Freehold covenants

Cameron Stewart (thanks to

Jim Helman and Shae
McCrystal errors are mine)

Introduction
19thC rising middle class, development
and property ownership
Little government control over development
Need for environmental regulation
Contract as the model
Contractual agreements regarding land bind
the parties but that is of little use into the
future when the property changes hands
The movement from contract to property

Introduction
Covenant The term covenant, at
law, refers to a promise made in a
deed so a term of a deed. However,
in practice we use the term covenant
more loosely to refer to a contractual
obligation affecting a land owner so
could arise under a contract not
effected by deed.

Introduction
Positive Covenant A covenant that
requires an act to be done.
Negative Covenant A promise that
requires an act not to be done.
Covenantor Person making the
promise
Covenantee Person taking the
benefit of the promise

Introduction
Burden of the Covenant The burden
of the covenant is the obligation to
act or not to act under the covenant.
So if a person bears the burden of
the covenant then they are the
person who is required or restrained
from acting in respect of their land.
The person subject to the burden is
called the covenantor (the person
who has covenanted to act or not to

Introduction
Benefit of the Covenant The benefit
of the covenant is the benefit that
flows from the other party bearing
the burden. So this is the benefit that
flows from that person acting or not
acting in a certain way with respect
to land. The person who obtains the
benefit of the covenant is the
covenantee (the person who has
sought the promise that the other

Introduction
A (Covenantor)
(Covenantee)

C
Burden of Covenant

D
Benefit of Covenant

Annexation of covenants
When will the burden of a covenant run with the
land such that the original covenantee can
enforce the covenant against successors in title
to the original covenantor in law and at equity;
When will the benefit of a covenant run with the
land such that a successor in title to the original
covenantee can enforce the benefit against the
original covenantor? in law and at equity
When will successors in title of the original
covenantee be able to enforce covenants against
successors in title of the original covenantor?

Passing the burden at law

Austerberry v Corporation of Oldham (1885) 29 CH
D 750. The case involved a private road. A man
called John Elliot conveyed some land to a
company for the purpose of building a road. The
company covenanted that it would build the road
and then maintain and repair the road at its own
expense. The company subsequently sold the land
to the Corporation of Oldham. Was the burden of
the covenant between Elliot and the company (the
obligation to maintain and repair the road at their
own expense) enforceable against the Corp of
Oldham?

Passing the burden at law

No - The court found that the covenant did
not bind the Corporation of Oldham. The
court said that the Corporation of Oldham
was only bound by a covenant which ran
with the land. The court found that the
burden of a covenant does not run with the
land: A mere covenant to repair, or to do
something of that kind, does not seem to me,
I confess, to run with the land in such a way
as to bind those who may acquire it per
Lindley J

Passing the burden at law

Section 70A(1) was inserted into the Conveyancing Act
It appears at first reading to change the common law
position with respect to the burden of covenants:
A covenant relating to any land of a covenantor or
capable of being bound by the covenantor by covenant
shall, unless a contrary intention is expressed, be
deemed to be made by the covenantor on behalf of
himself or herself and the covenantors successors in
title, and the persons deriving title under the covenantor
or the covenantors successors in title, and, subject as
aforesaid, shall have effect as if such successors and
other persons were expressed.
Does this override Austerberry?

Passing the burden at law

No the section deems a covenant to be made by
a covenantor on behalf of the covenantor and his
successors in title thus providing a legislative
presumption that a covenantor intends to bind
successors in title, but does not actually say that
the covenantor CAN bind successors in title. As
the common law says that they cant, simply
saying that we will deem them to have that
intent, does not overcome the common law rule.
In other words, the section allows conveyancers
to not have to write out that successors are
intended to be bound

Rhone v Stephens [1994] UKHL 3

Walford House shared a roof with Walford
Cottage
3 The Vendor herby covenants for himself and
his successors in title owner or occupiers for
the time being of the property known as
Walford House aforesaid to maintain to the
reasonable satisfaction of the Purchasers and
their successors in title such part of the roof of
Walford House aforesaid as lies above the
property conveyed in wind and water tight
condition

Rhone v Stephens [1994] UKHL 3

Lord Templeman:
This provision has always been regarded
as intended to remove conveyancing
difficulties with regard to the form of
covenants and to make it unnecessary to
refer to successors in title I do not
consider that it follows that section 79 of
the Act of 1925 had the corresponding
effect of making the burden of positive
covenants run with the land.

Ways around Austerberry

Chain of personal covenants in deeds
This method involves creating a chain of covenants
between the original covenantee and covenantor and
all their successors in title. The original covenantor
always remains liable to the original covenantee aim
is to extend the liability:
The first covenantor agrees to ensure that each
subsequent purchaser will enter into an identical
covenant with the next purchaser. This means that
the obligation is recreated in each deed;
When the first covenantor sells, the purchaser
agrees to be liable under the contract if the original
covenant is broken. That purchaser then requires
the same promise from the person they sell to and
so on. This means that if the covenant is broken
and the first covenantor is sued, they can seek

Ways around Austerberry

Under s 134 of the Conveyancing Act NSW, a
lease granted over property which is granted for
a term of not less than 300 years, and has not
less than 200 years to run, may be enlarged into
a fee simple estate provided that the lease does
not require rent or more than nominal rent to be
paid. Section 134(5) provides that where this
occurs,
The estate in fee simple so acquired by
enlargement shall be subject to all the same
trusts, powers, executory limitations over, rights,
and equities, and to all the same covenants and
provisions relating to user and enjoyment, and to
all the same obligations of every kind, as the
term would have been subject to if it had not

Ways around Austerberry

The Principle of Benefit and Burden
Another suggested mechanism for enforcing the
burden of covenants against successors in title is
the principle of benefit and burden. This is an old
principle of the law of deeds that provides that a
person who wants to claim the benefit conferred
by a deed, must submit to any burdens that are
also imposed by the deed.
This obligation comes from the fact, as we will
discuss later, that unlike burdens, benefits DO run
with the land (and we will discuss how and why
later). The idea here is that if a successor in title
wants to claim any benefits that have run with
the land, then they should also be subject to any

Hallsall v Brizell [1957] Ch

169
A housing estate of 174 lots was created in 1851.
The owners of the land kept ownership of the
common roads, sewer system, a sea wall and a
promenade area and covenanted with each
purchaser that they would make an annual
contribution to the maintenance and upkeep of
those common areas. In 1950, the current owner
of one of the houses challenged the amount he
had been charged that year as his contribution
and the matter ended up in court. The initial
question was whether or not the owner was
legally obligated to make the payment at all.
Justice UpJohn began by noting that the burden of
a covenant is not enforceable against successors
in title of the covenantor.

Ways around Austerberry

Lord Upjohn held that it is ancient law that a man
cannot take a benefit under a deed without
subscribing to the obligations contained within
the deed. While originally the rule only applied as
between the actual parties to the deed, the rule
had been expanded under English common law to
apply to successors in title of the covenantor
where they take a benefit under a deed to which
they are not a party
The principle of burden and benefit was restated
by the House of Lords in Rhone v Stephens [1994]
2 WLR 429 This case involved a house and a
cottage which shared a roof. When ownership of
the house and cottage was divided, the owner of
the house covenanted to be responsible for

Ways around Austerberry

Lord Upjohn held that it is ancient law that a man
cannot take a benefit under a deed without
subscribing to the obligations contained within
the deed. While originally the rule only applied as
between the actual parties to the deed, the rule
had been expanded under English common law to
apply to successors in title of the covenantor
where they take a benefit under a deed to which
they are not a party

Rhone v Stephens [1994]

UKHL
3
Lord Templemann (with whom the other Lords agreed)

stated that the rule was not that any party deriving any
benefit from a deed must accept any burden that is
contained in the same document. Instead, the burden
must be relevant to the exercise of the rights granted.
Therefore, the important thing is that the burden must
relate to the reciprocal benefit claimed and not be a
separate independent provision. Here, the benefit of
support from the neighbouring house was independent of,
and separate to, the covenant to repair the roof.
In the present case the owners of Walford House could
not in theory or in practice be deprived of the benefit of
the mutual rights of support if they failed to repair the
roof.

Ways around Austerberry

Not popular in Australia
Justice Branson of the NSW Supreme Court stated
that the principle of benefit and burden has not
become established as a general principle
(Clifford v Dove [2003] NSWSC 938 [67]) and
similar criticisms were made before the HOL
decision in Rhone by Justice Brooking in the Vic
Sup Court in Government Insurance Office (NSW)
v KA Reed Services [1988] VR 829.

Rufa v Cross [1981] Qd R

365
A party wall was constructed on a common boundary
between properties. Subsequently, the owners agreed by
deed to grant easements over the site of the wall and
included covenants that either owner by notice to the other
could extend the wall and that if the other owner later
decided to use the extended portion of the wall that the
second owner would pay for part of the cost of construction.
The District Court judge found that the right to extend the
existing wall and the right to use that extended portion
were rights capable of forming the subject matter of a grant
of easement and that where the appellants took the benefit
of the deed, they were bound by the conditions in it. This
was so, despite their not being parties to the deed. The
Queensland Full Court dismissed an appeal from the District
Court.

Rufa v Cross [1981] Qd R

365
Kneipp J.: It is laid down in Coke on Littleton, 230b, that a
man who takes the benefit of a deed is bound by a
condition contained in it though he does not execute it:
per Cozens-Hardy M.R., arguendo, in Elliston v. Reacher
[1908] 2 Ch. 665 at 669. It is sometimes put in Latin: qui
sentit commodum sentire debet et onus. Examples of its
application are Aspden v. Seddon (1 Ex. D. 496).
Westhoughton U.D.C. v. River Douglas Catchment Board
[1919] 1 Ch. 159, 171, and Halsall v. Brizell [1957] Ch. 169.
It seems that the easements in the present case were
executed under seal, but in any event they had the effect of
a deed on registration: Real Property Act of 1861, s. 35. In
the present case, the building of the defendants in at least
one respect encroaches on to that part of the wall which
stands above the plaintiffs land. If it is assumed, as I think
it should be, that this is justified by reference to the
relevant easement, then I think that they should bear the
obligation imposed by that instrument to pay half the cost

Rufa v Cross [1981] Qd R

365
Where a covenant is created as an essential

component of the grant of an easement, the

burden of the covenant may be enforceable if the
covenant is considered to be an incident or
essential part of the easement.
Frater v Finlay (1968) 91 (WN) NSW 730 Two
owners of adjoining pastoral land held under
Crown leases agreed that one could draw water
from a well on the servient land through a pipe
connected to the dominant tenement. The grant
of easement contained a requirement that the
owner of the dominant tenement pay for half of
the upkeep of the well and the pipes. The
successor in title to the owner of the servient
tenement sought payment of half the cost of the

Rufa v Cross [1981] Qd R

365
DCJ Newton found that while an easement

imposes no active obligation on the owner of the

servient tenement to repair the site of the
easement, the owner of the servient tenement
may voluntarily bind himself to repair or maintain
the site as a term of the grant of the easement.
He said that it follows from this that, per Newton
DCJ at 735:
[I]f the grantor of an easement can bind himself
and his assignees to repair by the grant then, a
fortiori, the owner of the dominant tenement can
bind himself and his assignees to repair or
contribute to the cost of repairs.

Clifford v Dove [2003]

NSWSC 938
A dispute involving an easement of a carriageway which also

granted in which the owner of the dominant tenement was given

the right to use cattleyards belonging to the owner of the servient
tenement.
(a) The owners of Lots 5 and 6 shall maintain and keep in good
repair and sound condition the Right of Way, the fences adjoining
the Right of Way and the cattleyards, the cost of repair and
maintenance being borne equally between the owners of Lots 5 and
6 AND the owners covenant not to pull down or remove any fences
without replacing them with cattle-proof fences of equal quality
(b) That if the owner of one Lot shall default in duly performing or
observing the above conditions the other owner shall be entitled to
rectify the default at the cost of the defaulting owner if he shall give
the defaulting owner fourteen (14) days prior written notice of his
intention to do so.

Clifford v Dove [2003]

NSWSC
938
Servient tenement holder wrongfully ripped up

the cattleyard and crush

Dominant tenement sought damages
Servient tenement raised a defence that that
dominant tenement had to pay for any repairs
under (b)
Bryson J said that it was a positive burden that
could not run

Clifford v Dove [2003]

NSWSC 938
Justice Bryson stated that the decision of the House of Lords in

Rhone v Stephens makes it clear that the burden of covenants does

not run with the land and as this was an additional covenant
separate to the easement it did not run.
Essential part of an easement? No Frater v Finlay is doubtful
authority. Rufa?
[66] With respect, I do not find the view expressed by D.M Campbell
J to be applicable to support any general principle relevant in the
present case. In my understanding his Honour was of the view that
the meaning and effect of the grant of easement were that the right
to use the extended portion of the wall was conditional upon
contributing half its value; see 368B. This conclusion does not
uphold the ruling inFrater v. Finlay, to which Lucas SPJ and D M
Campbell J did not refer. In my respectful view an observation of
Kneipp J at p370F-G shows that the conclusion of Newton DCJ
inFrater v. Finlaywas incorrect

Clifford v Dove [2003]

NSWSC 938

Benefits and burdens? No

The principle relating to benefit and burden cannot apply to the defendant in respect of
the cattle yards, which are situated on her own land; no benefit with respect to the use of
the cattle yards is conferred on her by the easement. The principle of benefit and burden,
if it had been invoked, may well have supported the decision in Frater v. Finlay. It was in
this context that, inGallagher v. Rainbow[1994] HCA 24;(1994) 179 CLR 624at 647-648
McHugh J referred to Frater v. FinlayandRufa v. Cross Furthermore, the successor in
title to a person bound by a deed may be bound by obligations in the deed if the
successor in title takes a benefit conferred by the deedRhone v Stephens[1994] UKHL 3
;[1994] 2 W.L.R 429;Halsall v Brizell[1957] Ch. 169;E.R. Ives Investments Ltd. v High,
[1966] EWCA Civ 1;[1967] 2 Q.B. 379;Frater v Finlay(1968), 91 W.N.(NSW) 730 ;Rufa
Pty. Ltd. v Cross,[1981] Qd R. 365. McHugh J assumed but to my reading should not be
understood to have decided that the benefit and burden principle extends to persons
who are not parties to or named in the Deed; see p648. The benefit and burden principle
was extensively criticised inGovernment Insurance Office (NSW) v. KA Reed Services Pty
Ltd[1988] VicRp 75;[1988] VR 829by Brooking J in his judgment at 830 to 841: the
views of Brooking J would have to be addressed carefully by a court which is asked to act
simply on that principle, but that is not the present case. The principle of benefit and
burden has not become established as a general legal principle. It has sometimes been
referred to as the Ocean Island Equity, an allusion toTito v Waddell (No 2)[1997] Ch 106.
It was considered with references to authorities and sources, by Young J inRural and
Agricultural Management Ltd v West Merchant Bank Ltd(1995) 18 ACSR 793and inRyan
v Rouen[2000] NSWSC 468at paras [72] to [75]. There seems to be room for such a
principle where owners of equitable interests or claimants against a fund compete with
other similar claims. In context of positive obligations under easementsRhone v
Stephensappears to have concluded against any such principle.

Ways around Austerberry

s 88BA was introduced into the CA in 1996
covering positive covenants for repair or
maintenance.
1) A covenant may be imposed requiring the
maintenance or repair, or the maintenance and
repair, of land that is the site of an easement or
other land that is subject to the burden of the
easement (or both) by any one or more of the
persons from time to time having the benefit or
burden of the easement.

Ways around Austerberry

(2) Such a covenant may be imposed:
(a) by registration under this Act or the Real
Property Act 1900 (as the case may require) of
the instrument indicating the persons bound by
or including the terms of the easement, if the
terms of the covenant are included in that
instrument, or
(b) by registration under the Real Property Act
1900 of a memorandum of positive covenant in
the form approved under that Act that includes
the terms of the covenant, if the site of the
easement is under the provisions of that Act, or
(c) by registration under Division 1 of Part 23 of a
deed expressed to be made under this section

Ways around Austerberry

((3) The instrument including the covenant must
clearly indicate the land which is to be
maintained or repaired, the land to which the
benefit of the covenant is appurtenant and the
land which is subject to the burden of the
covenant. If the land is subject to an easement
without a dominant tenement created in favour of
a prescribed authority (as referred to in section
88A), the instrument must indicate the name of
the prescribed authority.

Ways around Austerberry

Rentcharges - A rent charge is an annual or
periodic payment charged on and payable by the
owner of land from time to time. The payment is
made to a person who owns the rent charge and
the person who owns the rentcharge owns it
personally it is not connected to land.
Rent charges developed when subinfeudation was
prohibited. Since landowners could no longer
make persons to whom they sold land offer up
feudal duties, they would instead, when they sold
land, reserve to themselves the payment of rent
on the sale of the land. So I sell you this fee
simple and in return you agree to pay $x and

Ways around Austerberry

The rentcharge is owed to a person, but attaches
to the land and is imposed on the owner of the
land from time to time. The rentcharge can be
enforced through entry into possession of the
land in the case of old system land or sale in the
case of Torrens. Using a rentcharge as a
mechanism for enforcing the burden of covenants
at law was recognised in Austerberry v
Corporation of Oldham (1885) 29 CH D 750 per
Lindley LJ If the parties had intended to charge
this land forever, into whosesoever hands it
came, there are ways and means known to
conveyancers by which it could be done with
comparative ease; all that would have been
necessary would have been to create a

Passing the burden in Equity

Tulk v Moxhay (1848) 2 Ph 774; 41 ER 1143: In this case the plaintiff,
Tulk, sold land called Leicester Square Garden to a man called Elms. In
the contract of sale there were two covenants:
That Elm would maintain the land as a garden and not erect any buildings on it;
That Tulk would pay rent to Elms for access to the garden for Tulk and Tulks
tenants.

The case came to court when Tulk tried to enforce the covenants
against a purchaser of the fee simple from Elms, who was proposing to
erect buildings on the site. The purchaser of the fee simple had notice
of the Covenants. The court found that equity would enforce the burden
of the covenant against a purchaser of the land who takes the land with
notice of the covenant. The court said that if a purchaser takes the land
with notice of a covenant, then they will receive a reduced purchase
price to take the covenant into account and it would be inequitable to
allow them to escape the obligation in those circumstances.

Passing the burden in Equity

Equity will enforce the burden where:
The covenant is negative in effect
The covenant benefits the land of the
covenantee;
The burden of the covenant was
intended, by the original parties to the
covenant, to run with the land; and
The successor had notice of the
covenant

Only negative covenants

Haywood v Brunswick Permanent Benefit Building Society (1881)
8 QBD 403 which held that equity would only intervene to enforce
a negative covenant of which a purchaser had notice:
Brett LJ at 408 an assignee taking land subject to a certain
class of covenants is bound by such covenants if he has notice of
them covenants restricting the mode of using the land only will
be enforced.
Rhone v Stephens [1994] 2 WLR 429 - In considering whether the
court would enforce a covenant to repair a roof against the
successor in title of the covenantor, Lord Templeman stated that:
[E]quity cannot compel an owner to comply with a positive
covenant entered into by his predecessors in title without flatly
contradicting the common law rule that a person cannot be made
liable under a contract unless he was a party to it.

Only negative covenants

The question of whether a covenant is
negative or positive is a question of the
substance of the obligation imposed. Does it
require the successor to the covenantor to do
something (positive); or does it merely
require them to refrain from doing something
(negative). Butt suggests that a good rule of
thumb is whether the covenant requires the
expenditure of money positive or if it can
be complied with by doing nothing (negative).

Only negative covenants

Build on land within a certain time (positive)
Any buildings should be detached; cost not less
than x amount (negative dont have to build)
Keep a park uncovered with buildings (negative)
Not allow premises to fall into disrepair (positive)
Only use land for a bowling and recreation club
(negative can be complied with by doing nothing
dont have to build the club)
Covenant to build to a certain standard (positive);
covenant not to build unless to a certain standard
(negative)

The Covenant Must Benefit the

Covenantees Land
The covenant must benefit land owned by the covenantee at the
time of entering into the covenant. The only reason that equity
would elevate a contractual obligation into an equitable
encumbrance that will run with the land is that the covenant is
designed to preserve the value of the covenantees land. As the
High Court noted in Forestview v Perpetual Trustees WA (1998)
193 CLR 154 per Gaudron, McHugh, Gummow, Kirby and Hayne
JJ at 162:
The doctrine in Tulk v Moxhay has been said to evince the
appreciation by the courts of equity that the market value of
land may be affected by activities upon adjacent parcels as
much as by the uses to which the land can be put, and that
certain arrangements designed to protect such value and which
go beyond the frame of contract may be enforced in equity if
not at law.

The Covenant Must Benefit the

Covenantees Land
If the land of the covenantee is too big
to be affected, it cant benefit;
The land would have to be reasonably
close to the burdened land
Will the breach reduce the value of
the benefitted land?
Will the breach remove an amenity of
the benefitted land?

Intention that the burden should run

with the land
Equity will only enforce covenants against successors in title to
the covenantor if the original contracting parties intended the
covenant to run with the land. So, a covenant designed to be
personal to the original covenantor only will not run.
Proving intention for the purposes of the equitable rule has been
simplified by the passage of s 70A(1) of the CA:
A covenant relating to any land of a covenantor or capable of
being bound by the covenantor by covenant shall, unless a
contrary intention is expressed, be deemed to be made by the
covenantor on behalf of himself or herself and the covenantors
successors in title, and the persons deriving title under the
covenantor or the covenantors successors in title, and, subject
as aforesaid, shall have effect as if such successors and other
persons were expressed.

Notice
Because negative covenants will only be
enforced against successors in title
(outside of finding a conveyancing trick
to do it legally) in equity, the right to
have equity enforce the covenant will
depend on whether the land is taken by a
bona fide purchaser for value without
notice. Therefore for old system land a
BFPVWN will not be bound by the
covenant.

Notice
Notice includes actual constructive
and imputed notice
Torrens system has slightly different
rules.

The benefit of covenants passing at

law
Two substantive requirements must
apply before the law will allow a
successor in title to the covenantee
to enforce the covenant against the
covenantor. The covenant must:
Touch and concern (benefit) the land of
the covenantee; and
The parties must intend that the benefit
of the land should run with the land.

The benefit of covenants passing at

law
It must be a covenant that benefits the land, rather than
benefitting the covenantee personally. Therefore you are looking
for something that allows the better enjoyment of the land; or that
enhances the value of the land. In each case the question is a
question of fact. You dont have to point to an actual increased
land value, but can use intangibles such as character and amenity
of the land. Examples from Butt at page 503:
Can only build one dwelling house preserves the amenity of
adjoining land
Keep river banks in repair protects adjoining land from flooding
which can be good for a residence or for agricultural land
Keep road in repair affects access to the land and hence its
amenity
Dont carry on a butcher shop by protecting a business from
competition this enhances the value of the land

The benefit of covenants passing at

law
Large land In the case Re Ballards Conveyance [1937] Ch 437, Mrs
Ballard subdivided some of her land in 1906, including lengthy covenants
about requirements for building should one of the new owners build. She
retained about 1700 acres of land and subdivided some lots on the edge.
The case came to court some years later when the present owner of the
1700 acres a stud farm, sought to enforce the negative covenants
against the present owner of one of the much smaller lots. The court
found that while the covenant was entered into and intended to benefit
the land originally owned by Mrs Ballard (the 1700 acres), the covenants
concerned did not touch and concern her land because any breach of
the covenants could not possible affect the vast majority of her land
holding. In this case the land was just too large to be touched and
concerned; in that manner and the courts would not sever the benefit to
just attach to a small bit of the land. Note though that you can express
the covenant in that way: to benefit such part or parts of the land as is
relevant, and this will allow the covenant to be effectively annexed just to
those parts.

The benefit of covenants passing at

law
Marquess of Zetland v Driver [1939] 1 Ch 1
(8) the English Court of Appeal upheld an
appeal from a decision of a judge in the
Chancery Division and found that that a
covenant "for the benefit and protection of
such part or parts of the settled land as
should etc". The reason for the finding in this
case was that the covenant was expressed
to be for parts of the remaining land and not,
as in Ballards case, for the whole land.

The benefit of covenants passing at

law
Subdivisions - Ellison v ONeill (1968) 88 WN (NSW) 213.
In the case, a man called Benjamin owned a piece of land. He sold
one section of the land to relatives (the Ellisons) and included a
restrictive covenant which stated that they could not place a
building on the land that was more than one story high. The aim of
the covenant was to protect Mr Benjamins view of the Harbour. Mr
Benjamin died. He left his property to a relative Ms Benjamin, who
subdivided Mr Benjamins land into 3 lots. Lot 1, she gave to the
Ellisons honouring Mr Bs request. Lots 2 and 3 she sold. The
owners of lot 2 did not care about the covenant because their lot
was on higher ground and a two storey building would not obstruct
their view. The owners of Lot 3 the ONeills, did care because
their view would be obstructed. The Ellisons wanted to subdivide
their own land and they sought a declaration in court that if they
sold off one of the lots that it would be sold free of the covenant.

The benefit of covenants passing at

law
Justice Walsh reviewed the law on annexation and found a
preference at law for treating the benefit as attaching to the
whole of the land such that there is a preference for starting
from the premise that it is intended to attach to the whole of
the land unless it is shown that the benefit was supposed to
attach to portions of the land: Prima facie, the benefit of a
covenant enures to the land as an entirety (at 221-222)
(one other judge appeared to agree; 1 in dissent)
In this case there was not a sufficient indication in the
documents granting the covenant that the covenant was
intended to attach to portions of the land rather than the
whole of the land, as so the benefit of the covenant was lost
when the land was subdivided.

Intention to pass the benefit

The benefit of a covenant will not run at law unless
the original covenantee and covenantor intended
that the benefit should run with the land (and not
just constitute a benefit for the covenantee
personally). To ascertain intention you have to look
at the document creating the covenant and the
circumstances of its creation. You are looking for a
form of words which suggest that the benefit of the
covenant has attached to the land
enures for the benefit of the land
enures for all heirs or assignees of the land.

Intention to pass the benefit

Section 70 of the Conveyancing Act which provides with
respect to the benefit of covenants:
A covenant relating to any land of the covenantee shall
be deemed to be made with the covenantee and the
covenantees successors in title and the persons
deriving title under the covenantee or them, and shall
have effect as if such successors and other persons
were expressed.
For the purposes of this subsection in connection with
covenants restrictive of the user of land "successors in
title" shall be deemed to include the owners and
occupiers for the time being of the land of the
covenantee intended to be benefited.

Intention to pass the benefit

Does s 70 supply an intention?
In UK - yes - Federated Homes v Mill Lodge Properties Ltd
[1980] 1 WLR 594; s 70 did supply the necessary intention
because it allows not just heirs and assigns to enforce it
but owners/occupiers of the benefitted land suggesting
that the relevant heirs and assigns are ones who take the
land, not just any heirs and assigns of the contract (unless
the covenant is clearly expressed to the contrary).
In Australia? Not sure - Forestview Nominees v Perpetual
Trustees (WA) (1998) 193 CLR 154 High court declined
to consider whether the English approach to s 70 should
be followed as it did not need to be determined on the
facts of the case.

Intention to pass the benefit to

adjoing properties
Section 36C CA provides:
(1) A person may take an immediate or other
interest in land or other property, or the benefit
of any condition, right of entry, covenant, or
agreement over or respecting land or other
property, although the person may not be named
as a party to the assurance or other instrument.
(2) Such person may sue, and shall be entitled to
all rights and remedies in respect thereof as if he
or she had been named as a party to the
assurance or other instrument.

Dalton v Ellis; Estate of Bristow

[2005] NSWSC 1252
Promise by father to mother that he would name unborn child in will
Young J at [41]:
the following limitations apply to s 36C (my summary):
(1) it applies only to real property;
(2) to covenants running with the land;
(3) to cases where the instrument is not merely for the benefit of the
third party but purports to contain a grant to or covenant with him;
(4) to deeds inter partes;
(5) where the third party is in existence and identifiable at the time
when it was made.

Australian Mortgage & Properties Pty

Ltd v Baclon Pty Ltd [2001] NSWSC 774
A licence to occupy a property was grant to a company
and permitted that companys sole director to reside there
Licence also permitted two of the directors family
members to reside
They were not named in the licence and the plaintiffs
principals did not identify who those family members
were, after being requested to do so. Directors mother
sought to rely ons 36Cto enforce the provisions of the
licence
Austin J held that s 36Cdid not apply because she was not
a person with whom an agreement or covenant was
purportedly made, even though she indirectly benefited
from it.

Rogers v Hosegood [1900]

2Ch 388
Covenant prohibited the erection of other than one
messuage (dwelling-house) adapted for and used as and
for a private residence only and on another lot the erection
of messuages and buildings were required to be adapted
for and used as and for a private residence only.
The defendant proposed to erect one large building
spanning both lots, to comprise up to forty flats on five
floors with eight flats on each floor.
Current owner of benefited land pruchaser without
knowledge of covenant
The English Court of Appeal found that the benefit of a
covenant ran with the land in circumstances where the
purchaser was not aware of the covenants given by the
purchasers of other lots.

Passing the benefit in equity

1. The original covenantee must have owned
and retained the land intended to benefit
2. The covenant must actually benefit the
retained land (in value or amenity this
requirement applies in equity but not at law)
3. The covenantee must intend the covenant to
run with the land again s 70 will deem
intention unless contrary interpretation
prevails, you need to show actual intention

Passing the benefit in equity

4. The covenant grant should have words annexing
the benefit to the land (usually satisfied through
showing that the covenant benefits the land and
there is intention)
5. The covenant can be enforced by the holders of
the same estate as the covenantee and lesser
estate holders/occupiers. Unlike law, equity allows
lesser estate holders to enforce the covenant
(Forestview Nominees Pty Ltd v Perpetual
Trustees (WA) (1998) 193 CLR 154 but in any
event such an outcome also flows from s 70 CA.

Assignment of covenants
Covenants can also be assigned under s 12 CA
1. There must be a clear intention to make an immediate and
irrevocable transfer of the chose in action to the assignee:
Norman v FCT, at 32. It is not sufficient to merely authorise the
debtor or other person to pay someone else.
2. The assignment must be absolute and not by way of charge
3. The assignment must be in writing and signed by the assignor.
No particular form of words is necessary. So long as it is clear
that the debt or chose in action has been assigned, this
requirement of the statute will be satisfied: William Brandts
Sons & Co v Dunlop Rubber Company Limited, at 462.
4. Express notice in writing must be given to the debtor by either
the assignor or assignee: Norman v FCT, at 29. Notice can only
be given at the time of, or after, the assignment: Bishop v
Financial Trust Limited [2008] NZCA 170, at [35]. There are no
formal requirements as to the notice and it need not even state
the date of the assignment. The importance of the notice is that
the debtor be advised as to whom he or she must pay:

Creation of covenants
Old system deeds or part performance s 23B, s 23E
Torrens A purchaser of Torrens land will take an indefeasible
title free of the burden of any restrictive covenant unless it is
noted on the register (s 42 RPA). RPA s 88(3)(c) states that a
restrictive covenant is an interest within the meaning of s 42
of the RPA. So for land held under Torrens in addition to the
common law requirements for creation/enforcement of a
covenant need to note it on the folio of the burdened land.

NB You cant register a restrictive covenant only note it on the

folio therefore noting on folio does not cure defects in
covenants so all the discussion we have just had applies
when trying to enforce the burden of a covenant noted on the
Register. We will return to this issue

Creation of covenants
RPA s 46A allows a covenant to be
created where both the burdened and
benefitted land are owned by the
same person
CA s 88B allows for registration of a
plan of subdivision indicating
covenants to apply. These covenants
are recorded and annexed to the land
via s 88B.

Creation of covenants
CA s 88(1) imposes additional requirements for the creation of
covenants applying to either old system or Torrens title land. We
looked at s88(1) in the context of easements. If you remember the
section requires any covenant created over land to clearly identify:
the benefited land;
the burdened land;
any additional persons who may have the right to release, vary or modify
the right; and
the persons whose consent is necessary for a release, variation or
modification of the right.

So where the burden of a covenant is being enforced against a

successor in title, the covenant must have complied with these
requirements to be enforceable. (s 88(1) is only applicable to
enforcement against successors in title not the original covenantor).

Creation of covenants
In Kerridge v Foley (1964) 82 WN (NSW) (pt 1) 293 (10) land was
conveyed subject to a covenant concerning the number of
dwellings on each 40 feet of frontage and as to the use of the
premises. The defendants intended to convert the house into
two dwellings and the plaintiff objected.
The court held that the covenant was not enforceable as it did
not meet the requirements of section 88. The conveyance
described the land to which the benefit was appurtenant as "the
whole of the land shown in the said plan". The plan was
endorsed on the conveyance and showed lots 52, 53, 54, and
61. The land being sold was lot 53. Jacobs J found that the
inclusion of lot 54 in the plan was not correct as lot 54 had been
sold previously to a named purchaser and was not owned by the
original vendor, the A A Co, at the time of the first sale of lot 53.

Building Schemes
How do you create covenants over a
subdivision?
Problem of privity of contract
overcome by doctrine of equity
No longer hugely problematic
because of of s 88B CA

Elliston v Reacher [1908] 2

Ch 374
(1) that both the plaintiffs and defendants derived 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 detail 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 ...

Relaxation
Professor Peter ButtsLand Law [1794]
The modern trend is to relax the stringency of the fourElliston v
Reacherrequirements and to look primarily for the intention between the
common vendor and the respective purchasers to impose a local law
under a mutually enforceable system of covenants. Equity then gives
effect to this common intention notwithstanding any technical difficulties
involved in creating the covenants. The central concept being reciprocity
of obligations, the four requirements are a guide, not an inviolable formula
to be strictly applied in all cases.
[1795] To illustrate this relaxation of stringency: it is not necessary that all
the lots in the scheme be sold at the one time. A scheme of development
can exist where the common vendor sells the lots over a period of time. ...
What is crucial is that each purchaser from the common vendor accepted
that the covenants the purchaser gave were to enure for the benefit of the
vendor and those deriving title from the vendor, and that the purchaser
correspondingly would enjoy the benefit of similar covenants entered into
by all other purchasers.

Re Mack and the Conveyancing Act

[1975] 2 NSWLR 623
A case in which it had been argued that there was no building scheme because
there were two vendors, as opposed to a common vendor
Wootten J found that the existence of two vendors did not negative the
possibility of a valid building scheme. His Honour then said at 635:
Nor is the scheme negatived by the fact that some nine of the one hundred and
fifteen lots are shown to have been sold without the restrictions. It has never
been held necessary, for the existence of a valid building scheme, that the
vendor should be bound to impose the same, or any, restrictions on all lots which
he sells:Collins v. Castle[(1887)36 Ch.D. 243];Elliston v Reacher[[1908] 2 Ch.
665, at p.672], per Cozens-Hardy M.R. in the Court of Appeal.
The fact that some lots are in the event sold without the restrictions does not
negative the existence of, or destroy, a building scheme:Sutton v
Shoppee[[1963] S.R. (N.S.W.) 853];Re Dennerstein[[1963] V.R. 688].The
intention which is material is that existing when the scheme was
established:Nottingham Patent Brick and Tile Co v Butler[(1885)
15 Q.B.D. 261]...but it is clear that this is not the case if only a small proportion
are affected by the unenforceability:Re Louis[[1971]1 N.S.W.L.R. 164, at p.
183]. Only a small proportion are free of the restriction in this case.

Pirie v Registrar-General (1962) 109

CLR 619
Kitto J - building schemes cannot
exist over Torrens title land, because
their existence would depart from
the policy of the Torrens system by
giving the Registrar-General a
discretionary power to detract from
the indefeasibility of a registered
title.

Re Martyn (1965) 65 SR (NSW) 387

Covenant required the buildings to be occupied and used as a
private dwelling.
The covenant did not identify the land to which the benefit of the
covenant was or was to be appurtenant.
There was evidence before the Court of the advertisements
before and after the auction stating that, moderate building
covenant will protect buyers' interests.
There was also reference to the contracts of sale in the
subdivision containing similar covenants.
At trial Jacobs J - held that it was intended that there should be
a building scheme. All purchasers had the nature of the covenant
brought to their attention and knew that they would be bound by
a building covenant and that they were entitled to a building
covenant imposed on other lots to protect their interest.

Re Martyn (1965) 65 SR (NSW) 387

On appeal following Pirie Walsh J
finds at 394, that the registered
proprietor of land under theReal
Property Actwas free from the
equitable obligation or burden, which
would have been imposed upon the
land by the operation of the
equitable principles relating to a
common building scheme

Re Louis and the Conveyancing Act

[1971] 1 NSWLR. 164
Different Court of Appeal Jacobs JA
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.
S 88 must still be complied with so there must
still be a clear indication

Hosking & Anor v Haas (No 2)

[2009] NSWSC 1328
Bergin CJ in Eq
Common building scheme alleged to prevent a shed from
building built
The plaintiffs and the defendants derived their title from a
common vendor
AT [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 inElliston v Reacher.

Hosking v Haas (No 2) [2009]

NSWSC 1328
Third requirement: [47] I am satisfied,
notwithstanding the reservation of Mitmacs rights
to deal with the land without the imposition of a
covenant, that the intention was that the
covenants were for the benefit of all the Lots
intended to be sold.
Fourth requirement: at [51] evidence accepted
that the Lot Owners have claimed they had an
understanding that a common building standard
applied to all of the Lots in the Estate
Covenant upheld shed ordered to be dismantled

Interpretation of covenants
Ordinary principles of interpretation apply.
Normally the words of a covenant are
interpreted in their colloquial or ordinary
sense, not in any technical or legal sense:
see Bradbrook and Neave, Easements and
Restrictive Covenants in Australia (2nd Ed,
2000) [15.5]; Ex parte High Standard
Constructions Ltd (1928) 29 SR (NSW) 274
at 278 per Harvey CJ in Eq.

Interpretation of covenants
Ferella v Otvosi [2005] NSWSC 962 at [21] per Hamilton J :
In this case, the covenant was created in a transfer under the Real
Property Act 1900 (the RPA), which is, on registration, to have
the effect of a deed: RPA s 36(11). In any event, the covenant has
the nature of a grant by the transferee of rights affecting the land.
That rule is that, in case of doubt or ambiguity, a covenant or
grant should be construed against the covenantor or grantor.
Covenant: That not more than one main building shall be erected
upon the said land and that such building shall not be more than
two storeys in height
Land sloped down to harbour shore could they build two storeys
from the highest point or two storeys from wherever the land was?
Held not uncertain: two storeys from ground level not the highest
ground level. Construction was halted

The effect of covenants in

Torrens
There was no power to record covenants so they were
unenforceable against Rps who had made no
promises to honour the covenant
In 1930, s 88(3) was introduced to allow the recording
of a covenant on the register
The covenant must comply with s 88(1) in terms of
detail
The covenant takes effect as a recorded interest and
future RPs get the benefit and burden BUT recording
does not guarantee effectiveness so not registered
The old rules apply as to whether the covenant can
be enforced the interest remains equitable

Extinguishment of Covenants
Common ownership in old system would destroy covenants:
Kerridge v Foley (1964) 82 WN (NSW) (Pt 1) 293 a person
cannot be regarded subject to the burden of a covenant of which
he alone has the benefit.
Torrens - Post Investments v Wilson (1990) 26 NSWLR 598 the
doctrine of extinguishment by merger has no place in the law in
so far as land registered under the provision of the RPA is
concerned (at 640).
Post 2005 created covenants s 47(7):
(7) An affecting interest (being an affecting interest that benefits
land) recorded in the Register shall not be extinguished solely by
reason of the same person becoming proprietor of separate
parcels of land respectively burdened and benefited by the
affecting interest, notwithstanding any rule of law or equity in
that behalf.

Extinguishment of Covenants
old systems BFPVWN defeats
equitable interest (unlikely not to
have notice)
Torrens registration of interest
take subject to s 42

Extinguishment of Covenants
Release of Covenants
Person(s) entitled to benefit may release it at
general law by deed or if just in writing provided
equity will specifically enforce the contract.
Torrens Deed of release registered in the Register.
Implied release Benefitted owner has impliedly
released covenant if:
Submitted to long inconsistent course of use;
Disregarded breaches such that reasonable person
would assume release; or
Where character of neighbourhood has changed so much
that there is no value left in the covenant.

Extinguishment of Covenants
The Conveyancing Act s 89 allows Supreme Court to modify or wholly
extinguish covenants where:
change of use of land or neighbourhood conveyance deemed
obsolete, or impacts reasonable use of burdened land.
Benefit holders have offered to release or waived rights to
covenant.
Idea is for removal of covenants that have no practical utility to the
benefitted land. If you use the first limb you must show either that
the changes in the neighbourhood or use of the benefitted land
have made the covenant obsolete; or impeded the reasonable use
of burdened land with no practical benefit to benefitted land.
Obsolete if the purpose of the covenant can still be fulfilled (or one
of the purposes) it wont be obsolete.
Reasonable use Courts tend to give this a narrow construction
(although not clear if narrow or broad is required). Question tends
to be does the covenant hinder, to a real, sensible, degree, the
land being reasonably used, having due regard to the situation it
occupies, the land surrounding and the purpose of the covenants.

Extinguishment of Covenants
Post Investments v Wilson (1990) 26
NSWLR 598
This case involved the subdivision of a
largish piece of land in Mosman. The
owner of the estate kept a large bit of land
on which was built a large house which
had nice gardens and a magnificent view.
In 1910, subdivided 4 lots on the road with
a covenant preventing the building of
anything except a private dwelling house
no more than one storey high on each of
the lots.

Extinguishment of Covenants
In the mid 1980s three of the lots came
into the common ownership of one Mr
Reed and his company Post Investments.
Reed wanted to knock down the three
existing houses and put up an apartment
block of five various sizes apartments over
five levels. Post sought an order under s
89 that the covenants were obsolete and /
or impeded reasonable uses of the land
especially as the areas had been zoned for
medium density housing and some other
blocks on the street had been converted to

Extinguishment of Covenants
Powell JA: Obsolete? Designed to protect
the view of the main house and privacy of
garden. Still doing this job. Therefore not
obsolete.
Reasonable uses? Some of the
neighbourhood converted to medium
density but not all still houses left. Use
as single dwelling properties has
continued for 70 odd years no reason
why still cannot be used in this way and
done in keeping with the character of the
neighbourhood - no order of

Section 28 of the Environmental

Planning and Assessment Act 1979
(2) For the purpose of enabling development to be carried
out in accordance with an environmental planning
instrument or in accordance with a consent granted under
this Act, an environmental planning instrument may
provide that, to the extent necessary to serve that purpose,
a regulatory instrument specified in that environmental
planning instrument shall not apply to any such
development or shall apply subject to the modifications
specified in that environmental planning instrument.
(3) A provision referred to in subsection (2) shall have
effect according to its tenor, but only if the Governor has,
before the making of the environmental planning
instrument, approved of the provision.

Cumerlong Holdings Pty Ltd v Dalcross

Properties Pty Ltd [2011] HCA 27
Werona Avenue and Stanhope Road,
Killara.
Dalcross Hospital next door
Land covenanted to not be used for
hospital purposes
Development approved under LEP
LEP had not been approved by
Governor

Cumerlong Holdings Pty Ltd v Dalcross

Properties Pty Ltd [2011] HCA 27
Within the meaning of s 28(2), LEP 194 is an
environmental planning instrument which, by its
engagement with the provisions of the Ordinance,
including cl 68(2), provides and specifies that, to
the extent necessary to serve the purpose of
enabling development to be carried out in
accordance with LEP 194, the restrictive covenant
of which the appellant's land has the benefit shall
not apply to the land which it is sought to develop
and use for the purposes of a hospital. But LEP 194
cannot have this effect because approval, as
required by s 28(3), was not given