 0644446.

**35 According to correspondence from the Office of Titles, that equips the plaintiffs with the ability to apply under s 88 or s 106(1)(c) of the Transfer of Land Act to make such recordings as are necessary to give effect to the Court's declaration.

37 Unless there are exceptions or improvements to the proposed orders, I would ask the plaintiffs to prepare and submit a form of order for settling and authentication.

[1] There are two hand written insertions on the aged Transfer of Land that are illegible but ought not be of real concern. One appears after the word "shall", and the other before the word "brick", both within the phrase "shall be of brick or stone".

[2] The transfers are exhibit SL-2 to the affidavit of S.J. Libbis sworn 25 March 2013.

[5] [2000] VSC 258.

[6] Bradbrook and MacCallum, Easements and Restrictive Covenants at [13.29]. See also Butt, Land Law at [1765].

[9] [2007] HCA 45; [2007] 233 CLR 528.

[10] See commentary by Butt P in "Interpreting Registered Torrens Title Instruments: To What Extent is Extrinsic evidence admissible? "in (2013) 87 ALJ 15.

[11] [2012] VSC 4 at [57].

[15] The Act commenced operation on 18 December 1929. Section 78 of the Property Law Act 1958 is in the same form as appeared in the 1929 Act.

[16] Bradbrook and MacCallum, above at [13.77].