In the recent decision of Jessica Estates v Lennard  NSWSC 1175 and 1434 (Jessica Estates Case), the Supreme Court of New South Wales (Supreme Court) considered whether a clause in a local environmental plan enacted under section 28 of the Environmental Planning and Assessment Act 1979 (EPA) rendered a private restriction over a land void. After determining that the restrictive covenant was effective, the Supreme Court in the Jessica Estates Case ordered that a semi-detached duplex be modified so that it only contained one dwelling in order to enforce that restrictive covenant.
The facts of the Jessica Estates Case were as follows:
- Jessica Estates Pty Limited (Jessica) developed the Hunterview Estate and sold a lot in the subdivision to Mr and Mrs Lennard (Lennards).
- The Lennards' lot was subject to a section 88B instrument including restrictions that the registered proprietor of a lot must not, without the consent of Jessica, construct more than one dwelling on the lot, construct a semi-detached duplex or subdivide the lot (Restrictive Covenant). The Restrictive Covenant benefited all of the lots in the subdivision as well as Jessica as developer of the Hunterview Estate.
- After the purchase, the Lennards wrote to Jessica seeking consent to build a duplex because that 'was the main reason [they] purchased [the] block'. Jessica did not give its consent, explaining that the Lennards were aware of the Restrictive Covenant when they bought the lot and that they should have bought another lot which allowed them to build duplexes if their intention was to build a duplex.
- After receiving Jessica's refusal, the Lennards then obtained legal advice on their position. Their lawyer gave advice to the effect that despite Jessica's refusal of consent, they were entitled to build a duplex because clause 6 of the Singleton Local Environmental Plan (LEP) (enacted under section 28 of the EPA) suspended the operation of instruments, including restrictive covenants, that prohibited development which was permitted under the LEP.
- Clause 6 of the LEP provided that: "If in any agreement, covenant or similar instrument prohibits a land use allowed by this plan, then it shall not apply to that land use (to the extent necessary to allow that land use)".
- After receiving the legal advice the Lennards then lodged a development application (DA) with Singleton Council (Council) for the construction of a duplex on the property and for a strata subdivision of that lot. The Council subsequently gave its consent to the DA.
- Jessica then wrote to the Lennards' builder, warning that any attempt to build a duplex would be in breach of the Restrictive Covenant and would be vigorously opposed. The Lennards' lawyers responded that Council's consent to the DA overrode the Restrictive Covenant due to clause 6 of the LEP and section 28 of the EPA.
- In subsequent correspondence Jessica maintained its position that it had not consented to building a duplex. The correspondence requested that the Lennards immediately cease work on the construction and that proceedings for injunctive relief would be commenced if they did not cease to construct.
- By the time the matter was heard in Court construction of the duplex was complete.
The Supreme Court of New South Wales held that:
- The Restrictive Covenant was not rendered void due to the operation of clause 6 of the LEP. Whilst the Restrictive Covenant was a 'prohibit' activity, the restrictions in relation to the construction of a duplex and strata subdivision did not qualify as a 'land use' as referred to in clause 6 of the LEP but rather a 'development'.
- The Lennards had breached the Restrictive Covenant by constructing a semi-detached duplex without Jessica's consent and in doing so there was serious infringement of Jessica's rights.
- Despite not being the owner of any of the lots in the subdivision, Jessica had a legitimate interest in preserving the amenity of the estates it developed.
- The normal remedy for a threatened or actual breach of a restrictive covenant is an injunction. However, a court can exercise its discretion to award damages in lieu of an injunction.
- The court held that damages were not a sufficient remedy for breach of the Restrictive Covenant. The loss of amenity and effect on Jessica's reputation was not readily compensable in monetary terms.
- While the Lennards' conduct could not be described as a 'flagrant disregard' of Jessica's rights it was certainly 'highly imprudent'. Having been refused consent by Jessica in relation to the construction of a duplex, the Lennards sought and obtained the development consent and the DA and started to construct without any further correspondence with or notice to Jessica. The Lennards knew it would be sensible to wait and resolve the issue before commencing building works.
- In light of the above circumstances, the semi-detached duplex had to be modified so that it contained only one dwelling. The estimated cost of these modifications was $40,000.
A restrictive covenant over a private land and a section 28 clause in a local environmental plan must be read together to ascertain whether and to what extent the restrictive covenant is rendered inapplicable by virtue of the local planning laws. This case illustrates that section 28 clauses are interpreted quite strictly so as not to affect anything more than necessary for the purpose of the development allowed in the local planning laws.
This case also illustrates that disregarding the risks involved and proceeding to construct can be very costly. Courts will generally award injunctions for the breach of a restrictive covenants unless there are very good reasons for exercising a discretion to award damages.
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