High Court Rules Registered Proprietors not bound by Restrictive Covenant

20 NOV 2020

 

The High Court has recently ruled in the case of Deguisa v Lynn [2020] HCA 39 that registered proprietors of a residential property in Adelaide were not bound by a restrictive covenant because the covenant had not been notified on the Certificate of Title.

Background

The property had been created in a subdivision during the 1960s. When it was transferred out of the parent title, a Memorandum of Encumbrance (Memorandum) was recorded on the title for the property, which imposed particular building restrictions on the property.

The Memorandum provided that it was an encumbrance in favour of the owners of the parent title, and said “this encumbrance forms portion of a common building scheme”. Although, neither the Certificate of Title nor the Memorandum made any mention of the lots that were intended to benefit from the restrictions contained in the Memorandum.

In 2008, the registered proprietors purchased the property and obtained development approval for the construction of two (2) townhouses on the property. In response to their request for development approval, several parties initiated legal proceedings to stop the development alleging that it would violate the building restrictions as provided in the memorandum.

High Court Decision

Both at trial and on appeal to the Supreme Court of South Australia, it was held that the registered proprietors were bound by the Memorandum.

In response, the registered proprietors appealed to the High Court of Australia where the decision was ultimately overturned. The High Court accepted the registered proprietors’ argument that their registered interest over the restrictions within the memorandum prevailed.

The primary justification of the High Court was in accordance with Section 69 of the Real Property Act 1886 (SA), which provides that “the title of every registered proprietor of land shall, subject to encumbrances, liens, estates or interest as may be notified on the original certificate of such land, be absolute and indefeasible”.

The High Court acknowledged that the memorandum was not notified on the certificate of title and found that a registered proprietor will not be bound by any restrictive covenant that is not properly notified on the Certificate of Title. This case highlights the importance of covenants being properly notified on Certificates of Title to ensure that they are legally enforceable.

If you require more information on the above please contact Ben Wong on bwong@marsdens.net.au or by phoning 02 4626 5077.

The contents of this publication are for reference purposes only. This publication does not constitute legal advice and should not be relied upon as legal advice. Specific legal advice should always be sought separately before taking any action based on this publication.

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