Plaintiffs v Defendants

2 I am informed that the area of these subdivisions is one where the amenity of the outlook is important with attractive views of the nearby Dandenong Ranges. The restrictive covenants under consideration in this case affect the lots in both the Stirling and Caithness subdivisions, and they are almost identical in each case. The relevant passage is as follows:

... that they [the purchasers of the particular allotment] will not erect on the said Lot hereby transferred any building other than one brick or brick veneer dwelling house with usual outbuildings also of brick or brick veneer construction the main floor of which dwelling house shall not be more than two feet above the natural level of the ground at the highest point covered by such floor and such dwelling house shall have only one storey above such floor.

3 On 21 December 2000 the Dissanayakes become joint registered proprietors of the property at 19 Caithness Crescent, Glen Waverley which is Lot 58 on the Caithness subdivision. The issues at the basis of this case arose because in March 2003 the Dissanayakes had plans drawn up for a second storey to their dwelling house at Lot 58 which was to be faced with cladding rather than brick. Arguably, both the addition of the second storey and the nature of the exterior cladding were in breach of the restrictive covenant affecting their land.

4 On 6 March 2003 the solicitor representing a group of residents of the Stirling and Caithness subdivisions (hereinafter "the group of residents") wrote to the Dissanyakes informing them that the proposal was in breach of the restrictive covenant affecting their land. Issues arose about the role of the local council, being the City of Monash, but ultimately the work was carried out on the Dissanayakes' property. The Dissanayakes had contended in the course of proceedings that the wording of the restrictive covenant was ambiguous and that it was unclear whether the covenant restricted the construction to one floor or one floor above the ground floor (i.e. a first floor). Be that as it may, the argument did not occur before me.

5 The group of residents brought proceedings (being No. 6277 of 2004) against the Dissanayakes, asserting in an amended originating motion of 26 August 2005 that the Dissanayakes had breached the restrictive covenant by constructing a second storey, and constructing it with Hardiplank cladding rather than brick or brick veneer. In those original proceedings the group of residents sought declaratory relief only. As was noted in the course of the written submissions filed in the second matter before me (No. 5207 of 2006) which are proceedings brought by the Dissanayakes to vary the terms of the covenant as it affects them, no relief by way of mandatory injunction seeking the demolition of the alleged wrongful building works or by way of damages was sought by the group of residents in the first matter.

6 In the more recent proceedings brought by the Dissanayakes on 28 March 2006 (No. 5207 of 2006), they sought to wholly discharge or modify the restrictive covenant affecting their land at 19 Caithness Crescent, Glen Waverley. Those orders are sought under s 84(1) of the Property Law Act 1958 (Vic) ("the Act"). In fact, the actual relief sought constitutes a modification of the restrictive covenant as it affects their property, which effectively exempts the building work which has already been completed from the effect of the covenant.

7 After a history of some three years, both these matters are the subject of compromise between the parties. They have agreed on a modification to the restrictive covenant for which the Court's approval is required under the Act. This modification would exempt the completed building works on the Dissanayakes' property from the effect of the covenant but would otherwise continue to restrict their property. Further, the parties have agreed on the terms of the declaration sought by the group of residents who brought the initial proceedings in relation to the meaning and effect of the restrictive covenants affecting the Stirling and Caithness subdivisions more generally. Such declarations, as I understand the intention, would come into effect from the date on which they are pronounced by the Court, and would take into account the modification of the covenant sought by the Dissanayakes. It is not surprising that the Dissanayakes do not oppose the declarations, since they would only affect their future dealings with the land. Provided I approve the order modifying the covenant, the past building works conducted by the Dissanayakes would remain secure. Therein lies a problem which, despite the agreement of the parties, I have not been able to resolve in favour of making the declarations sought.

8 It is appropriate to address the applications in a particular order, dealing first with the unopposed application by the Dissanyakes under s 84(1) of the Act.

Proposed Modification of the Restrictive Covenant

9 Pursuant to s 84(1) of the Act, the Court has the power, on the application of any person with an interest in land affected by a restrictive covenant, "wholly or partially to discharge or modify any such restriction" upon being satisfied of certain elements.

10 In the submissions to this Court, the parties agree that words be added to the concluding words of the restrictive covenant affecting Lot 58 on the Caithness subdivision as follows:

... save for that presently constructed on the land at this date.

11 It is submitted that such a modification will preserve and maintain the text of the covenant in its present form but will permit the reasonable user of the land, thereby preserving the status quo. Obviously, the modification will permit the continued existence of the second storey on the Dissanayakes' property.

12 The power of this Court to order the proposed amendment to the covenant depends on compliance with s 84(1) of the Act, which is in the following terms:

The Court shall have power from time to time on the application of any person interested in any land affected by any restriction arising under covenant or otherwise as to the user thereof or the building thereon by order wholly or partially to discharge or modify any such restriction (subject or not to the payment by the applicant of compensation to any person suffering loss in consequence of the order) upon being satisfied -

(a) that by reason of changes in the character of the property or the neighbourhood or other circumstances of the case which the Court deems material the restriction ought to be deemed obsolete or that the continued existence thereof would impede the reasonable user of the land without securing practical benefits to other persons or (as the case may be) would unless modified so impede such user; or

(b) that the persons of full age and capacity for the time being or from time to time entitled to the benefit of the restriction whether in respect of estates in fee-simple or any lesser estates or interests in the property to which the benefit of the restriction is annexed have agreed either expressly or by implication by their acts or omissions to the same being discharged or modified; or

(c) that the proposed discharge or modification will not substantially injure the persons entitled to the benefit of the restriction ...

13 Thus, although there is no opposition to the modification, it cannot be made except by order of the Court.

14 In his submissions on behalf of the Dissanyakes, Mr Miller of counsel put that all elements of s 84(1) are satisfied, with reliance being placed on the second limb of s 84(1)(a).

15 The second limb of s 84(1)(a) covers cases where the continued existence of a restrictive covenant would impede the reasonable user of the land without securing practical benefits to others. It was submitted on behalf of the Dissanayakes, and was not in contention, that a necessary building permit and certificate of final completion had been obtained for the works carried out on the subject property. It was also not in contention that in order to give effect to the restrictive covenant in its present form, it would be necessary to order the demolition of the works carried out by the Dissanayakes - works which were carried out in good faith after having obtained the necessary local government approvals. Of course, in this case no injunctive relief was sought. Even if it had been, there is obviously a real question as to whether this Court would be prepared to make such an order to give effect to the covenant. This was recognised in Thorne v Doug Wade Consultants,[1] where O'Bryan J was concerned with the consequences of the issue of a building permit being void. In relation to those who had applied for the permit and acted upon it, his Honour said:

On the other hand, should they fail to obtain the necessary planning permit to validate the alterations and additions, I would still decline to order the demolition of building works which were approved under relevant building regulations and carried out by the building owners in good faith. It would be most unjust in my opinion to do so.

That being the case, it would be futile to grant the declaration sought and stand over for the future the question of injunctive relief. The plaintiffs might eventually satisfy an appropriate person that a planning permit cannot or should not be granted. But that might only be achieved after many months delay and at great costs. This dispute should be brought to an end as soon as it reasonably can be.[2]

16 For the purposes of s 84(1)(a), since the enforcement of the covenant in this case would require the demolition of the second storey, I am of the view that the continued existence of the restriction in relation to the Dissanayakes' land impedes the reasonable user of that land, without securing practical benefits to the other residents of the Stirling and Caithness subdivisions. The second limb of s 84(1)(a) is therefore satisfied.

17 While it is only necessary to comply with one of the subparagraphs of s 84(1) of the Act, it was also submitted that subparagraphs (b) and (c) of s 84(1) were satisfied. With respect to s 84(1)(b), the provisions are satisfied by the fact that the parties have effectively agreed to the modification.

18 As to s 84(1)(c), by virtue of the agreement of the parties it appears that it is accepted generally that the proposed modification will not substantially injure the persons entitled to the benefit of the restriction. Furthermore, given that this Court would refuse to enforce the restrictive covenant in this case by way of injunctive relief, there is no utility in refusing to grant the application to amend the covenant in the practical circumstances that apply.

19 In Stanhill Pty Ltd v Jackson & Ors,[3] in relation to the operation of s 84(1)(c) of the Act, Morris J observed:

Section 84(1)(c) turns upon the expression "substantially injure". The ordinary, grammatical meaning "injure" means to harm. The adverb "substantially" has different shades of meaning, depending upon the context. Sometimes the word simply means "real" or "actual"; whereas in other contexts it means "of ample or considerable amount, quantity, size, etc". In my opinion, the language used in para (c) does not require a case to be made that the proposed discharge or modification of a restriction will not harm the persons entitled to the benefit of the restriction. The hurdle is not this high. Rather it is sufficient to show that the proposed discharge or modification will not cause harm to the persons entitled to the benefit of the restriction which could be regarded as being of real significance or importance. This will require a judgment call in the particular circumstances being considered; it does not admit some universal answer based upon the attitude of the beneficiary, the original purpose of the covenant or any other similar factor.[4]

20 With respect I agree with his Honour's interpretation of the meaning of that section. Applying this interpretation, an amendment to the covenant in this case would cause no harm to those residents who would benefit from the covenant.

21 Furthermore, relying on his Honour's reasoning, it has been submitted that in this case each of the persons affected by the restrictive covenant has been duly notified of the proceedings. It is also submitted that it can be assumed that the responsible authority duly considered issues of amenity and harm to the benefiting owners (i.e. the neighbours of the Dissanayakes) as part of the planning process. It is further submitted that there is no evidence before this Court of any substantial injury or real or actual harm, whether ample or considerable, which might have been suffered by any person entitled to the benefit of the restriction by the Dissanayakes being permitted to retain their second storey. Moreover, the modifications proposed on behalf of the Dissanayakes were not opposed by Mr Jones, who appeared on behalf of the defendants in respect of this application.

22 I accept the submissions made on behalf of the Dissanayakes, and in the circumstances I approve the proposed modification to the restrictive covenant.

23 When orders are to be made consistent with what I have said in relation to s 84(1) of the Act, that resolves the dispute between the parties before me in relation to the second proceedings (No. 5207 of 2006). However, there is also before me an application by the group of residents who brought the initial proceedings (No. 6277 of 2004) for declarations as to the effect and meaning of the restrictive covenants affecting the Stirling and Caithness subdivisions more generally.

24 This application is before the Court by way of originating motion filed on 31 May 2004 on behalf of 20 plaintiffs who are property owners in both the Stirling and Caithness subdivisions. The affidavit in support of the application refers to correspondence with the Dissanayakes and then describes a process where registered proprietors in the two plans of subdivisions were contacted. They were informed that a particular interpretation of the covenant was going to be sought and 57 responded by providing their written consent to such an application.

25 When the matter came on before Kaye J on 6 May 2005, his Honour expressed a provisional view that there was no proper contradictor with respect to the application, and that the declaration sought had "all the hallmarks"[5] of a hypothetical question for the opinion of the Court. At that time, although the Dissanayakes had been party to the proceedings at an earlier stage, they had effectively withdrawn from the proceedings and were not involved in the case at all. His Honour considered that the absence of a dispute between opposing parties might be an insurmountable obstacle to the exercise of the Court's discretion to grant the declarations sought.

26 As a result of that discussion the matter was adjourned to a date to be fixed and since then the Dissanayakes have been reinstated in those proceedings, and have commenced their own for the modification of the covenant as I have earlier described.

27 When the question of the declarations came before me, the application was not opposed by the Dissanayakes; Mr Miller, who appeared on their behalf, indicated that he was "comfortable" with the declarations sought. No one else has ever sought to oppose the application at any stage of the proceedings.

28 The question that concerns me is whether it is appropriate in the exercise of the Court's discretion to make the declarations sought by the group of residents in the particular circumstances of this case. The application for these declarations is not the subject of any existing dispute. In seeking declarations as to the proper construction of the restrictive covenant, it is intended that the declarations will: (a) confirm that the Stirling and Caithness subdivisions are "building schemes"; and (b) enable the enforcement by the residents of those subdivisions of the restrictions imposed by those covenants (i.e. that only

single-storey residences be built). I will deal with this in slightly more detail shortly.

29 It is appropriate to note that the situation before me is different from the situation that was before Kaye J in 2005. When the application was before his Honour, the Dissanayakes were not party to the proceedings; they now are. Arguably, the Dissanayakes now have a genuine interest in debating whether the declarations should be made by the Court (irrespective of whether they have chosen to oppose them). Both actions have been presented to me as being actions which effectively have been settled between the parties and, as a result of the proposed modification to the covenant, such declarations would have no consequence for the Dissanayakes unless and until they embark upon further building works. There is no indication of an intention on their part to engage in conduct which would lead to any additional dispute about the meaning and effect of the restrictive covenant as it affects them.

30 During the submissions before me, the "proposed declarations" that it was requested the Court make were produced. The making of declarations in that form would result in the Court declaring the meaning of the covenant in relation to each of the transfers identified by numbers in schedules attached to the draft. In turn, that would mean that some 98 separately owned properties would be affected. Apart from those who are part of the group of residents who are plaintiffs, obviously many other people who would be affected are not parties to the proceedings. That fact, in itself, is significant because the intention of the declaration, if I were to make it, is not just to resolve the situation of the parties to these proceedings but also to affect a number of other people.

31 In the proposed declaration, apart from interpreting the words used in the covenant, in summary, the Court is also asked to declare:

(a) That both plans of subdivision are building schemes;

(b) That each and every original registered proprietor and their successors in title have the benefit of the covenant;

(c) That such persons are entitled to bring proceedings in any relevant Court or Tribunal to enforce the covenant;

(d) That each and every original registered proprietor and their successors in title have the burden of the covenant.

32 The question of jurisdiction or, if "jurisdiction" is not the appropriate term, the question of the constraints on the exercise of discretion, has been widely discussed. The Court's jurisdiction to grant declarations is wide but clearly constrained by requirements not to do so where the question raised is hypothetical and/or not the subject of a genuine dispute. The Court exists to deal with disputes and not to provide advisory opinions.

33 In the course of his very thorough submissions, Mr Jones on behalf of the plaintiffs seeking the declarations, outlined the matters that needed to be considered. As he submitted, the covenants were created in 1965 and 1968 and, in law, operate as personal covenants but can run with the land if there is a benefit that runs with the land or of there is a building scheme. I was urged to conclude that a proper interpretation of the covenant leads to the conclusion that the benefit runs with the land and "... indicates an annexation for the benefit of every other registered proprietor from time to time of any part of the land, that is the individual lot owners".[6] Therefore, it is clear, it is submitted, that each of the covenants touch and concern the land. It was also submitted that these subdivisions are building schemes. There was, originally, a common vendor or two common vendors. Each covenant obliged each owner to develop their lots in a certain manner for the benefit of each other which retained an immunity for the entire scheme rather than each separate lot. Finally, Mr Jones made submissions concerning the wording of the covenant saying that its meaning was clear that there should only be a single storey.

34 The plaintiffs submit that the power of the Court to make a declaration is wide, discretionary and there is no simple formula for the exercise of equitable power. As the authorities make clear, it is important to consider whether or not the question which the proposed declarations are intended to deal with is hypothetical. As Professor Borchard observes in his text Declaratory Judgments, which was cited with approval by the High Court of Australia,[7] judicial power is the power to

... adjudicate upon contested or adverse legal rights or claims. To interpret the law, and to declare what the law is or has been. It is the final determination of the rights of the parties in an action which distinguishes the judgment from all other public procedural devices to give effect to legal rights.[8]

35 It is submitted that the issue in this case is not theoretical. However, it is appropriate for me to consider whether the making of this declaration would represent a conclusive or final decision based on a concrete and established or agreed situation which aims to quell controversy.[9] Further, would this declaration be predicated upon the likelihood of a specific, defined event occurring? I am by no means sure that the answer to either of those questions is positive.

36 It is submitted that it is no impediment to the making of a declaration that it relates to a potential dispute rather than an existing actual dispute. In Commonwealth v Sterling Nicholas Duty Free Pty Ltd,[10] declarations were made by the Supreme Court of New South Wales in Equity that delivery of duty free goods within an airport to passenger purchasers was not a contravention of the Airports (Business Concessions) Act 1959 (Cth) or the Customs Act 1901 (Cth). The Court (per Hope J) made declarations and the Commonwealth unsuccessfully appealed. In the judgment of Barwick CJ, the following appears:

The jurisdiction to make a declaratory order without consequential relief is a large and most useful jurisdiction. In my opinion, the present was an apt case for its exercise. The respondent undoubtedly desired and intended to do as he asked the Court to declare he lawfully could do. The matter, in my opinion, was in no sense hypothetical, but in any case not hypothetical in a sense relevant to the exercise of this jurisdiction. Of its nature, the jurisdiction includes the power to declare that conduct which has not yet taken place will not be in breach of a contract or a law. Indeed, it is that capacity which contributes enormously to the utility of the jurisdiction.

Here the respondent was in business carrying out in relation both to ships and airports activities of the general kind proposed in this case. No doubt, duty free goods not desired to be personally carried by a departing passenger purchaser, or too large to be admitted to the cabin of an aircraft were being delivered by the respondent to the airport prior to and at the date of the commencement of this suit. Further, there had been actual opposition by the Customs Department to the course which the respondent desired and intended to take. In my opinion the Supreme Court was right to entertain the respondent's suit in relation to both the declarations sought. Further, assuming that conduct in accordance with the second declaration of the Supreme Court would not be in breach of the Customs Act and regulations, I find no reason to criticize the form of the declaration made. Indeed I would endorse it as a most careful and precise exercise of the jurisdiction to make a declaratory order.[11]

37 As I follow the reasoning of the Chief Justice, this was a circumstance where although the conduct was future, it was clearly in dispute between the parties as I have endeavoured to illustrate by my emphasis (above). That is not the situation I am concerned with. Unlike in Sterling, as between these parties, a resolution of the issues has occurred. There are no other lot holders concerned to participate in the action with an interest in opposing the making of the declarations. Notwithstanding the plaintiff's submissions,[12] there does not appear to me to be even a potential dispute. Such a dispute is, at best, theoretical.

38 In Forster v Jododex Australia Pty Ltd & Anor,[13] the declaration sought was pursuant to s 10 of the Equity Act 1901 (NSW), which empowered a judge sitting in Equity in the Supreme Court of New South Wales to grant declaratory relief as wide as that given to a judge of the High Court in England by Order 25 Rule 5 of the Rules of the Supreme Court (Eng. of 1883). Referring to that power, Gibbs J (as he then was) noted that:

It is neither possible nor desirable to fetter the broad discretion given by s. 10 by laying down rules as to the manner of its exercise. It does, however, seem to me that the Scottish rules summarized by Lord Dunedin in Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd., should in general be satisfied before the discretion is exercised in favour of making a declaration ...[14]

39 His Honour then referred to the judgment of Lord Dunedin in Russian Commercial & Industrial Bank v British Bank of Foreign Trade Ltd,[15] where the House of Lords was concerned with a loan obtained by the British Bank from the Russian Bank on the security of certain bonds. The question arose concerning the construction of the contract and the nature of the currency in which the loan was repayable. Lord Dunedin dealt with the question of whether the circumstances of that case represented a proper occasion for the granting of a declaration of the kind asked for and ultimately given. His Lordship said that:

The question must be a real and not a theoretical question; the person raising it must have a real interest to raise it; he must be able to secure a proper contradictor, that is to say, some one presently existing who has a true interest to oppose the declaration sought.

Applying this rule to the present case, this is in no sense a theoretical question. Moreover it is obvious that it is a matter of real importance to the respondents, as guiding their rule of conduct, to know whether the loan is truly a rouble loan or a sterling loan. In the one case, they will probably redeem; in the other case, they will not. Further, there is no doubt that there is here secured a proper - and, indeed, the only - contradictor.[16]

40 Referring to that passage, Gibbs J expressed the view in Forster that the question of whether or not a valid exploration licence was held was in no way hypothetical. The matter, as his Honour described it, was very much the subject of contest.

41 In Ainsworth & Anor v Criminal Justice Commission,[17] the Court said in relation to the approach to declaratory relief:

It is now accepted that superior courts have inherent power to grant declaratory relief. It is a discretionary power which "[i]t is neither possible nor desirable to fetter ... by laying down rules as to the manner of its exercise." However, it is confined by the considerations which mark out the boundaries of judicial power. Hence, declaratory relief must be directed to the determination of legal controversies and not to answering abstract or hypothetical questions. The person seeking relief must have "a real interest" and relief will not be granted if the question "is purely hypothetical", if relief is "claimed in relation to circumstances that [have] not occurred and might never happen" or "if the Court's declaration will produce no foreseeable consequences for the parties".[18]

42 Their Honours went on to indicate that the present case involved no mere hypothetical question and that a declaration made in terms indicating that the appellants in the case were denied natural justice was appropriate in those circumstances.

43 Dawson J applied the reasoning of Ainsworth in Oil Basins Ltd v Commonwealth & Ors.[19] In that case the plaintiff had sued the Commonwealth, the Commissioner of Taxation for the Commonwealth, and two companies engaged in petroleum production in the High Court of Australia. The question at issue was whether the plaintiff was liable to pay petroleum resource rent tax upon an amount it derived under an overriding royalty agreement upon which the petroleum production companies had become liable by assignment. The plaintiff sought declarations that the petroleum production companies did not pay the tax on its behalf and sought an injunction restraining them from doing so.

The question raised by the plaintiff is neither abstract nor hypothetical and the answer to that question will clearly produce consequences for the parties. In those circumstances I would, for my own part, doubt whether the failure on the part of the Commissioner to indicate whether or not he disputes the plaintiff's claim could preclude the plaintiff from seeking against him the relief which it does. The most that could be urged is that there is no proper contradictor, but I doubt whether that is so when the Commissioner's participation in the action is likely to force him to abandon his present stand of neutrality. Even if he were to maintain that stand, I doubt whether that would prevent him from being a proper contradictor. He clearly has a true interest in the plaintiff's claim and, if he were to choose not to oppose it and to abide by any order which the Court might make, that might perhaps amount to no more than the performance of his role as a contradictor in a particular manner.

But there is no need in this case to reach any conclusion whether the Commissioner is a proper contradictor because the producers obviously have a true interest in opposing the declaration sought. There is no requirement that all defendants in an action claiming a declaration must oppose the plaintiff. In Forster v. Jododex Australia Pty. Ltd., for example, the mining warden submitted to the order of the court, but the court made a declaration binding upon him where another party opposed the declaration being made.[20]

45 So, unlike the situation confronting Dawson J, in the proceeding before me there is no party opposing the making of the declaration. In support of the granting of declarations, Mr Jones submitted that "right up until the point" when I make orders under the Act, the Dissanayakes have a "real interest" in opposing the making of the declarations sought. With respect, that is artificial and so much is borne out by the submissions that followed from Mr Miller on behalf of the Dissanayakes.

46 It is true, as Mr Jones further submitted,[21] that the Dissanayakes would be bound by the covenant and any declaration as to its effect and meaning in the future, but that in itself does not seem to me to be enough to engage the Court's jurisdiction. There is no threat of further conduct which will lead to a dispute which the Court can resolve.

47 In this Court, the issue of the discretion and jurisdiction to make declarations has been considered on a number of occasions. In Swift Australian Co (Pty) Ltd v South British Insurance Co Ltd,[22] the plaintiff sought a declaration that the defendant was obliged to indemnify it under a policy of insurance issued by the defendant to the plaintiff. The matter was placed before the Full Court of this Court as a special case for the opinion of the Court on questions of law which were said to have arisen. The Court rejected the request for an opinion. In the course of the judgment the Court made it clear that there was a "long line of authority" that the courts will not advise parties to actions upon their rights under a hypothetical state of facts nor give advisory opinions nor answer hypothetical questions.[23]

48 In C E Heath v Pyramind Building Society,[24] the Court of Appeal was concerned with the Pyramid Building Society and in particular with an application by the building society and the liquidator for joinder of the insurance companies and declarations in relation to the application of policies of insurance. The order for joinder made at first instance was set aside by the Court of Appeal. Ormiston JA reviewed the considerations which apply and concluded:

I have set out rather more than is ordinarily desirable from the relevant passages in three of the four most recent leading cases on declaratory relief in order to demonstrate that the respondent's contention that the jurisdiction to grant declarations is unlimited (except by statute) cannot be accepted. The "boundaries of judicial power" do place a sensible limit on what the courts may be asked to declare. It is perhaps of no great consequence whether certain aspects of the tests as to what is theoretical or hypothetical may lead to a denial of jurisdiction or whether they go only to a discretionary ground to refuse relief. If there is no real "legal controversy" then the courts will not embark upon a hearing which will certainly lead to the refusal of declaratory or any other relief. If it is a controversy which is not "fit for determination by judicial declaration" then I see no reason why the litigation should not be immediately resolved.[25]

49 Phillips JA was of the view that the question was one of discretion rather than jurisdiction:

... I would be content to adopt with respect what was said by Gibbs J. (as he then was) in Forster as providing proper guidance when declaratory relief is sought. In particular, I agree with what his Honour said in reference to Salmar Holdings per Mason J.A. and by reference to Russian Commercial and Industrial Bank

v. British Bank for Foreign Trade, Ltd. per Lord Dunedin and Ibeneweka

v. Egbuna per Lord Radcliffe. I refer also to the following statement by King C.J. in J. N. Taylor Holdings Ltd. v. Bond as reflecting what is nowadays the position:

I can find no warrant for the imposition by the courts of a

self-denying restriction on their jurisdiction to grant declaratory relief. In my opinion there is no jurisdictional limit. The court's power to grant such relief is "only limited by its own discretion" (Hanson v Radcliffe) and the boundaries of judicial power: Ainsworth v Criminal Justice Commission_. The settled practice of the courts may indicate the manner in which the discretion will be exercised in given circumstances._[26]

50 In determining how the discretion of the Court should be exercised, I am unable to see that there is any real "legal controversy" in the present circumstances. It is submitted in support of the making of the declarations that there is a "a real controversy or real question to be determined",[27] but I am unable to agree. No party appeared before me to resist the making of the declarations sought.

51 In Ansett Australia Ground Staff Superannuation Fund Pty Ltd v Ansett Australia Ltd & Ors,[28] the Court of Appeal of this Court concluded that in the circumstances it was "inappropriate" to answer the questions before the Court by way of appeal.[29] The Court was of the view that the question raised by the appeal was "both advisory and hypothetical".[30] In the course of his judgment, Ormiston JA said:

I would not wish to lay down any rule which would trammel the usefulness of declaratory relief, which has been demonstrated over at least the last 100 years. Nevertheless, there are limits to what courts of highest authority have seen to be discretionary power to grant declaratory relief, which are perhaps best summarised in the judgment of the six members of the High Court in Bass v. Permanent Trustee Co. Ltd. As was there said it is central to the purpose of judicial determination that there is a "notion that such a determination includes a conclusive or final decision based on a concrete and established or agreed situation which aims to quell a controversy". It followed, that "courts have traditionally refused to provide answers to hypothetical questions ... or to give advisory opinions".

One should be cautious about the meaning of the word "hypothetical" in this context. From time to time and in particular contexts it has been held to be appropriate for courts to decide the legal consequences of certain events, when precisely defined, which either have not occurred or, more especially, when they may be affected by the occurrence of some future event, if that is a real likelihood which has led to a present and genuine controversy between the relevant parties which there is a practical need to resolve. For years courts exercising equitable jurisdiction have been prepared to answer questions arising under wills, trusts and the like as to what the rights of beneficiaries etc. will be when a life interest falls in or some other clearly predictable event occurs in the future, albeit some caution must still be applied ... Further, declarations are frequently made as to rights of indemnity when certain moneys are yet to be paid or called up and likewise, in limited circumstances, where it is asserted by some party in authority that some proposed conduct will amount to a breach of statute: see Commonwealth v. Sterling Nicholas Duty Free Pty. Ltd., referred to in Bass_. Usually, however, the Court's willingness to exercise the jurisdiction to make such a declaration is predicated upon the likelihood of the specific defined event occurring, whereas in the present case, even assuming the question to be reformulated in a hypothetical form, that is by no means likely._[31]

52 His Honour went on to identify the vice in that particular case as being that the Court's answer to the question presented to it would be advisory and noted that one "critical test" is whether the declaration will settle the dispute finally. In this case the dispute between parties has already been settled and although the proposed declarations will affect the Dissanayakes to some degree they are effectively exempt by virtue of the orders I propose to pronounce under s 84(1) of the Act. No declaration I could make could prevent future dispute, the combination of circumstances of which no one could predict.

53 Further, and despite my earlier observation during argument, I am not persuaded that the requirement of a proper contradictor has been resolved by the addition of the Dissanayakes to these proceedings. The Dissanayakes do not presently have a true interest in opposing the declaration presumably because of the proposed amendments to the covenant pursuant to s 84(1) of the Act. There is, therefore, still the question as to whether there is a dispute on foot that the Court must adjudicate. I have come to the view there is not.

54 In this case it does not seem to me there is any "real likelihood" (per Ormiston JA in Ansett) of an event occurring which will bring about a dispute. The application is not borne out of a threat of a breach of the restrictive covenant but out of the anxiety of the plaintiffs wishing to clarify their rights just in case another lot owner commences construction of a two storey building. The proposed amendment to the covenant in order to accommodate the position of the Dissanayakes resolves the dispute that previously existed.

55 In Klefend Pty Ltd v Santom Pty Ltd & Shoalhaven City Council,[32] Pearlman J, sitting in the Land Environment Court of New South Wales, upheld a motion that the proceedings be struck out on the basis that the questions sought to be determined were purely hypothetical. In that case the plaintiff's land was burdened by a restrictive covenant that limited the commercial use of the land. The plaintiff wished to sell the land and in order to make the land more attractive to a potential purchaser the plaintiff brought proceedings against the beneficiary of the covenant and the local council seeking a declaration that the covenant was not enforceable. The Court in Klefend considered two cases - Leverington v State Planning Authority & District Council of East Torrence,[33] and Sterling Nicholas Duty Free Pty Ltd v Commonwealth[34] - and stated that in those cases where declarations were granted:

... there was a clear dispute between the parties. In both cases, the defendant had exercised or threatened the exercise of some power and the plaintiff had sought a declaration as to the plaintiff's right at law to do what it wished to do. This is not such a case. There is no existing dispute between Klefend and the council or between Klefend and Santom. What Klefend is seeking is for the Court to make a declaration which would satisfy the RSL Club as a potential purchaser of the Klefend land that Santom could not enforce the restrictive covenant on that land. The covenant on its face constrains the use of the Klefend land such that Klefend is having difficulties in contractual negotiations with the RSL Club. There is no development consent to use the Klefend land in a manner which might breach the restrictive covenant and there has been no application for development consent. Indeed, the suggestion is that the current use may be carried on "for a number of years", and that the RSL Club's possible investment in the Klefend land is "long term". Santom has not attempted to enforce the restrictive covenant, nor is there any reason for it to do so at the present time. In these circumstances there is no dispute between the parties. There is only a hypothetical set of facts upon which a dispute may arise and on which the Court is asked to base its determination, a series of "what ifs" that may never come to pass.[35]

56 In the circumstances as I understand them in this case, I also consider it is based on a series of "what ifs". The only dispute in existence between the plaintiffs and the Dissanayakes is now resolved. The plaintiffs are now seeking advice from the Court as to their rights in case a situation arises in the future.

57 In deciding whether or not to grant a declaration it is necessary for me to consider what consequence, if any, a declaration will have. If the Court in this case grants a declaration and satisfies the plaintiffs' anxiety as to their right to enforce the covenant, a later case may arise, on specific facts, that would be decided differently. Arguably a declaration made now in circumstances of no real dispute between the parties might have no practical effect. It may dissuade a future defendant from challenging the enforceability of the covenant but it would not preclude him or her from doing so. Thus, where the High Court in Bass v Permanent Trustee Co Ltd,[36] noted that the "crucial difference" between an advisory opinion and a declaratory judgement is that the former is not based on a concrete situation and does not amount to a binding decision "... raising a res judicata between the parties", it is that former category that seems to me to apply in this case.

58 I am acutely aware that my views about the appropriateness of granting declaratory relief in this case is effectively at odds with what has been agreed between the parties. Although consent orders were not presented to me, as I have said there was no debate about the issue. The question arises as to whether, where there is effective lack of opposition to the making of a declaration by the party or parties in the proceedings, that has an effect on whether declaratory relief should be granted.

59 In his submissions before me, Mr Jones acknowledged that the parties had reached a compromise,[37] but relied on the observations of Dawson J in Oil Basins.[38] I am not sure that in that case his Honour was resolving the issue because, as he noted, there was no need to reach a conclusion as to whether the Commissioner was a proper contradictor given that other parties had a genuine interest in opposing the declaration sought.

60 In BMI Ltd & Ors v Federated Clerks Union of Australia (NSW) Branch & Ors,[39] the Federal Court of Australia was concerned with the interpretation of an industrial award under the Conciliation and Arbitration Act 1904 (Cth). The application was amended to include an application for a declaration under s 108 of the Federal Court of Australia Act 1976 (Cth). A single judge dealt with the application under the Conciliation and Arbitration Act 1904 but the Full Court dealt with the application under s 108 of the Federal Court of Australia Act 1976. As has occurred before me, counsel for the respondents to the application raised no objection to the making of the declaration sought.

61 Keely and Beaumont JJ constituted the majority and concluded that in those circumstances the declarations sought should not be made. A declaration, they observed, is a judicial act and ought not to be made only on the admissions of counsel or by consent. Their Honours were of the view that it is generally undesirable that a court should grant relief by way of declaratory orders in the absence of any contest on the question.[40] They went on:

If the matter were merely one of private right between particular parties, for example, a question as to the respective rights of parties under a contract, it may well be appropriate for a court to make a declaration as to those rights by consent. In such a case, the public and other parties cannot be affected, let alone bound, by such a declaration ...

But different considerations apply in a case such as the present. If a declaration were made, even in the terms sought, its practical operation may well extend beyond the activities of the first applicant. The claim has been fully argued by the applicants and if we were to make the declarations sought, we have little doubt that the grant of such relief would be perceived by others as the expression by the court of its views on the matter, notwithstanding that the court has not had the benefit of any contrary argument ... It is not easy to imagine what useful purpose would be served by the court making the declarations sought except possibly to achieve the undesirable object of binding, in practical terms, other parties in other situations in the future.[41]

62 The Court concluded that there was no contradictor and the question was now academic.

63 Northrop J dissented. He considered the declaration could be made by consent. As I understood he relied upon the distinction between a declaratory order sought in equity (as sought in the case before me) and the order sought in that case pursuant to a power conferred on the Federal Court by its Commonwealth statute.[42]

64 The case before me is not merely one of private right between then parties. I am not asked to make a declaration in relation to whether the Dissanayakes have breached the restrictive covenant but rather to declare as to its effect and meaning for all purposes and affecting all parties in both Plans of Subdivision. Thus, other parties are affected.

65 I have therefore concluded that in the present circumstances I would not exercise my discretion to grant the declarations sought.

66 Subject to hearing further from counsel, I will make the following orders:

1. The restrictive covenant contained in Instrument of Transfer No. D243851 in the register book affecting the land described in Certificate of Title Volume 8776 Folio 841 be modified pursuant to s 84(1) of the Property Law Act 1958 (Vic) so as to add thereto the expression "save for that presently constructed thereon as at the date of this Order" but to not otherwise affect the said restrictive covenant.
2. A copy of this Order be served on the Registrar of Titles by the plaintiffs.
3. The Registrar of Titles shall pursuant to s 88(1B) of the Transfer of Land Act 1958 (Vic), amend the register book accordingly and shall issue a written declaration to that effect to the plaintiffs.

1. The amended originating motion dated 26 August 2005 is dismissed.

MUDIYANSELAGE BANDULA DISSANAYAKE and MIHIRI DISSANAYAKE

MUDIYANSELAGE BANDULA DISSANAYAKE and MIHIRI DISSANAYAKE

[1] [1985] VicRp 48; [1985] VR 433.

[3] [2005] VSC 169; (2005) 12 VR 224.

[5] Transcript of Proceedings, Hillman & Ors v Dissanayake & Anor (Supreme Court of Victoria, Kaye J, 6 May 2005) at 74.

[6] Plaintiffs' Submissions before Kaye J, at [33]. See also Fitt & Anor v Luxury Developments Pty Ltd [2000] VSC 258 at [115] (per Gillard J).

[7] See Bass v Permanent Trustee Co Ltd [1999] HCA 9; (1999) 198 CLR 334 at 355.

[8] Edwin M Borchard, Declaratory Judgments (1934) 6-7.

[9] Bass v Permanent Trustee Co Ltd [1999] HCA 9; (1999) 198 CLR 334 at 355.

[10] [1972] HCA 19; (1972) 126 CLR 297 (hereinafter "Sterling").

[13] [1972] HCA 61; (1972) 127 CLR 421 (hereinafter "Forster").

[15] [1921] 2 AC 438.

[17] [1992] HCA 10; (1991) 175 CLR 564 (hereinafter "Ainsworth").

[18] Ibid at 581-2 (per Mason CJ and Dawson, Toohey and Gaudron JJ) (citations omitted).

[19] [1993] HCA 60; (1993) 178 CLR 643 (hereinafter "Oil Basins").

[21] Transcript of Proceedings, Dissanayake & Anor v Hillman & Ors (Supreme Court of Victoria, Lasry J, 7 November 2007) at 65.

[22] [1970] VicRp 47; [1970] VR 368.

[23] Ibid at 369 (per Winneke CJ, Little and Starke JJ).

[24] [1997] 2 VR 256.

[28] [2003] VSCA 117 (hereinafter "Ansett").

[32] (1994) 88 LGERA 307 (hereinafter "Klefend").

[33] [1970] SASR 387.

[34] [1971] 1 NSWLR 353.

[35] Klefend (1994) 88 LGERA 307 at 312-3.

[36] [1999] HCA 9; (1999) 198 CLR 334 at 356.

[37] Transcript of Proceedings, Dissanayake & Anor v Hillman & Ors (Supreme Court of Victoria, Lasry J, 7 November 2007) at 63.

[38] See especially [1993] HCA 60; (1993) 178 CLR 643 at 649.

[39] [1983] FCA 351; (1983) 76 FLR 141.