Statutory override of covenants requires strict compliance with section 28 of the EPAA

In brief - Restrictions on hospital or medical use of property upheld

The High Court held in Cumerlong Holdings Pty Limited v Dalcross Properties Pty Limited that the terms of restrictions preventing a property being used for hospital or medical purposes should be upheld, as the restriction was valid and enforceable and, due to defects in the relevant environmental plan, section 28 of the Environmental Planning and Assessment Act (EPAA) did not operate to negate the effect of the covenant.

Proposal to extend private hospital onto lot affected by covenant

The case is a simple one involving land in Killara in the municipality of Kuring-gai.

It was affected by a covenant prohibiting the land being used as a hospital or for medical purposes.

The relevant local environmental plan (LEP194) purported to contain a provision in accordance with section 28 of the EPAA which would have allowed a permissible development to take place notwithstanding any covenant to the contrary.

The appellant operated a private hospital on the adjoining lot and proposed to extend that hospital onto the lot the subject of the covenant.

Restrictive covenant an important proprietary right

The High Court read section 28 of the EPAA in a restricted way as it represented a serious erosion of "property rights" of parties.

One of the requirements of section 28 of the EPAA was that the approval of the governor should be given and this procedure was not adopted in the correct way with respect to LEP194.

As the approval was not given by the governor, the High Court held that the respondent was to be restrained from using the lot in question for any hospital or ancillary medical purposes contrary to the restriction.

The High Court held that the procedures in section 28, particularly sections 28(2) and (3), provided protection of persons having the benefit of a restrictive covenant which was a valuable and important proprietary right, and therefore strict compliance with the sections was required.

Importance of following correct procedures under Section 28 of EPAA

Section 28 of the EPAA is an important provision which allows parties to ignore the effect of covenants, restrictions and the like which would otherwise preclude a permissible development taking place.

However, before a party relies on this section, it must go through and forensically assess each of the requirements of section 28 and the actions taken in accordance with each of those sections to ensure that the correct procedures have been completely followed if a party intents to rely upon it.

If this is not done, then as occurred in this particular case, a party with an interest in the restrictive instrument may be able to thwart an otherwise permissible development.