Ferella v Otvosi

[2005] NSWSC 962

Reported Decision: 64 NSWLR 101
(2006) NSW ConvR 56-149

New South Wales

Supreme Court

CITATION:	Ferella v Otvosi [2005] NSWSC 962
HEARING DATE(S):	18 & 19 July, 1 & 2 August 2005
JUDGMENT DATE :	23 September 2005
JURISDICTION:	Equity
JUDGMENT OF:	Hamilton J
DECISION:	Modification of restrictive covenant refused. Injunction to restrain development as in breach of covenant granted.

CATCHWORDS:	REAL PROPERTY [432], [435], [436] - Restrictive covenants - Interpretation - General principles - Covenant that no building be erected "more than two storeys in height" - Meaning - Whether uncertain for ambiguity - Rule to be applied to resolve ambiguity - Proceedings to extinguish, modify or discharge restriction - Restriction obsolete - Meaning of obsolete - No substantial injury to person entitled - Meaning of substantial injury
LEGISLATION CITED:	Conveyancing Act 1919 s 89(1) and (2) Real Property Act 1900 s 36(11) Supreme Court Rules 1970 Part 40 r 8
CASES CITED:	Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (2000) 202 CLR 588 Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130 Cavacourt Pty Ltd v Durian (Holdings) Pty Ltd (1998) 9 BPR 16,833 Clark v Wodehouse 669 P2d 170 (1983) Doe d Abdy v Stevens (1832) 3 B & Ad 299; 110 ER 112 Druitts Developments Pty Ltd v Gosford City Council (2001) 114 LGERA 61 Durian (Holdings) Pty Ltd v Cavacourt Pty Ltd (2000) 10 BPR 18,099 Elliston v Reacher [1908] 2 Ch 374 Ex parte High Standard Constructions Ltd (1928) 29 SR (NSW) 274 Ferella v Otvosi [2003] NSWSC 1254 Ferella v Otvosi [2004] NSWSC 230 Ferella v Otvosi [2005] NSWSC 678 Fong v Hashimoto 92 Hawai'i 568; 994 P2d 500 (2000) Fowle v Welsh (1822) 1 B & C 29; 107 ER 12 Hiner v Hoffman 90 Hawai'i 188; 977 P2d 878 (1999) Hughes v ACT Planning and Land Authority (2004) 136 LGERA 420 Johnson v Linton 491 SW 2d 189 (1973) Kirby v Esplin NSWSC Bryson J 26 May 1989 unreported Leichhardt Municipal Council v Daniel Callaghan Pty Ltd (1981) 46 LGRA 29 Lolakis v Konitsas (2002) 11 BPR 20,499 Ludwig v Chatauqua Shores Improvement Association Inc 5 AD 3d 1119; 774 NYS 2d 240 (2004) Metius v Julio 27 Md App 491; 342 A 2d 348 (1975) Mogensen v Portuland Developments Pty Ltd (1983) NSW ConvR 55-116 NSW Sports Club Ltd v Solomon (1914) 14 SR (NSW) 340 Pebruk Nominees Pty Ltd v Woolworths (Victoria ) Pty Ltd [2003] TASSC 94 Pieper v Edwards [1982] 1 NSWLR 336 Re Mason (1960) 78 WN (NSW) 925 Re Media, Entertainment and Arts Alliance; Ex parte Hoyts Corporation Pty Ltd (1993) 178 CLR 379 The Olympic Brilliance [1982] 2 Lloyds Rep 205 Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429 W & D Engineering Pty Ltd v Chief Executive Officer of Customs [2000] FCA 440 Webb v Plummer (1819) 2 B & Ald 746; 106 ER 537 Williams v James (1867) LR 2 CP 577 Bradbrook and Neave, Easements and Restrictive Covenants in Australia (2nd ed, 2000) [15.5], [15.6], [19.62] & [19.64] Lewison, The Interpretation of Contracts (2nd ed, 1997) par 7.07 Norton on Deeds (2nd ed, 1928) 549 - 550
PARTIES:	Angelo Ferella (P1 & XD1) Gustavo Ferella (P2 & XD2) Ervin Lloyd Otvosi (D1 & XC1) Keiko Otvosi (D2 & XC2)
FILE NUMBER(S):	SC 2583/03
COUNSEL:	T F Robertson SC and J E Lazarus (Ps & XDs) P Brereton SC and G A Sirtes (Ds & XCs)
SOLICITORS:	Klimt & Associates (Ps & XDs) Landerer & Company (Ds & XCs)

LOWER COURT JURISDICTION:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

HAMILTON J

FRIDAY, 23 SEPTEMBER 2005

2583/03 ANGELO FERELLA & ANOR v ERVIN LLOYD OTVOSI & ANOR

JUDGMENT

HIS HONOUR:

THE ISSUES

1 These are proceedings by cross claim for the enforcement of a restrictive covenant (“the covenant”) by an injunction restraining the carrying out of a development approved by the Woollahra Municipal Council, which is the relevant consent authority (“the development”). The restriction that it is alleged will be infringed is a restriction that any building to be erected on the land should “not be more than two storeys in height”. The latest defence (filed 5 August 2005) includes a claim that the covenant be extinguished or modified on the ground that it is obsolete or that the proposed modification will not substantially injure the persons entitled to it: see s 89(1) and (2) of the Conveyancing Act 1919 (“the CA”).

2 The issues which arise are:

(1) Whether the restriction contained in the covenant is ambiguous and therefore unenforceable.

(2) Whether the restriction that the building shall not be more than two storeys in height means that the building shall not be more than two storeys in height above natural ground level.

(3) Whether the development is in breach of the covenant as so construed.

(4) Whether the covenant ought be modified pursuant to s 89(1) of the CA.

(5) Whether discretionary considerations should preclude the granting of injunctive relief if the defendants are otherwise entitled to it.

THE COVENANT

3 The relevant land is at Point Piper. Prior to 1954 Anthony Hordern was the registered proprietor of Lot 12 and part of Lot 11, Section 1 of the Point Piper Estate. He had procured the registration of DP 389502, by which that land was subdivided into four lots, being Lots 1, 2, 3 and 4. Their relative locations are shown in the diagram in the Schedule to this judgment. The defendants are now the registered proprietors of Lot 4, which is known as 60 Wolseley Road, Point Piper (“the Otvosi land”). The plaintiffs are now the registered proprietors of Lot 2 (“the Ferella land”). Lot 1 will be referred to in this judgment as “the Symonds land”. Lot 3 is known as 62/62A Wolseley Road.

4 The covenant was created by a transfer of Lot 2 by Anthony Hordern to Samuel Hordern dated 15 June 1955. The terms of the covenant as originally created were as follows:

“1 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.

2 That no walls of any such building shall be of any material other than stone or brick or of a combination of stone and brick.

3 That no roof (other than a flat one) of any such building shall be of material other than slates or tiles.

4 That no building erected upon the subject land shall at any time hereafter be used for any purposes other than as one or two private dwelling units.

5 That during the ownership of Lots 1, 3 and 4 of the said Plan of Subdivision by the Transferor his executors administrators and assigns other than purchasers on sale and for the benefit of the said Lots no fence shall be erected on the land hereby transferred to divide it from such adjoining land without expense to the transferor his executors administrators and assigns and in favour of any person dealing with the Transferee or his assigns such consent shall be deemed to have been given in respect of every such fence for the time being erected.”

Similar covenants were imposed on the other three lots in the subdivision, in each case in favour of all the other lots. By deed between the plaintiffs and the defendants dated 25 February 2002 the defendants consented to the variation or modification of the covenant by the deletion of clauses 2 to 5 quoted above, in so far as they benefited the Otvosi land. That leaves clause 1 subsisting and the subject matter of these proceedings.

5 Whilst the other mutual covenants have to a considerable degree been released or modified, enough of the original mutual scheme remains for the covenant to have been held subsisting by McLaughlin M (as his Honour then was) at an earlier stage of these proceedings: Ferella v Otvosi [2003] NSWSC 1254 (“the McLaughlin judgment”), as to which see [8] below. That decision was upheld on appeal by Gzell J in Ferella v Otvosi [2004] NSWSC 230 (“the Gzell judgment”), as to which see [9] below.

6 In or about October 1998 the Woollahra Council granted consent to the development, although there was an objection that the carrying out of the development would infringe the covenant. The officers’ report to the Council on the development expressed the view that the subsistence of the covenant had not been established. The plaintiffs acquired Lot 2 in 2000 with the benefit of the development consent.

THE COURSE OF THE LITIGATION

7 These proceedings were commenced by a summons filed on 30 April 2003. By their further amended summons filed 30 September 2003 the Ferellas by prayers 1 and 2 claimed a declaration that the Ferella land is not affected by the covenant or, alternatively, that the covenant is not enforceable against the Ferella land. By prayer 3 they claimed a declaration that the development does not infringe the covenant and by prayers 4 and 5 they claimed a modification of the covenant to a form where the height of the building to be erected was limited not to two storeys in height, but by reference to particular levels based on Australian Height Datum “AHD”. The cross claim was filed on 27 June 2003. That cross claim claimed only an injunction restraining the plaintiffs from infringing the covenant.

8 The first hearing in these proceedings was fixed before McLaughlin M for 13 October 2003. On 8 October 2003 the learned Master made an order noting that the parties agreed that the hearing specially fixed for 13 October 2003 should be limited to the relief sought in prayers 1 and 2 in the further amended summons. The hearing proceeded on 13 October 2003. As Anthony Hordern had ceased to own any part of the subdivided land other than Lot 2 at the time of its transfer to Samuel Hordern, the validity of the covenant depended on there being in existence a common building scheme. The Ferellas contested the existence of the four requirements for a common building scheme specified by Parker J in Elliston v Reacher [1908] 2 Ch 374 at 384. In particular, they contested that it was established that Anthony Hordern, as the common vendor, had the intention specified in the third of those four requirements, namely, that the restrictions be for the benefit of all the lots intended to be sold. They also contended that there were no longer in force sufficient mutual obligations for the common building scheme still to exist. Judgment was reserved. On 23 December 2003 McLaughlin M delivered the McLaughlin judgment. He held that there did exist a valid common building scheme and that it still subsisted. He dismissed the Ferellas’ claims for relief in terms of prayers 1 and 2 of the further amended summons and stood over the balance of the summons generally with liberty to restore.

9 The Ferellas appealed and their appeal was heard on 18 March 2004 by Gzell J, who on 31 March 2004 delivered the Gzell judgment. Of this no more need be said than that his Honour indicated that he would uphold the learned Master’s judgment and dismiss the appeal. His Honour stood the matter over for short minutes of order to be brought in. Before they were brought in, negotiations took place between the Ferellas and the Otvosis. On 19 July 2004, by a reference to a document entitled Consent Orders, the Court ordered that:

“(1) All proceedings by the plaintiffs against the defendants (including and not limited to the summons filed 30 April 2003, the amended summons filed 22 May 2003 and the further amended summons filed 30 September 2003) be dismissed;

(2) The plaintiffs pay any costs of the defendants in respect of those proceedings which are not the subject of existing orders or costs, as assessed or agreed; and

(3) The defendants’ cross claim filed 10 June 2003 be stood over generally with liberty to the defendants to restore the cross claim to the Registrar’s list on seven (7) days notice.”

The Court also made an order noting that:

“(4) The plaintiffs agree that they will not appeal from the judgments of Gzell J given on 31 March 2004 and 15 April 2004 in these proceedings.”

The latter of those judgments was as to costs. (Those orders are referred to as “the consent orders”.)

10 Some comment should be made at once on the form and effect of the consent orders. As noted above, the form of orders by reference to which the consent orders were made was brought in after a direction by Gzell J that short minutes be brought in to give effect to his Honour’s decision. The consent orders encompass, but go far beyond, that. The decision was limited to prayers 1 and 2 in the further amended summons, but the consent orders disposed of all the prayers in that summons. It is noted that the orders were made by consent. This certainly must be so in respect of the order of dismissal, in so far as order (1) disposed of prayers 3 and following (“the subsequent prayers”), in respect of which there had been no hearing at all. In reality, it is dubious whether order (1) can be said to have been made by consent in so far as it disposed of prayers 1 and 2, which had been heard to finality.

11 The cross claim was subsequently restored to the list and fixed for trial before me on 18 and 19 July 2005. Amended points of cross claim were filed on 30 March 2005. By notice of motion filed on 29 June 2005 the Ferellas sought to file amended points of defence to the amended cross claim. The amendments sought to be made included the claim mentioned in [1] above, made under s 89(2) of the CA, that the covenant be modified pursuant to s 89(1). That amendment was opposed by the Otvosis on the ground that the existence of the consent orders precluded the making of any claim for extinguishment or modification under s 89(1). The Otvosis relied on the doctrines of res judicata, issue estoppel and Anshun estoppel. However, I held that the order of dismissal of the earlier claims was made under Part 40 r 8 of the Supreme Court Rules 1970 (“the SCR”) and, except to the extent that the order for dismissal was made after a hearing on the merits, it did not preclude the making anew of the dismissed claims. I also considered an argument that the intent of the consent orders was to preclude the bringing anew of any of the claims, but did not accede to that argument. The result was that the claims formerly made by the subsequent prayers could be made again. I assessed the prejudice said to arise from the late application for amendment and, in the exercise of my discretion, I allowed the amendment of the points of defence by the addition of paragraphs 9 and 10: see Ferella v Otvosi [2005] NSWSC 678 (“my interlocutory judgment”).

THE FACTS

12 The Ferella land falls away sharply from Wingadal Place to the Harbour foreshore. The plans of the development show a proposed building which at its Wingadal Place (northern) end is two storeys in height. As the land falls away, the building increases in height to four storeys by the use of space under the topmost two storeys to accommodate two levels of rooms, one above the other. The plans also show by a line an existing ground level which falls away as the building progresses towards the south. At the southern end, to the uninstructed eye, the plans show a building which has more than three storeys above that existing ground level. There is not really any dispute that the line mentioned above represents the ground level after demolition of the pre-existing building and before excavation on the Ferella land, nor that this is the level to be taken as ground level for the purposes of this case. This is established by plans of the pre-existing two storey house built on the land in 1955 and by extrapolation from the present ground level, which exists at the eastern boundary of the Otvosi land.

13 A view was taken at the site. Furthermore, there was expert evidence as to the impact the development would have on views from the residential building erected on the Otvosi land (as to which the experts were agreed). That building at present has extensive views over Double Bay to Darling Point on the opposite shore. There is also an extensive view westwards up the main Harbour with views of the Opera House and the Harbour Bridge. These views have been somewhat restricted by a very large building, the erection of which is almost complete, on the Symonds land (which has been relieved of the burden of the covenant). Neither that building nor the development would restrict the views towards the inner end of Double Bay, but the construction of the development would substantially reduce the prospect of the main body of the waters of Double Bay, leaving only a sliver of water visible below the shoreline of Darling Point. It would also substantially reduce the views of the main Harbour looking westwards, although leaving the Opera House and the Harbour Bridge visible. The above account describes the view from the middle of the three storeys of the Otvosi building. Although there is less obstruction if you go up one storey and more obstruction if you go down one, it is also generally descriptive of the reduction of views from those levels. In my assessment it is a very significant reduction of the harbour views available from the Otvosi land.

THE LAW

14 There are two areas of the law of restrictive covenants which need to be taken into account in the decision of this case. These relate respectively to the principles applicable to the interpretation of restrictive covenants and the basis on which the jurisdiction under s 89(1) of the CA is exercised.

INTERPRETATION OF RESTRICTIVE COVENANTS

15 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.

16 One of the general principles which is relevant is that in the case of a contract or other document inter partes the court will not lightly hold it to be void for uncertainty: Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429 at 436 - 438; it will endeavour to give a meaning to the contract or document: Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130 at 135.

17 Words in an instrument must always be construed in their context and upon a reading of the whole of the instrument: Re Media, Entertainment and Arts Alliance; Ex parte Hoyts Corporation Pty Ltd (1993) 178 CLR 379 at 386 – 387; Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (2000) 202 CLR 588 at 609; as to statutes, see the judgment of the Full Court of the Federal Court in W & D Engineering Pty Ltd v Chief Executive Officer of Customs [2000] FCA 440. This means that decisions upon an expression in one instrument are of very dubious utility in relation to another.

18 There are not a lot of decisions on whether a building contains more than x storeys or is more than x storeys in height. A storey is conveniently defined as “each of the stages or portions one above the other of which a building consists”: Shorter Oxford English Dictionary (5th ed, 2002); Leichhardt Municipal Council v Daniel Callaghan Pty Ltd (1981) 46 LGRA 29 per Samuels JA at 37.

19 In the Daniel Callaghan case, the NSW Court of Appeal held that a building “contained” more than three storeys, where it had seven storeys, but nowhere were there more than three storeys superimposed on each other, because the building was stepped back progressively on a sloping site. This was followed in a similar context by Crispin J in the Supreme Court of the ACT in Hughes v ACT Planning and Land Authority (2004) 136 LGERA 420. See also the decision of Bignold J in the Land and Environment Court in Druitts Developments Pty Ltd v Gosford City Council (2001) 114 LGERA 61.

20 However, provisions that a building not exceed x storeys in height have a rather different incidence. In a number of US cases expressions in terms of x storeys in height have been found ambiguous and uncertain: see Hiner v Hoffman 90 Hawai’i 188; 977 P2d 878 (1999); Fong v Hashimoto 92 Hawai’i 568; 994 P2d 500 (2000); Ludwig v Chatauqua Shores Improvement Association Inc 5 AD 3d 1119; 774 NYS 2d 240 (2004). But the expression “not more than one storey … high” did not occasion difficulty for Bryson J in Kirby v Esplin NSWSC 26 May 1989 unreported. His Honour took that expression to refer to a building that was one storey high above ground level at the site of the building. This concept was encompassed by the description in the Daniel Callaghan case by Glass JA at 33 of a building “no part of … which rose from the ground in the vertical plane for a distance of more than three storeys” (although the Daniel Callaghan case, as already noted, dealt with a provision which required a building to contain no more than x storeys).

21 The rule to be applied to the interpretation of a covenant in case of doubt or ambiguity is somewhat vexed. This arises from the confused nature of the contra proferentem rule: see the useful discussion in Lewison, The Interpretation of Contracts (2nd ed, 1997) par 7.07. I take the view, bearing in mind that a restrictive covenant is of the nature of a covenant or grant, that the established rule as to the construction of covenants or grants should apply. 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: Norton on Deeds (2nd ed, 1928), 549 – 550; Webb v Plummer (1819) 2 B & Ald 746; 106 ER 537; Fowle v Welsh (1822) 1 B & C 29; 107 ER 12; Doe d Abdy v Stevens (1832) 3 B & Ad 299; 110 ER 112; Williams v James (1867) LR 2 CP 577; NSW Sports Club Ltd v Solomon (1914) 14 SR (NSW) 340. None of these cases involved a restrictive covenant. However, the principle was applied in relation to an easement by Campbell J in Lolakis v Konitsas (2002) 11 BPR 20,499 and in relation to a restrictive covenant by Young J (as his Honour then was) in Cavacourt Pty Ltd v Durian (Holdings) Pty Ltd (1998) 9 BPR 16,833. Although this decision was reversed on the facts by the Court of Appeal in Durian (Holdings) Pty Ltd v Cavacourt Pty Ltd (2000) 10 BPR 18,099, there was no derogation from this principle. Bradbrook and Neave take the view that this is the appropriate rule: see [15.6].

22 It has been drawn to my attention that there is a considerable body of authority in the US to a different effect, namely, that an ambiguity in a restrictive covenant should be resolved against the person seeking to enforce the covenant. Examples are the decisions of the Supreme Court of Hawaii in Hiner v Hoffman supra and Fong v Hashimoto supra. There are decisions to like effect in New York, Texas and Maryland: Ludwig v Chatauqua Shores Improvement Association Inc supra; Johnson v Linton 491 SW 2d 189 (1973); Metius v Julio 27 Md App 491; 342 A 2d 348 (1975). The rationale of this rule is stated to be that the “unencumbered use of real property” is to be favoured: Ludwig NYS at 241.

23 However, I take the law of NSW to be as stated in [21] above, for the reasons given. It must be emphasised, however, that this is a rule of last resort or “very late resort”, to be turned to only if the meaning remains in doubt or ambiguous after other rules of interpretation have been resorted to: The Olympic Brilliance [1982] 2 Lloyds Rep 205 per Eveleigh LJ at 208; Pebruk Nominees Pty Ltd v Woolworths (Victoria ) Pty Ltd [2003] TASSC 94 at [31]; and see generally Lewison ibid.

MODIFICATION OF RESTRICTIVE COVENANTS

24 As noted in [11] above, I have permitted an amendment to the defence claiming modification of the covenant and allowed that amendment to be relied on at the hearing. The application was made under pars (a) and (c) of s 89(1). That subsection provides, so far as relevant, as follows:

“89 Power of Court to modify or extinguish easements, profits à prendre and certain covenants

(1) Where land is subject to an easement or a profit à prendre or to a restriction or an obligation arising under covenant or otherwise as to the user thereof, the Court may from time to time, on the application of any person interested in the land, by order modify or wholly or partially extinguish the easement, profit à prendre, restriction or obligation upon being satisfied:


(a) that by reason of change in the user of any land having the benefit of the easement, profit à prendre, restriction or obligation, or in the character of the neighbourhood or other circumstances of the case which the Court may deem material, the easement, profit à prendre, restriction or obligation ought to be deemed obsolete, or that the continued existence thereof would impede the reasonable user of the land subject to the easement, profit à prendre, restriction or obligation without securing practical benefit to the persons entitled to the easement or profit à prendre or to the benefit of the restriction or obligation, or would, unless modified, so impede such user, or

………

(c) that the proposed modification or extinguishment will not substantially injure the persons entitled to the easement or profit à prendre, or to the benefit of the restriction or obligation.”

25 In relation to par (a), the application was made only under the first limb, that the restriction ought be deemed obsolete. The meaning of “obsolete” was discussed in the Court of Appeal in Durian (Holdings) Pty Ltd v Cavacourt Pty Ltd supra. There is a recent collection of the relevant authorities by Campbell J in Lolakis v Konitsas supra. This is a perfectly ordinary English word. It was said by Jacobs J, when a Judge of this Court, in Re Mason (1960) 78 WN (NSW) 925 at 927, in the context of this section, to mean that “the object of the covenant is now incapable of fulfilment or perhaps that it serves no present useful purpose.” This seems to me to be both its ordinary meaning in the context and the meaning which, on authority, ought be adopted.

26 As to the application under par (c), if the covenant can be modified, but so that its original purpose may be met, a case for modification may be made out. If something can be done under the covenant, which would have as serious an effect on the property benefited as that which is sought to be restrained, then it may be that a case for modification is also made out. The test was stated by Jacobs J as follows in Re Mason supra at 928:

“… the applicant is entitled to approach the matter by taking, as it were, the worst that could be done under the restrictions imposed by the covenant and to compare that with the effect that the proposed block of home units would have…”

27 The injury referred to in par (c) may be financial, as by a diminution in the value of the property benefited, but an injury may also be constituted by a detriment to that property which cannot be measured in monetary terms. In Mogensen v Portuland Developments Pty Ltd (1983) NSW ConvR 55-116 at 56,856 McLelland J (as his Honour then was) said:

“In this context ‘substantially’ connotes injury which has substance in the sense of being real or appreciable ( Re Mason (1960) 78 WN (NSW) 925 at p 928). The kind of injury contemplated in the section is injury to the relevant person in relation to his ownership of (or interest in) the land benefited. The injury may be of an economic kind, eg, reduction in the value of the land benefited, or of a physical kind, eg, subjection to noise or traffic, or of an intangible kind, eg, impairment of views, intrusion upon privacy, unsightliness, or alteration to the character or ambience of the neighbourhood. These arbitrary categories, while serving to illustrate the ambit of the concept of injury for the purposes of the section, are neither mutually exclusive nor necessarily exhaustive, and what I have described as injuries of a physical or intangible kind could well also affect the value of the land in question. However it is clear that a person may be ‘substantially injured’ within the meaning of sec 89(1)(c) notwithstanding that the value of his land would be unaffected or even increased by the proposed modification (see Re Parimax SA Pty Ltd (1956) SR (NSW) 130 at p 133, Heaton v Loblay (1960) SR (NSW) 332 at pp 335 – 336, Re Cook (1964) VR 808 at p 810 and Re Robinson (1972) VR 278 at pp 283 – 284).”

28 In case of either par (a) or par (c), the onus is upon the applicant for modification to establish that a case for modification is made out. If the onus of showing a case is not made out, the application cannot succeed. Even if a case for modification is made out, the court retains a discretion to refuse the modification: Pieper v Edwards [1982] 1 NSWLR 336; and see generally Bradbrook and Neave [19.62] and [19.64].

ISSUE 1: WHETHER THE RESTRICTION CONTAINED IN THE COVENANT IS AMBIGUOUS AND THEREFORE UNENFORCEABLE

29 In the end, the submission appeared to be that the covenant is a height control covenant and, as the height of a storey is variable, the height to which building is limited is not clearly established. An alternative argument is that, on a sloping site, it is impossible to determine how many storeys in height a building is: see the US case of Hiner v Hoffman supra. However, in Kirby v Esplin supra, whilst Bryson J thought such a covenant “a curious and roundabout way” of protecting views, his Honour did not appear to regard the covenant as uncertain for either of these reasons. I take the same view. Whatever the motive, the limitation is to two storeys and the covenant operates according to its terms. The lack of definition of a particular height does not render it uncertain. The sloping nature of the site may make the determination of fact as to whether a building is more than two storeys in height a more difficult one (the judgment will have to be made in respect of a particular building), but it does not render it impossible. I bear in mind the Court’s duty to endeavour to uphold the provision. I shall return to the issue of where the height is to be measured from in [30] below, but the covenant is not void for uncertainty and is enforceable.

ISSUE 2: WHETHER THE RESTRICTION THAT THE BUILDING SHALL NOT BE MORE THAN TWO STOREYS IN HEIGHT MEANS THAT THE BUILDING SHALL NOT BE MORE THAN TWO STOREYS IN HEIGHT ABOVE NATURAL GROUND LEVEL

30 In my view the restriction means that no part of the building shall rise from the ground in the vertical plane for a distance of more than two storeys, in the words of Glass JA cited above. The ground referred to is the ground where the building stands, whether it be at the highest or lowest point of the land. This was the meaning attributed to the similar restriction by Bryson J in Kirby v Esplin supra. See also the US authority of Clark v Wodehouse 669 P2d 170 (1983). In my view it is the meaning to be attributed to the restriction in the context of this case. The Ferellas have contended that the ground means the ground at the highest point of the property. They say that the expression is ambiguous and that the rule of construction that they have espoused, that in case of doubt the construction should be in favour of the burdened landowner, means that the restriction should be construed in this way. In my view, there is no ambiguity. The meaning that I have stated is clear. The meaning that the base point of measurement should be the highest point of the property is fanciful and not open on the ordinary meaning of the words in the context of the restriction, the nature of the properties the subject of the building scheme and the obvious purpose of the restriction to limit height to preserve views. There is no need to turn to the rule of last resort. If there were such a need, the applicable rule is not as propounded by the Ferellas, but as I have stated in [21] above. The application of that rule would, if there were an ambiguity, resolve the matter in favour of the meaning that I have stated.

ISSUE 3: WHETHER THE DEVELOPMENT IS IN BREACH OF THE COVENANT AS SO CONSTRUED

31 In view of my construction of the covenant and the nature of the development as stated in [12] above, in my view it is clear that the development is in breach of the covenant. The building is more than two storeys in height. It contains four storeys superimposed on each other. The portion of the building which contains four storeys rises from the ground at that point in the vertical plane for four storeys, or certainly for more than three storeys, which is undoubtedly more than two storeys. The construction of this development would be in breach of the covenant.

ISSUE 4: WHETHER THE COVENANT OUGHT BE MODIFIED PURSUANT TO s 89(1) OF THE CA.

32 As to their application under s 89(1)(a) of the CA, the Ferellas have relied strongly, in support of the proposition that the covenant is obsolete, on changes in the neighbourhood, which photographs and other evidence show have occurred since 1955. However, this, in general terms, is little to the point. It is clear that the view from the Otvosi property has suffered a substantial invasion by the construction of the building on the Symonds property. However, the evidence of the expert witnesses is agreed that there will be a considerably greater invasion of the view by the construction of the development. This is confirmed by the view on site. The long and short of the matter is that there are still very extensive views from the Otvosi property and that they may be substantially interfered with by a building which breaches the restrictive covenant over the Ferella land. In these circumstances, it appears to me quite impossible to say that the restriction ought be deemed obsolete or that it does not secure practical benefit to the persons entitled to the benefit of the restriction. In those circumstances, no ground for modification under par (a) is made out.

33 So far as par (c) is concerned, it is put that the proposed modification will not substantially injure the Otvosis. This is on the basis that the Ferellas could erect a building in the form of the development, but with the rooms that constitute the first and second storeys of the development deleted. This, they say, could be done by their seeking a variation of the development consent to permit them to erect a building with the same envelope, but with the first and second floors suppressed and replaced by either a void within the external walls which contain those storeys or the filling of the space behind those walls. Alternatively, the top two storeys in their present form could be suspended in the air supported upon piers or columns of the appropriate height. The height of those piers or columns would be the same as the height of the two suppressed storeys, so that the proposed building would be of the same height as the present undoubtedly four storey building.

34 There are a number of objections to this proposal. The first is that a case is not made out that the erection of such a building is possible: it is not established that the Council would give consent to such a building. It must be borne in mind that the development was permitted by the Council in a context where it was not accepted that the existence of the covenant had been established. Presumably, on an application now made, its existence could easily be established: its existence and effectiveness have been decided by this Court. But, quite apart from that, expert opinion differs as to whether consent would be given. Mr Neustein, called for the Ferellas, says that in his opinion it would be approved. Mr Ingham, called for the Otvosis, expressed the gravest doubts that it would be approved. In general terms I prefer the evidence of Mr Ingham to that of Mr Neustein where they conflict, because it was given in a more measured, professional and apparently impartial way. Even if I did not have this preference, and the opinions are simply regarded as the opinions of two knowledgeable experts, which cannot be chosen between, the Ferellas, bearing the onus, would not have made out that this form of development would be consented to. Even if the Council were prepared to consent to it, the question would arise, in respect of such a building, as to whether it exceeded two storeys in height and therefore breached the covenant. There would be a substantial case that it was a building that “contained” only two storeys. However, as I have already observed, the piers or other structure on which the two storeys would need to be supported would themselves be of the height of approximately two storeys of the proposed building. In my view the building would retain the characterisation of being about four storeys in height, which is the correct characterisation of the development. In other words, such a building might contain only two storeys, but would be more than two storeys in height.

35 No other concrete proposal was put forward as to a building that might be built which would be as bad as the development in the relevant regard: cf Kirby v Esplin supra, where there were a number of firm alternative plans. In these circumstances it has not been established that the worst that could be done in compliance with the covenant would be as bad as the development. No case is made out under paragraph (c) of s 89(1).

36 The covenant will therefore not be modified by the Court.

ISSUE 5: WHETHER DISCRETIONARY CONSIDERATIONS SHOULD PRECLUDE THE GRANTING OF INJUNCTIVE RELIEF

37 Nothing more need be said concerning the considerations put forward in submissions by the Ferellas going to the discretion to grant injunctive relief than that, whether taken separately or together, those considerations do not justify the refusal of relief.

CONCLUSION

38 The Otvosis are therefore entitled to an injunction restraining the construction of the development. I shall appoint a time for short minutes to be brought in to give effect to my decision. Any question as to costs may be raised at that time.

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