Gardencity Altona v Grech & ors

[2015] VSC 538

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

S CI 2012 05752

IN THE MATTER of an Application under Section 84 of the Property Law Act 1958

BETWEEN:

GARDENCITY ALTONA PTY LTD (ACN 113 976 935)	Firstnamed Plaintiff
SONNY AUSTRALIA INVESTMENTS PTY LTD (ACN 603 071 101)	Secondnamed Plaintiff
v
DENNIS GRECH AND OTHERS (according to the attached schedule)	Defendants

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JUDGE:	Lansdowne AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	28, 29, 30 May 2014 and 26 June 2015
DATE OF JUDGMENT:	5 October 2015
CASE MAY BE CITED AS:	Gardencity Altona v Grech and ors
MEDIUM NEUTRAL CITATION:	[2015] VSC 538

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RESTRICTIVE COVENANT – application to remove restriction in covenants to construction in brick or stone – whether the plaintiff is required to identify all beneficiaries of the covenants – whether brick veneer complies with the restriction - whether the restriction is obsolete – consideration of the proper neighbourhood - no evidence of change in the neighbourhood - covenant complied with on subject land – variety of materials in the neighbourhood but brick the most common material - restriction not obsolete – whether removal of the restriction will cause no substantial injury to the defendants – defendants have genuine and reasonable preference for brick – other amenity interests of defendants not protected by the restriction - some non- adherence to like covenants shown but also adherence - no proposal from the plaintiff in the light of which the effect of removal of the restriction can be considered- removal of the restriction would cause uncertainty – precedential effect of removal of the restriction – not shown removal of the restriction will not substantially injure the persons entitled to its benefit – application dismissed- Property Law Act 1958 (Vic) s 84(1)(a) and (c).

JOINDER – subject land sold after trial but before judgment – purchaser joined as second plaintiff by consent.

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APPEARANCES:	Counsel	Solicitors
For the Firstnamed Plaintiff	Ms T J Acreman	Simon A Nixon
For the Secondnamed Plaintiff	Mr M G R Gronow (on 26 June 2015)	P & B Law (on 26 June 2015)
For the Defendants	Mr M D Townsend	Russell Kennedy

TABLE OF CONTENTS

Introduction and summary............................................................................................................... 1

Summary of conclusions.............................................................................................................. 2

Procedural history........................................................................................................................ 4

Facts....................................................................................................................................................... 7

History of the titles and the covenants...................................................................................... 7

Benefited land.................................................................................................................... 12

The parties acquire their land................................................................................................... 16

The character of the area............................................................................................................ 19

Plaintiff’s proposals.................................................................................................................... 21

Legal principles................................................................................................................................ 23

S 84(1)(a): obsolete....................................................................................................................... 24

‘Obsolete’............................................................................................................................ 24

‘Neighbourhood’............................................................................................................... 25

Change or other circumstances........................................................................................ 25

S 84(1)(c): no substantial injury................................................................................................. 25

Generally...................................................................................................................................... 28

Submissions...................................................................................................................................... 29

Plaintiff......................................................................................................................................... 29

Obsolescence...................................................................................................................... 29

No substantial injury........................................................................................................ 30

Defendants................................................................................................................................... 31

Obsolescence...................................................................................................................... 32

No substantial injury........................................................................................................ 33

Discussion.......................................................................................................................................... 34

Purpose of the restriction........................................................................................................... 34

Neighbourhood and beneficiaries............................................................................................ 36

Does brick veneer comply with the restriction?..................................................................... 40

Current extent of the use of brick............................................................................................. 41

Change.......................................................................................................................................... 45

Non-compliance with the materials restriction...................................................................... 48

The defendants’ views................................................................................................................ 51

Benefit by way of limitation on height?................................................................................... 56

Uncertainty................................................................................................................................... 57

Creation of a precedent.............................................................................................................. 59

Conclusion......................................................................................................................................... 60

Obsolescence............................................................................................................................... 60

No substantial injury.................................................................................................................. 61

Discretion..................................................................................................................................... 62

Orders................................................................................................................................................. 63

ANNEXURE: IDENTIFICATION OF BENEFITED LAND................................................... 64

SCHEDULE OF PARTIES.......................................................................................................... 68

HER HONOUR:

Introduction and summary

1. By this proceeding the plaintiffs seek to remove a restriction on the materials that can be used to build on two pieces of adjoining land at 99 Queen St and 7 Davies St, Altona (together ‘the subject land’).  The subject land is a corner block, on the corner of Davies and Queen Streets, Altona.  The subject land is currently burdened by restrictive covenants in identical terms, which provide that the main walls of any dwelling or shop on the land must be of brick and/or stone.   At the time of the trial, a single storey brick building was constructed on each of 99 Queen St and 7 Davies St.

1. The plaintiffs’ application is made pursuant to s 84(1) of the Property Law Act 1958 (‘the Act’). That section confers power on the Court to modify or discharge a restriction imposed on land in certain circumstances. The plaintiffs rely on two distinct grounds under that section for their application. The first ground is contained within s 84(1)(a), to the effect that the restriction is now obsolete. The second ground is that contained within s 84(1)(c), which is to the effect that the modification or discharge will not substantially injure the persons entitled to the benefit of the restriction.

1. The defendants are persons entitled to the benefit of the restriction.  The first and second defendants are husband and wife who are the registered proprietors of the land known as 11 Davies St, Altona.  That property is two parcels north of the subject land, on Davies St.  The third and fourth defendants are husband and wife who are the registered proprietors of the land known as 9 Davies St, Altona.  That  land immediately abuts the subject land to the north on Davies St.

1. I have described the application as being made by the plaintiffs in the plural, but it was commenced and prosecuted at trial by the first plaintiff only.  The second plaintiff was added by consent after the trial, when the defendants became aware that the first plaintiff had sold the subject land to the second plaintiff.  In these reasons, when I refer to the ‘plaintiff’ singular, the reference is to the first plaintiff.

Summary of conclusions

1. Before summarising my conclusions, I first set out some observations. First, although the covenant in question is not a single dwelling covenant, but a materials covenant,   it was apparent from both the plaintiff’s case and the defendants’ case that an underlying desire of the plaintiff and an underlying concern of the defendants relates to the potential construction of an apartment block on the subject land, being multiple dwellings and potentially several stories high.  This put in issue the extent to which that underlying concern in the defendants’ case was relevant to their objection to removal of the brick/stone covenant. 

1. The plaintiff did not, however, disclose at trial its current intentions in relation to development of the subject land.  This made consideration of the impact of removal of the materials restriction difficult, and necessarily somewhat speculative.  As a consequence, the task of the plaintiff to show that the removal will not cause substantial injury to the persons entitled to the benefit of the covenant was a difficult one.

1. Secondly, the plaintiff seeks to remove an obligation to construct the main walls of any building on the subject land in brick or stone but the evidence shows that the most common building material in the geographical area around the subject land is brick.  This creates an immediate difficulty for the plaintiff in showing, as it seeks to do, that the restriction to brick or stone is obsolete or that its removal would not cause substantial injury to the persons entitled to the benefit of the covenant. 

1. Thirdly, the plaintiff did not seek to identify at trial all the beneficiaries of the covenants, and did not identify for the assistance of its experts all the benefited land.  Restrictive covenants confer proprietary rights, and so in determining whether or not they should be removed or modified the usual practice of the Court is to first identify all the benefited land.  Identification of the benefited land is relevant to, although not necessarily definitive of, the identification of the appropriate ‘neighbourhood’ for the purpose of showing changes in that neighbourhood that make the restriction now obsolete.   Identification of all the benefited land is also clearly relevant in determining whether or not there will be any substantial injury to the beneficiaries of the covenant, who may not be confined to the defendants.

1. The trial also proceeded on an unfortunate misconception as to how the benefit of the restrictions was conferred.  The parties proceeded on the assumption that the benefit was conferred on lots transferred out of the parent subdivision after the transfer of the lots making up the subject land.  In fact, the covenants confer their benefit on land transferred out of the parent title after the transfer of the subject land.  In most cases, parent title and parent subdivision are co-extensive.  In this case, they are not.

1. Finally, although the plaintiff relied heavily on expert evidence that materials other than brick or stone had been used in the main walls of many buildings in the physical proximity of the subject land, there was no expert evidence that this had changed since the date of the covenants.  The experts did not say when the non-brick buildings were built (with some limited exceptions), or whether there had been any change since the 1920s.  It is change in the character of the neighbourhood that is relevant to show that a restriction is obsolete, and the plaintiff had no evidence to demonstrate any such change.

1. Nor could the plaintiff’s experts say whether or not the non- brick buildings were built in breach of a brick/stone restriction, whether in this covenant or another similar covenant, because the information provided to them by the plaintiff simply did not identify which land other than the subject land was burdened by this or a similar materials covenant.   This was remedied to some extent in respect of a sub-set of the neighbourhood, by title searches conducted by the solicitor for the plaintiff.  Those searches demonstrated three things- that there was non-brick construction on land burdened by a brick or stone covenant; there was brick construction on land with no such covenant; and there was brick construction on land burdened by such a covenant.  The evidence was led to show that non-brick buildings had been constructed in breach of a covenant, but it only illustrated that that was the case in some instances..

1. For the reasons I will shortly give in detail, I do not consider that the plaintiff has shown that the materials restriction is obsolete.  I have also concluded that the plaintiff has not shown that the removal of that restriction will not substantially injure the defendants, who are persons entitled to the benefit of the restriction.  The plaintiff chose to run its case on the basis that it was not necessary to identify all beneficiaries, as any injury to the defendants, being the most physically proximate beneficiaries, was determinative.

1. Accordingly, I will dismiss the plaintiffs’ application.

Procedural history

1. This proceeding was commenced by the first plaintiff by originating motion filed on 11 October 2012.    At the time the proceeding was commenced the first, and then the only, plaintiff owned 7 Davies Street, Altona and had entered into a contract to purchase the land at 99 Queen Street, Altona.  By the trial, the purchase of 99 Queen St had completed and the first plaintiff was also the registered proprietor of 99 Queen St, Altona.[1]

   [1]T 59.28-31.

1. The covenants in question contain three restrictions.  The first is a restriction as to the value of any shop or dwelling constructed on the land.  The second restriction is a restriction as to the material that may be used for the main walls of any such shop or dwelling, and restricts those materials to brick and/or stone.  The third restriction stipulates that the land will not be used for the carrying on of quarrying or any noxious trade or business or the manufacture of bricks, tiles, pipes, pottery or any kindred manufacture. 

1. The first plaintiff initially sought a declaration that the subject land was no longer affected by the restrictions sought to be imposed by the covenants.  The basis of this application was that the particular wording of the covenants allowed for consent to be given by the original developer of the land, Altona Beach Estates Limited.  That company was deregistered in 1953.  The first plaintiff contended in the early stages of the proceeding that as a consequence there was no longer any person who had a right to oppose removal of the covenants, as they were personal to Altona Beach Estates Limited, or had become inoperative on the deregistration of that company.  The first plaintiff amended the originating motion on 21 October 2012 to add this contention.

1. In these early stages, the proceeding was managed by Associate Justice Mukhtar.  The first plaintiff sought to have this question as to whether or  not the restrictions remained operative notwithstanding the deregistration of Altona Beach Estates Limited heard on an ex parte basis before Associate Justice Mukhtar.  Associate Justice Mukhtar declined to proceed in that way on 25 October 2012 and published reasons for his decision.  In short, he considered that there was a question to be tried as to whether or not the deregistration of Altona Beach Estates Limited meant there was no-one else in the subdivision who had the right to oppose removal of the covenants.  He considered that that question was better determined with a contradictor, and on 15 November 2012 made orders for amendment of the originating motion to clarify the nature of this preliminary question and for notification of the application to the registered proprietors and mortgagees of certain land.  The land owned by the defendants fell within the lots whose owners were to be directly notified.

1. Subsequently, the defendants were joined and the plaintiff filed a further amended originating motion on 13 February 2013 evidencing that joinder.  The question as to whether the defendants had a right to object to the application for discharge or removal was listed for trial as a preliminary question.  The parties subsequently agreed that that aspect of the first plaintiff’s application be dismissed.  Those orders were made on 30 April 2013 by Associate Justice Mukhtar. 

1. The further amended originating motion filed on 13 February 2013 was then listed for trial.  It came before me for trial on 28 May 2014.  The trial and a view extended over three days to and including 30 May 2014. 

1. At the commencement of the trial, counsel for the plaintiff indicated that certain paragraphs of the further amended originating motion dated 13 February 2013 were no longer pressed.  I ordered that a second further amended originating motion be filed to reflect those changes.  A Second Further Amended Originating Motion to this effect was filed in Court on 29 May 2014.  The effect of the further amendments and the dismissal of the application for declarations by Associate Justice Mukhtar is that at trial the first plaintiff pressed only its application for modification of the restrictive covenant so as to delete entirely the materials restriction, but otherwise retain the other two restrictions. 

1. At the request of the parties on the afternoon of the second day of the trial I undertook a view of the subject land; the neighbourhood identified by the town planning expert retained by the plaintiff, Mr Peter Barber; and a portion of a broader area identified as a distinct precinct by the local council, Hobsons Bay City Council (‘the Council’) within which Mr Barber’s neighbourhood sits. I recorded my observations from that view (‘the View’) on the transcript.[2]

   [2]T 215.16-T 219.22.

1. Unfortunately, I was unable to deliver judgment in the usual time frame, for which I extend my apologies to the parties.   The defendants became aware in 2015 that the subject land had been sold.  They caused the proceeding to be re-listed on the basis of the affidavit of Damien Thomas Neylon sworn 23 June 2015 which deposed to the sale.  Title searches exhibited to that affidavit showed that two of the three lots affected by the restrictions were transferred to Sonny Australia Investments Pty Ltd by transfer registered on 25 March 2015.  The affected lots comprised the bulk of 7 Davies St and 99 Queen St, Altona.   The solicitor for the defendants has now filed a copy of the third certificate of title to confirm that the whole of the subject land was transferred to Sonny Australia Investments Pty Ltd by transfers registered on 25 March 2015.

1. At the re-listing of the proceeding on 26 June 2015, consent orders were made that Sonny Australia Investments Pty Ltd be joined as the second plaintiff and that the first plaintiff pay into Court the amount of $65,000, by way of security for the costs of the defendants.  The orders made 26 June 2015 refer to the joinder being reflected by a second further amended originating motion. That was an error.  In fact, the amended originating motion to be filed should have been the third further amended originating motion.   Perhaps because of this error, the document then filed on 3 July 2015, which is dated 30 June 2015, adds the second named plaintiff not to the Second Further Amended Originating Motion filed in Court on 29 May 2014, but to the Further Amended Originating Motion dated 13 February 2013.  In other words, the amended application on which the first plaintiff in fact proceeded at trial has been overlooked. I have drawn this to the parties’ attention.  The second named plaintiff confirms that it adopts the case of the first plaintiff as argued at trial, being that reflected in the Second Further Amended Originating Motion dated 29 May 2014.

Facts

1. There is no dispute between the parties on the essential facts.   The case turns on the application of the statutory tests to largely undisputed evidence.  I will set out the factual context in this section, and make comment on specific factual matters where required in the discussion section of the judgment.

History of the titles and the covenants

1. The subject land was originally part of a larger parcel of land in Altona subdivided in 1888 by Plan of Subdivision LP 2102. That subdivision created allotments from Civic Parade in the north, to the Esplanade running along the bay in the south, McBain St (two streets west of the current activity centre on Pier St) on the west and Mount St (one street east of Davies St) on the east.[3]  The area encompassed within LP 2102 is largely, but not entirely, co-extensive with an area that the Council has identified as Precinct 4 in a 2002 Neighbourhood Character Study.[4]  Precinct 4 does not include the portion of LP 2102 south of Queen St to the bay; ends on the east on the west facing lots on Davies St; on the west it includes the east facing lots on McBain St; and excludes the activity centre.  It otherwise corresponds to LP 2102.

   [3]SN-4 to the Further Affidavit of Simon Nixon sworn 5 May 2014.

   [4]Plaintiff’s Exhibit D and Defendants’ Exhibit 2.

1. In LP 2102, the subject land was part of Lots 80 and 81, which were north/south running lots facing onto Queen St.   Altona Beach Estates Limited became the registered proprietor of Lots 80 and 81 on 14 April 1920.  Those lots became part of the land owned by Altona Beach Estates Limited in Certificate of Title Volume 4316 Folio 125 (‘the parent title’).  The parent title includes other non-contiguous parcels of land in the area bounded by Railway St South on the north, Bent St on the west, Queen St on the south and Davies St on the east.[5] 

   [5]Exhibit PHZ-4 to the affidavit of Pin Hua Zheng sworn 10 October 2012.

1. Shortly thereafter, in August 1920, Altona Beach Estates Limited caused the land in the parent title, together with other parcels of land, to be subdivided into housing allotments by Plan of Subdivision No 7931.  In the case of the subject land, the effect of this further subdivision was to create three lots out of what had been Lots 80 and 81, now aligned east/west.  The subject land became Lots 27 and 28 in LP 7931.[6] 

   [6]PHZ-5 to the affidavit of Pin Hua Zheng sworn 10 October 2012 and PSN-5 to Further Affidavit of Simon Nixon sworn 5 May 2014.

1. LP 7931 contained many lots in the area bounded on the north by Civic Parade; on the west by Upton St (three streets further west than McBain St, the western boundary of LP 2102); on the south generally, but not entirely by Queen St; and on the east by Davies St.  The lots are not contiguous, and there are large areas within that geographical area that are not part of the subdivision, in particular in the area between Sargood and Bent Sts (much of which is now the activity centre around Pier St).  The subject land is identified on Sheet 4 of LP 7931, which is an area bounded by the Esplanade on the south, Davies St on the east,  Railway St South on the north and Bent St on the west.

1. Sheet 4 of LP 7931 created Lots 27-37 inclusive running north from Queen St along Davies St to Railway St South (with one parcel excluded).  The subdivision also created Lots 108-113 along The Esplanade, south of Queen St.  In summary, LP 7931 did not include all lots in the physical proximity of the subject land, in particular it did not extend to the east side of Davies St,  or the land opposite the subject land on the south side of Queen St. 

1. Nor are LP 7931 and the parent title co-extensive.  Lots 27 and 28 of the subdivision are in the parent title, but there are other lots on Sheet 4 of LP 7931 which are not in the parent title (in particular the lots along the Explanade) and land in the parent title which is not in LP 7931.  This latter difference is evident from the site map attached to the parent title after the subdivision, which appears to show that the parent title includes land still within the earlier subdivision 2102, not re-subdivided by LP 7931.

1. Lot 28 of Plan of Subdivision 7931, the largest portion of which is now known as 7 Davies St, Altona, was transferred by Altona Beach Estates Limited to George Dummett on 11 February 1924.  That transfer created the restriction that is the subject of this proceeding.   The land transferred is identified both by lot number in LP 7931 and by parent title reference, but the restriction imposed by the covenant runs with land identified by the parent title only.  I have italicised the portion of the covenant showing this to be the case.

1. The transfer[7] is in these terms:

ALTONA BEACH ESTATES LIMITED of 84B Pitt Street Sydney in the State of New South Wales being registered as the proprietor of an estate in fee simple in the land hereinafter described subject to the encumbrances notified hereunder in consideration of the sum of THIRTY SEVEN POUNDS SEVENTEEN SHILLINGS AND NINE PENCE paid to us by ISABELLE THERESA DUMMETT late of No. 67 Union Road Ascot Vale in the State of Victoria Married Woman deceased during her life and on her death the sum of THIRTY POUNDS SEVENTEEN SHILLINGS AND THREE PENCE paid to it by FRANCIS REGINALD DUMMETT of 50 Addison Street Moonee Ponds in the State of Victoria Manager as the Executor of the Will of the said Isabella Theresa Dummett deceased and in further consideration of certain bequests and trusts contained in the Will of the said Isabella Theresa Dummett deceased to GEORGE EDMUND VIVIAN DUMMETT of Union Road Ascot Vale in the State of Victoria Bookkeeper DO HEREBY at the request and by the direction of the said Francis Reginald Dummett testified by his execution hereof TRANSFER to the said George Edmund Vivian Dummett all its estate and interest in the surface and down to a depth of fifty feet below the surface of ALL THAT piece of land being lot twenty eight of Block B Portion Number one on Plan of Subdivision lodged in the Office of Titles Number 7931 and being part of Crown Allotment (unclear) Section (unclear) Parish of Truganina County of Bourke and part of the land comprised in Certificate of Title entered in the Register Book Volume 4316 Folio 863125 together with all registered appurtenances easements mentioned or referred to in the said Certificate of Title.  And I the said George Edmund Vivian Dummett do hereby for myself my heirs executors administrators and transferees registered proprietor or proprietors for the time being of the land hereby transferred covenant with the said Altona Beach Estates Limited and its successors and transferees registered proprietor or proprietors for the time being of the balance of the land comprised in the said Certificate of Title  and every part thereof that I the said George Edmund Vivian Dummett my heirs executors administrators or transferees registered proprietor or proprietors for the time being of the land hereby transferred will not erect upon the said piece of land hereby transferred any shop or dwelling of a less value than One hundred pounds nor will I or my heirs executors administrators or transferees use any material other than brick and or stone for the main walls of any such shop or dwelling without the consent in writing of the said Altona Beach Estates Limited AND FURTHER that I the said George Edmund Vivian Dummett my heirs executors administrators or transferees will not use or allow the said land hereby transferred to be used for the carrying on of quarrying or any noxious trade or business or the manufacture of bricks tiles pipes pottery or any kindred manufactures and the foregoing covenants shall be noted and appear on the Certificate of Title to be issued to me for the said land and on every Certificate of Title therefor or any part thereof as an encumbrance affecting the same and every part thereof.

[7]PHZ 10 to the affidavit of Pin Hua Zheng sworn 10 October 2012.

1. It is the portion in bold that the plaintiffs seek to discharge.  The transferred land became the subject of Certificate of Title Volume 4970 Folio 928.

1. The main portion of what is now known as 99 Queen St Altona was Lot 27 of the subdivision.  Altona Beach Estates Limited transferred Lot 27 to Clara Hanson on 9 May 1924, and new Certificate of Title, Volume 4876 Folio 169 was issued for Lot 27.  The instrument of transfer[8] similarly identified the land transferred both by lot number in LP 7931 and by parent title, and contained a restrictive covenant in the same terms as that created on the transfer of Lot 28 similarly benefitting the land remaining in the parent title. 

   [8]PHZ 6 to the affidavit of Pin Hua Zheng sworn 10 October 2012.

1. In 1955 the rear portion of Lot 28, 7 Davies St, was transferred to the then registered proprietor of 99 Queen St. This resulted in an L shaped block of land known as 99 Queen St, the long side of which runs along Queen St and the short side of which lies along the rear of 7 Davies St.  The transferred portion of Lot 28 became the subject of a separate title, Certificate of Title Volume 8081 Folio 873.  The balance of Lot 28 was transferred in 1958 and became Certificate of Title Volume 8186 Folio 951.  That land is now known as 7 Davies St, Altona and the two titles Volume 4876 Folio 169 and Volume 8081 Folio 873 are together known as 99 Queen St, Altona.  All the land is subject to the restriction that the main walls of any shop or dwelling constructed thereon must be of brick or stone.  The second named plaintiff became registered proprietor of all three titles on 25 March 2015.

1. It is common ground that there are similar materials covenants burdening land    not in this parent title but geographically proximate to the subject land, including covenants burdening lots on the east side of Davies St, and on the southern side of Queen St which are in different subdivisions and parent titles.[9]  Mr Fagioli gave evidence, which was not contradicted, that he had been given a list of 18-19 similar covenants in the area by the Council at the time of the second review proceeding commenced by the plaintiff in the Victorian Civil and Administrative Tribunal (‘VCAT’), which I will shortly describe.[10]   With the exception of some title searches exhibited to Mr Nixon’s second affidavit, however, the burden of other similar covenants is not in evidence, nor is their benefit.  The plaintiff does not assert that the defendants benefit from any other covenant, other than the subject covenants.  The plaintiff relies on evidence of the other covenants, and whether or not building on burdened land is in brick, as relevant to neighbourhood character and whether the covenants have achieved their purpose.[11]

   [9]T 55.9-28; T 56.10-11.  Further Affidavit of Simon Nixon sworn 5 May 2014 at [9] (in relation to the east side of Davies St) and [11] (in relation to the south side of Queen St).

   [10]T 180.12-15; T 186.27-31.

   [11]T 222.9-21, T 223.20-22, T 234.14-21.

1. The defendants do not concede that they benefit only from the subject covenants.[12]  On my analysis of the benefit of the covenants, which I now set out, that is probably the case.  It remains relevant to the character of the area, however, that there are similar materials covenants that burden other land in the area proximate to the subject site.

   [12]T 195.

Benefited land

1. At trial the plaintiff did not seek to identify all the land, and so all the persons, benefited by the subject covenants[13].  Counsel for the plaintiff submitted that this was not necessary because it was conceded that the land owned by the third and fourth defendants, 9 Davies St, Altona, which immediately abuts the subject land to the north, and the land owned by the first and second defendants, at 11 Davies St the next lot north on Davies St, is benefited land.  The plaintiff submitted that this physical proximity has the consequence that any injury is most likely to be suffered by the defendants, and accordingly it was not necessary to identify the other beneficiaries.[14]

   [13]T 225.30- T 226.1.

   [14]T 228.24

1. I accept that the physical proximity of the defendants’ land to the subject land, and the absence of any other objector, provides practical force to the submission of the plaintiff. I do not, however, consider it conceptually correct.  The conceptually correct starting point to any consideration of obsolescence and substantial injury is proper identification of all the benefited land.  Identification of all the benefited land can also have practical significance.  In the particular circumstances of this case, for example, identification of all the beneficiaries may have exposed that some beneficiaries, who were made aware of the proposal, did not object.  An argument could then have been put, which is not open to the plaintiff given the approach taken at trial, that there would be no substantial injury to beneficiaries as a whole if the restriction was removed.

1. My consideration of identification of the benefited land has exposed two matters of misconception relating to the identification of benefited land.  The trial unfortunately proceeded on the basis of these misconceptions, which were advanced by the plaintiff, accepted by the defendants, and not detected by me to be in error until writing these reasons.  I will set them out below.  If critical to the result, I would have alerted the parties to these matters prior to judgment and given them the opportunity to make further submissions.  In other words, if the application were to fail principally or solely because all the beneficiaries have not been identified, it would have been necessary to invite further submissions.  I have not done so, because, although I do not consider the plaintiff’s approach to be conceptually correct, I do not consider it to be fatal to its case.  I will dismiss the application not because the plaintiff did not identify all the benefited land, but because even considering only the defendant beneficiaries, as the plaintiff invites me to do, the plaintiff has not proved its case. 

1. Further, the plaintiff expressly disavowed the need to identify all the benefited land, notwithstanding the submission from the defendants that this was critical.  Inviting further submissions would invite the plaintiff to go down a path it said was unnecessary.

1. In any event, as I will shortly discuss, I consider that the plaintiff did identify all benefited land and orders were made for the notification of the registered proprietors and mortgagees of that land.

1. The first misconception is the submission  by counsel for the plaintiff at trial that the plaintiff did not identify all the benefited land at the commencement of the proceeding when orders were to be made for notification to beneficiaries.  Conventionally, a proprietor of land burdened by a restrictive covenant who seeks to modify or discharge that covenant first identifies to the Court the beneficiaries of the restriction.  Those beneficiaries, or a selection of them, are then notified at the direction of the Court of the application.  Counsel for the plaintiff informed me that the plaintiff did not seek to identify the benefited land at the stage of identifying persons to be notified of the application, and instead the Court selected a number of lots from LP 7931 for the purpose of identifying the persons to be notified. [15]  This would suggest physical proximity, rather than benefit, was the basis of the selection.  This would be unusual. 

   [15]T 213.

1. Scrutiny of the file suggests that this was not in fact the case.  The file contains a table headed ‘List of lots benefitted (sic) by restrictive covenants 1167849 and 1153839’ which Associate Justice Mukhtar marked as Exhibit A on 2 November 2012.  Mr Nixon attended court for the plaintiff on that day, and, I infer, prepared or caused to be prepared the table.  The table identifies a number of lots said to be in LP 7931, being Lots 29, 30, 34, 36, 72, 79 and 130, which from the heading to the table were implied to be all the benefited lots.  Mr Nixon prepared orders for the direct notification of the registered proprietors and mortgagees of these lots, identified in the order, as in the table, as being lots within LP 7931.  Associate Justice Mukhtar made those orders on 15 November 2012.[16]   After detailed consideration of the parent title, the plan of subdivision and the orders, I consider it likely that these orders in fact required direct notification of the application to all benefited owners and mortgagees, although the benefited land was wrongly identified by reference to the plan of subdivision not the parent title. 

   [16]Order made 15 November 2012.  ‘Other Matters’ to that order makes it plain that Associate Justice Mukhtar acted on a submission from the plaintiff that the lots identified in the table were all the benefited lots.

1. This mode of identification of benefited land is the second misconception.  It is shown by the manner adopted by the plaintiff to identify the benefited land, in the table and so in the orders.  The plaintiff in the table identified land as benefited by reference to the plan of subdivision, rather than by reference to the parent title.  This was incorrect.  As noted earlier, it is plain from the wording of the subject covenants[17] that the benefit of the restrictions is expressly conferred by reference to inclusion of the land in the parent title, and having regard to its date of transfer out of that parent title relative to the date of the covenant, not by reference to inclusion of the land in the subdivision. 

   [17]Exhibits PHZ 6 and PHZ 10 to the affidavit of Pin Hua Zheng sworn 10 October 2012.

1. This incorrect approach carried over into the trial. The plaintiff identified the benefited land as land within the subdivision, provided it was transferred out of the subdivision after the creation of the covenant.   The defendants accepted this analysis at trial[18], and accordingly the case proceeded on that basis.

   [18]T 224.18- T 225.15.  See also T 297.18-21.

1. In many cases, this would cause no real difficulty because the parent title would encompass the whole of the subdivision.   The assumption that this was the case may be the reason for the approach adopted by the plaintiff, agreed by the defendants, and assumed by the Court to be correct, until the writing of these reasons.[19]  It was not, however, the case here.  The historical title contains a history of land transfers out of the parent title.  Accordingly, the correct approach was for the plaintiff to identify all the beneficiaries of the covenants by scrutiny of the parent title. 

   [19]See T 224.18-19.

1. The question is whether this approach has occasioned substantive error in relation to identification of the benefited land, and orders for notification.  On balance, I consider that unlikely.  I have only been able to reach that conclusion, however, by detailed scrutiny of the parent title, and of LP 7931, and of the titles exhibited to Mr Nixon’s further affidavit.  It should not have been necessary to undertake this exercise, which should have been the starting point of the plaintiff’s case both at the notification stage and at trial.  I attach as an annexure to this judgment my detailed reasons for reaching this conclusion.  

1. It follows that it is probable that despite this confusion, the benefited land was in fact all identified at the initial stage of the proceeding.  It was not identified at trial, however. Both parties made submissions on the basis that the full extent of the beneficiaries was not before the Court, and this omission was a significant aspect of the defendants’ case.  The plaintiff has chosen to run its case on the basis that the impact of the discharge of the restriction on the defendant beneficiaries is determinative, both as to injury and as to obsolescence.[20]  I will determine the case on that basis.

   [20]T 228.24-29; T 230. 15-21.

The parties acquire their land

1. Mr and Mrs Fagioli acquired their land at 9 Davies St in 1995.  They were aware that their land was burdened by a brick or stone covenant, and when they developed their land in 1999 by construction of three units they did so in brick to comply with the covenant.[21]  Mr Fagioli says that they built single storey units not because of the covenant, which contains no height restriction, but to appease their neighbours.[22]

   [21]T 178, T 191.19-22.

   [22]T 185.

1. The house that is now owned by Mr Grech and Ms Matina at 11 Davies St was probably constructed in the early to mid-2000s.[23]  The land at 11 Davies St is agreed to be burdened by a similar brick or stone covenant as the subject covenants, but the exterior walls of the house now owned by Mr Grech and Ms Mattina are not solely brick.  The exterior wall on the recessed third storey is said by the plaintiff’s architect expert to be lightweight cladding, that has been rendered to have a similar appearance to the render on the brickwork on the lower walls.[24] 

   [23]Per Mr Barber at T 128.28-31.

   [24]Per Mr McLaughlin at T 143.17- T 144.7.

1. Mrs Fagioli said in cross examination that she and her husband did not object to the construction of the adjoining house at 11 Davies St, which was after the construction of the units on their property in brick, on the basis of the covenant.[25]  They would, of course, have only been entitled to do so if their land was a beneficiary of the covenant burdening 11 Davies St.  The certificates of title and transfers exhibited to Mr Nixon’s Further Affidavit for 9 and 11 Davies St show that 9 Davies St is not a beneficiary of the covenant burdening 11 Davies St, because the land at 9 Davies St was transferred out from the parent title on 2 February 1926 whereas the land at 11 Davies St was not transferred out until 10 August 1929, and the covenant created in that transfer is for the benefit of the land remaining in the parent title only. Accordingly, Mr and Mrs Fagioli cannot be said to have condoned a breach of the covenant burdening Mr Grech’s land, as their land was not a beneficiary of that covenant.  From scrutiny of the parent title, the only beneficiary of the covenant burdening 11 Davies St is the land at 50 Railway St, as 11 Davies St was the second last transfer out of the parent title. 

   [25]T 198.21-22.

1. On 21 April 2011 the plaintiff entered into a contract to purchase 99 Queen St, which subsequently settled in December 2012.  The plaintiff became the registered proprietor of 7 Davies St on 14 July 2011.  Shortly after acquiring its interests in the subject land, the plaintiff made two applications to Council relating to the development of the land, and when each was unsuccessful, sought review by VCAT.

1. The plaintiff applied to the Council at some point in 2011 for a permit to remove the restrictive covenants on the subject land.  The permit was refused on 1 December 2011.  The plaintiff sought review of the refusal from VCAT, which heard the application in March 2012. VCAT affirmed the Council’s decision by orders and reasons dated 1 May 2012.  Mr and Mrs Fagioli, the third and fourth defendants were objectors at the Council and in the review.  

1. The test that Council and VCAT were required to apply in relation to removal of the covenant is different to the test that applies in this proceeding. The test that they were required to apply is that specified in s 60(5) of the Planning and Environment Act 1987, which provides as follows:

The responsible authority must not grant a permit which allows the removal or variation of a restriction … (created before 25 June 1991) unless it is satisfied that—

(a)the owner of any land benefited by the restriction (other than an owner who, before or after the making of the application for the permit but not more than three months before its making, has consented in writing to the grant of the permit) will be unlikely to suffer any detriment of any kind (including any perceived detriment) as a consequence of the removal or variation of the restriction; and

(b)if that owner has objected to the grant of the permit, the objection is vexatious or not made in good faith.

1. Member Naylor accepted the submission from Mr and Mrs Fagioli that there would be detriment to their property in relation to two matters: the outlook from their property, and that removal of the covenants would create greater uncertainty as to what developments may take place on the subject land.  For these reasons, she concluded that removal of the covenants was likely to cause them detriment, including perceived detriment, and so affirmed the decision of the Council.[26]

   [26]Gardencity Australia (sic) v Hobsons Bay City Council, reasons of R. Naylor, Member, 1 May 2012 being PF-1 to the  affidavit of Peter Fagioli sworn 24 March 2014, at [19].

1. In the meantime, the plaintiff had sought a planning permit from the Council to construct a four storey apartment building on the subject land.  That application was refused by the Council in January 2012.  The plaintiff sought review of the refusal at VCAT at a hearing in June 2012.  A different member of VCAT affirmed Council’s decision by orders and reasons dated 10 July 2012.  Mr and Mrs Fagioli were among a number of objectors at Council and very many at VCAT.  In the Tribunal’s reasons, Member Rundell noted that the parties agreed that the materials proposed to be used in the development complied with the restrictive covenants, and so the Tribunal did not consider that matter.  Member Rundell held that the proposal was excessive for its context, and that a two or three storey development would be more acceptable.[27] 

   [27]Gardencity Altona Pty Ltd v Fagioli and ors, reasons of G. Rundell, Member, 10 July 2012, being PF-2 to the affidavit of Peter Fagioli sworn 24 March 2014, at [78]-[79].

1. Mr Grech and Ms Matina were not involved in these earlier applications for development by the plaintiff.  They entered into a contract to purchase their property in April 2012, after a two year search.  Mr Grech was aware that the property he was purchasing was burdened by a restrictive covenant, but did not undertake any enquiry as to similar covenants which benefited the land.  In particular, he did not know that the next door property at 9 Davies St had a similar brick or stone covenant (which in fact benefited his land) or that the subject land was burdened by similar covenants (which benefit his land).  He did not  make any enquiries of the Council about development plans for 9 Davies St, the subject land or the properties opposite his.[28]  Mr Grech and Ms Matina settled the purchase and moved into their house in October 2012, after both unsuccessful applications to VCAT by the plaintiff.  The plaintiff commenced this proceeding shortly thereafter, also in October 2012.

   [28]T 171- T 174.

The character of the area

1. I will return to identification of the appropriate neighbourhood and detailed discussion of it shortly. For present purposes, I sketch only the immediate area surrounding the subject land, including the block within which it is located, and properties facing it in Davies and Queen Sts.  This area is bounded by Blyth St to the north; Bent St to the west; properties fronting onto Queen St from the south; properties fronting onto Davies St on the east; and the land diagonally opposite the subject land on the south-eastern corner of Queen and Davies Sts.  This description is drawn from the evidence of Mr McLaughlin, the architect called by the plaintiff, and the Further Affidavit of Mr Nixon, put into context by my observations on the View.  

1. A single storey brick dwelling is constructed on each of the lots forming the subject land, 7 Davies St and 99 Queen St.  To the immediate north, there are the three single storey brick units constructed and owned by Mr and Mrs Fagioli, at 9 Davies St.  There are four further lots north along Davies St to Blyth St.  Two, the property owned by Mr Grech and Ms Matina at 11 Davies St, and the neighbouring house at 13 Davies St, are of two or three stories, constructed partly of brick (the lower walls) and partly of lightweight material, all covered with painted render.[29]  The houses at numbers 15 and 17 Davies St are brick.[30]  Mr Nixon deposes that each of 9-17 Davies St is burdened by a brick or stone covenant.[31]

   [29]Mr McLaughlin at T 144.

   [30]This flows from their omission from the annexure to the report of Mr McLaughlin, which identifies buildings whose main walls are not constructed solely of brick or stone.

   [31]Further Affidavit of Simon Nixon sworn 5 May 2014 at [5].

1. Three lots face onto Blyth St in this block.  One, 38 Blyth St, is weatherboard.  The other, 36 Blyth St, is two storey, with lower walls of face brick and upper walls of rendered lightweight cladding.   The title search exhibited to Mr Nixon’s Further Affidavit shows that the land at 36 Blyth St is burdened by a brick or stone covenant.[32] The remaining lot, on the corner of Blyth and Bent Sts is brick.  The title searches for that land and 38 Blyth St are not in evidence.

   [32]Part of Exhibit SN-6 to the Further Affidavit of Simon Nixon sworn 5 May 2014.

1. All of the buildings running down Bent St to Queen St are brick.  On the corner of Bent and Queen Sts is a brick single storey church.  Between the church and the 99 Queen St is one lot only, containing three single storey brick units at 107 Queen St.  That land is burdened by a brick or stone covenant. [33] Thus the subject land and the immediately adjacent lots to the north and west all are currently burdened by a brick or stone covenant and all have brick construction on them.

   [33]Further Affidavit of Simon Nixon sworn 5 May 2014 at [10].

1. Facing the subject land are four lots on Queen St.  They all contain buildings, said by Mr McLaughlin to be brick (within which description he included brick veneer)[34] which are residential except for the building on the south western corner of Queen and Davies St, 98 Davies St, which contains doctors’ rooms.  Mr Nixon deposes that all these lots, numbered 98, 100-104 and 106 Davies St, are burdened by a brick or stone covenant.[35]

   [34]T 140.14-17.

   [35]Further Affidavit of Simon Nixon sworn 5 May 2014 at [11].

1. There are six lots on Davies St facing the subject land, and the defendants’ land, together with a lot on the north east corner of Queen and Davies St, which opens to Queen St.   The building on that lot is double storey brick.  Immediately opposite the Fagioli land at 8 Davies St is a single storey weatherboard building with fake brick cladding.  Mr Nixon deposes that this land is burdened by a brick or stone covenant.[36]  Further north along the east side of Davies St are two other homes whose main walls are not entirely brick.  At 14 Davies St, the construction is also fake brick cladding over weatherboard.  Mr Nixon deposes that this land is also burdened by a brick or stone covenant.[37]  Next door at 16 Davies St, Mr McLaughlin has identified that the home has ‘a section of weatherboard around the highlight windows’.  Mr Nixon describes the balance of the construction as brick veneer.  He deposes that it is burdened by a brick or stone covenant.[38]       The other three houses opposite the defendants’ land, 6, 10 and 12 are brick.  Mr Nixon exhibits a certificate of title for 10 Davies St[39], which shows that it is burdened by a brick or stone covenant, but does not exhibit the titles for 6 or 12 Davies St.

   [36]Further Affidavit of Simon Nixon sworn 5 May 2014 at [9(a)].

   [37]Further Affidavit of Simon Nixon sworn 5 May 2014 at [9(c)].

   [38]Further Affidavit of Simon Nixon sworn 5 May 2014 at [9(d)].

   [39]Part of Exhibit SN-9 to the Further Affidavit of Simon Nixon sworn 5 May 2014.

1. Diagonally opposite the subject land, on the south eastern corner of Davies and Queen Sts at 96 and 92 Queen St.  Mr Nixon deposes that each of these lots is burdened by a brick or stone covenant, although he does not exhibit the covenant burdening 92 Queen St.  The external walls of the house at 96 Queen St are fibre cement planks, not brick or stone.[40]  The walls of the building on 92 Queen St are fibro cement.[41]

   [40]T 145.3-12 per Mr McLaughlin.

   [41]Photograph and commentary 42 in Mr McLaughlin’s report.

1. In short summary, the buildings in the immediate proximity of the subject land, including the block in which it is located, vary in style and age considerably and include some non-residential buildings.  Of the 27 lots in this area (counting the subject land as two lots, and the land at 9 Davies St and at 107 Queen St as one lot each) nine i.e. a third contain buildings in which the main walls are not entirely constructed of brick or stone.  Five of these buildings are in Davies St itself, including the land owned by Mr Grech and Ms Matina.  This brief sketch demonstrates some non-compliance, or incomplete compliance, with a brick or stone covenant on the site.  It also demonstrates some compliance with such a covenant.  This is consistent with the broader title searches conducted by Mr Nixon on the whole of the north/south axis along Davies St between the Esplanade and Blyth St, and on the whole of the east/west axis along Queen St from Bent to Mount Sts, which identify multiple instances of both compliance and non-compliance.  That broader search also shows that in some instances building is in brick although the site is not burdened with a brick or stone covenant.[42]

   [42]T 246.2-9.

Plaintiff’s proposals

1. In this proceeding, it became apparent that the plans before VCAT in the plaintiff’s second application, in which he sought a planning permit to build a four storey apartment building, were amended shortly before the hearing commenced on 13 June 2012.  This amendment was to meet a foreshadowed further objection by the objectors that the plans did not comply with the restrictive covenants.  In their first iteration, the plans had specified ‘masonry’ as the material for certain walls.  In their amended form, identified as Revision A, and attached to a letter dated 5 June 2012 from the then solicitors for the plaintiff to the representative of the objectors, the plans changed the material to brick.[43]  The director of the plaintiff exhibited plans he said complied with the restrictive covenants, and were the subject of Member Rundell’s reasons, to his second affidavit.[44]  Those plans were the first iteration, specifying masonry, and not the second, which changed the material to brick.  In cross examination, Mr Zheng agreed that his first intention was to construct out of materials other than brick and stone.  He acknowledged that masonry may not be brick or stone, as it could be, for example, blockwork.  He said that he was unaware that the plans were changed to specify brick, in lieu of masonry.[45]  

   [43]Exhibit 1.

   [44]Affidavit of Pin Hua Zheng, sworn 24 April 2014, at [3]-[4].

   [45]T 75.10-20; T 76. 12-15.

1. In his affidavit in support of the originating motion, sworn 10 October 2012, Mr Zheng deposed that the plaintiff wished to construct an apartment block on the subject  land using materials other than brick or stone in the construction of the main walls.  He did not exhibit any proposed plans. 

1. The instructions given by the plaintiff’s solicitor, Mr Nixon, to the plaintiff’s town planning expert Mr Barber in June 2013 are consistent with this.  They state that the solicitor is instructed that the plaintiff wishes to construct a block of apartments using concrete.[46]  Counsel for the plaintiff agreed that it was a fair inference that this was indeed the plaintiff’s intention at the time.[47]

   [46]Exhibit E.

   [47]T 272.18-24.

1. At trial in May 2014, however, Mr Zheng said that he currently had no plans for the subject land, and was awaiting the release of new planning zones by the Council.[48]  Accordingly, there were no plans for the development of the subject land before the Court on the basis of which the impact of the proposed removal of the materials covenants could be considered.

   [48]T 60.4-7; 25-30.

1. The plaintiff at trial, the first plaintiff, has now sold the subject land.  The intentions of the purchaser, the second plaintiff, in relation to its development are unknown.

Legal principles

1. Section 84(1) of the Property Law Act 1958 relevantly provides as follows:

84Power for Court to modify etc. restrictive covenants affecting land

(1)The Court shall have power from time to time on the application of any person interested in any land affected by any restriction arising under covenant or otherwise as to the user thereof or the building thereon by order wholly or partially to discharge or modify any such restriction (subject or not to the payment by the applicant of compensation to any person suffering loss in consequence of the order) upon being satisfied—

(a)that by reason of changes in the character of the property or the neighbourhood or other circumstances of the case which the Court deems material the restriction ought to be deemed obsolete or (second limb not here relied on); or

(b)(not relied on); or

(c)that the proposed discharge or modification will not substantially injure the persons entitled to the benefit of the restriction:

1. There was no significant dispute between the parties as to the principles that apply in the application of these provisions.  They have been the subject of recent helpful exhaustive compilation and consideration by trial judges in Vrakas v Registrar of Titles[49] (‘Vrakas’) (Kyrou J as he then was); Prowse v Johnstone & Ors[50] (‘Prowse’) (Cavanough J) and Freilich v Wharton[51] (‘Freilich’) (Bell J).  Each of Cavanough J and Bell J in the cases before them adopted the compilation of the relevant case law by Kyrou J in Vrakas, adding particular comment in relation to matters pertaining to the cases before them.  I too will take that approach, adding reference to particular authorities as appropriate.  The observations of Morris J in Stanhill Pty Ltd v Jackson[52] that minimised the burden cast on a plaintiff under s 84(1) have been the subject of adverse comment in Prowse[53] and Freilich,[54] and accordingly I do not adopt the approach taken by Morris J. 

   [49][2008] VSC 281.

   [50][2012] VSC 4.

   [51][2013] VSC 533.

   [52][2005] VSC 169.

   [53]Prowse, at [99].

   [54]Freilich at [23]-[24].

1. I summarise the relevant principles, as the parties sought to apply them to the facts of this case, as follows.

S 84(1)(a): obsolete

‘Obsolete’

1. A covenant is ‘obsolete’ if it can no longer achieve or fulfil any of its original objects or purposes, or has become futile or useless.  A covenant is not obsolete if it is still capable of fulfilling any of its original purposes, even if only to a diminished extent.[55]  In Re Robinson, the chain of authority in relation to the word ‘obsolete’ was summarised by Adam J to the effect that if the restrictive covenant continues to have any value for the persons entitled to the benefit of it, having regard to its purpose, then it can ‘very rarely, if at all, be deemed obsolete’.[56]  The enquiry is strictly as to whether the restriction of user created by the covenant is obsolete, not whether the covenant itself is obsolete.[57] 

   [55]Vrakas, at [26], citing earlier authorities.

   [56][1971] VR 278, at 282.

   [57]Greenwood, at 65,194 adopted in Vrakas, at [27].

1. Accordingly, it is first necessary to identify the original purpose or object of the restriction imposed by the covenant.  That is not necessarily the end of the enquiry, however, in relation to obsolescence.  In Greenwood & anor v Burrows & ors (‘Greenwood’)[58] Eames J noted that ‘in theory, at least’ it could be possible for a covenant to be held not to be obsolete even if the purpose for which it was designed had become wholly obsolete, provided that it conferred a continuing benefit by maintaining a restriction on the user of land.[59]  He did not need to decide the point, because he held that the covenant in that case was in any event not obsolete because one of its objects was still effective. 

   [58]Greenwood (1992) V ConvR 54-444.

   [59]Greenwood, at 65,198.

1. The defendants rely[60] on an observation they submit is to the same effect in an earlier NSW case, Re Callanan[61]. The observation in that case was in relation to the New South Wales equivalent of the second limb of the test in s 84(1)(a) for obsolescence, that the covenant’s continued existence would impede the reasonable user of the land without practical benefits to other persons. Helsham J speculated that ‘practical benefits may perhaps not be confined to those intended to be conferred by the restrictions’ but decided the case on other grounds. The plaintiff does not here rely on the second limb of s84(1)(a).

   [60](Defendants’) Written (Closing) Submissions at [44].

   [61][1970] 2 NSWLR 127, per Helsham J at 132.

‘Neighbourhood’

1. The next step in determining an application under the first limb of s 84(1)(a) is the determine the ‘neighbourhood’. This is a question of fact, and is to be determined as at the date of the hearing, not the date of the covenant.[62]

   [62]Greenwood at 65,196 and Vrakas, at [25].

Change or other circumstances

1. The final element of the first limb of s 84(1)(a) is that the obsolescence has come about by reason of changes in the character of the property or neighbourhood, or by reason of other circumstances. The phrasing of the subsection leaves it ambiguous in my view as to whether the ‘other circumstances’ aspect also requires demonstration of change. It is not necessary to decide that question in this case.

S 84(1)(c): no substantial injury

1. Section 84(1)(c) requires a plaintiff to prove a negative. The first step is a comparison between the benefits initially intended to be conferred and actually conferred by the covenant, and the benefits, if any, which would remain if the restriction was discharged. The difference between the two is the ‘injury’. In Greenwood, Eames J noted that ‘arguably’ a plaintiff relying on this subsection has the further task of identifying the persons entitled i.e. the beneficiaries of the covenant.[63] 

   [63]Greenwood, at 65,199.

1. Next, the plaintiff must show that this difference will not be ‘substantial’.[64]  There has been in the older authorities discussion and some disagreement as to whether the requirement that the injury not be substantial means anything more than that the opposition to modification be not vexatious.  In Re Robinson, Adam J applied the test on the basis that the addition of the adjective ‘substantial’ did not add to English authority to the effect that vexatious opposition to an application was precluded.[65] The English legislation did not require proof that the injury would not be ‘substantial’. However, in the case before him he held that the objectors were not only acting bona fide, they also did so on reasonable grounds.  Arguably then, opposition to the modification was more than not vexatious in any event.

   [64]Vrakas.

   [65]Re Robinson, at 285.

1. In Re Stani, the Full Court noted, without deciding, that Adam J ‘may well’ have taken the correct view.  However, they articulated the test as being that ‘any injury sufficient to prevent the Court modifying the restriction must be something more than unsubstantial, must be real and not a fanciful detriment.’[66]  A ‘fanciful’ detriment may nevertheless be genuinely feared, and so the articulation of the test by the Full Court would suggest that ‘substantial’ means more than not vexatious.  This interpretation is consistent with Re Alexandra,[67] decided shortly after Re Stani.  In Re Alexandra, Menhennitt J applied Re Stani so as modify a single dwelling covenant to allow two dwellings. He noted that it was erroneous to submit that any difference between the initial benefits and those that would still apply if the covenant was modified was sufficient to defeat an application based on s 84(1)(c).

   [66]Unreported judgment of Young CJ, Barber and Nelson JJ delivered 7 December 1976 at 10.

   [67][1980] VR 55.

1. This view, which gives the word ‘substantial’ content, was also adopted by Eames J in Greenwood. Eames J held that while the restriction of (c) to substantial injury would ‘enable the weeding out of vexatious objections’ it was not limited to that end.  He held that ‘the dichotomy in the section is not between vexatious and non-vexatious claims but is between cases involving some, genuinely felt but insubstantial injury, on the one hand, and cases where the injury may truly be described as substantial, on the other.’[68]

   [68]Greenwood, at 65,199.

1. Whether or not there will be substantial injury is a question of fact.[69]  In determining that question, Cavanough J in Prowse held that the Court may take into account intangibles such as impairment of view, intrusion upon privacy, unsightliness or alteration to the character or ambience of a neighbourhood.  Subjective tastes, preferences or beliefs of particular individuals, provided that they are within the bounds of reasonableness, may give rise to injury in a relevant sense to those individuals.[70]  The test as to substantial injury was stated in Freilich to be an objective one, but Bell J also expressly agreed with Cavanough J in Prowse that the subjective views of the beneficiaries and intangible considerations such as the preservation of the character of a neighbourhood may be taken into account.[71]

   [69]Re Alexandra, at 60 adopted in Vrakas, at [40].

   [70]Prowse, at [106].

   [71]Freilich at [29].

1. In Freilich, the application was based on s 84(1)(c) but the Court considered that a determination of the relevant neighbourhood was important to the assessment of substantial injury. In that case, the plaintiff had submitted that no defendant lived close enough to the property to be much affected by what happened there. The plaintiff submitted that the relevant ‘neighbourhood’ was a few houses either side and opposite. The defendants in that case lived a few streets away. The facts are of course different in this case, where the defendants are immediately adjacent to the subject land. Nevertheless, the determination of this issue by Bell J is of potential application.

1. Bell J rejected both the very narrow identification of neighbourhood by the plaintiff, and the broader identification by the defendants, which was still largely based on physical proximity to the subject site.  He held that the relevant neighbourhood was the whole of the original residential subdivision, which had been developed over time with a network of residential covenants, of which the covenant burdening the subject site was one.  He did so although he accepted that the only those defendants living close to the subject site would be much affected in a physical sense by modification of the residential only covenant to allow consulting rooms for  medical specialists.  He held that the section does not impose on the Court a preconceived concept of neighbourhood, and  the physical conditions of the area, the presence of any defining boundaries, and the character of the housing may be relevant in determining the appropriate ‘neighbourhood’ on the facts. 

1. Bell J held that ‘where relevant’ the Court should also have regard to the concept of neighbourhood that is reflected in the benefits conferred by the covenant.  In the case before him, the covenants created on transfer out of lots from further subdivisions of the subdivision created and preserved a residential area of homogeneous and quality appearance.  Bell J held that the network of covenants had contributed to the development of a neighbourhood, being the whole of the original subdivision, of substantial residential amenity.  If the modification was approved, the contribution that the subject site made to that amenity would be lost and the use of the house for business purposes would detract ‘somewhat’ from the residential character of the neighbourhood.  He held that ‘(e)very defendant would experience a sense of injury in consequence’.[72]

   [72]Freilich, [48]-[57].

1. A lack of specific plans makes it more difficult for a plaintiff to show that there will be no substantial injury to the persons entitled to the benefit of the covenant.[73]

   [73]Vrakas, at [38].

1. Whether or not a discharge or modification will have a precedential effect may be relevant to the question as to whether substantial injury would be occasioned.[74]

   [74]Vrakas at [39] and Greenwood at 65,200.

Generally

1. Town planning principles and considerations are not relevant to the Court’s consideration as to whether a plaintiff has established a ground under s 84(1).[75]  This is because a restrictive covenant constitutes a proprietary interest in land which is private in character, and so rests on a different legal foundation to the rights and interests that form the subject of planning law.[76]

   [75]Vrakas at [41], citing Greenwood amongst other authorities.  See also Prowse at [105].

   [76]Freilich, at [19].

1. The Court has a residual discretion to refuse an application for discharge or modification even if one of the grounds in s 84(1) is made out. Town planning principles and considerations may be relevant to the exercise of this discretion, as may concerns about precedential effect.[77]

   [77]Vrakas at [45]-[46].

Submissions

Plaintiff

Obsolescence

1. The plaintiff agrees that there was a dual purpose to the restriction to brick or stone, being both to ensure quality of construction and a particular visual presentation.[78]  The plaintiff submits that the appropriate neighbourhood is that identified by Mr Barber, on the basis of his town planning expertise.  Mr Barber identified the relevant neighbourhood having regard to physical barriers on the north and south (respectively, the railway line and the shoreline) ; by the commencement of the town activity centre on frontages to Pier St on the west; and by what he felt was a reasonable distance of 300 metres to the east. 

   [78]T 260.26- T 261.3.

1. The plaintiff contends that the intention of the covenant was never really achieved.[79] The plaintiff relies on evidence from Mr McLaughlin as to the extent of the use of material other than brick or stone in buildings within the neighbourhood identified by Mr Barber, and evidence from the solicitor for the plaintiff, Mr Nixon, as to the existence of, and apparent departure from, similar materials covenants in a subset of that neighbourhood.   The thrust of the plaintiff’s case is that the variety of material used within that neighbourhood, and the extent of departure from brick or stone covenants, means that the purpose of the covenant was either never achieved, or can no longer be achieved.

   [79]T 262.22-25; T 263.1-6.

1. The plaintiff describes this claimed failure of the intention of the covenant as being a change in the character of the neighbourhood[80], but has not adduced any historical or longitudinal evidence to demonstrate this change.  Counsel for the plaintiff submits that this is not required.[81]

   [80]T 262.22-25.

   [81]T 263.7-26.

1. The plaintiff also adduced evidence from Mr Barber and Mr McLaughlin about changes in building materials. The thrust of that evidence is that there are now quality building materials other than brick or stone. Although this evidence in chief may have suggested that the plaintiff intended to rely on this change in building materials as a relevant circumstance in itself within s 84(1)(a), irrespective of change in the neighbourhood, the plaintiff did not in fact do so in closing submissions.

No substantial injury

1. The plaintiff submits that in comparing the situation with the restriction and the situation that would apply if the restriction to brick or stone were removed, the concerns expressed by the defendants about lack of amenity by way of restriction on views, height, bulk, density, and so on if an apartment complex were built must be ignored, because these are not benefits that the restriction confers.  It restricts building material only –it does not restrict construction to one dwelling or any number of dwellings, or impose any height or bulk restriction.  The only difference, if the brick or stone restriction was removed, would be as to building material. 

1. Counsel for the plaintiff acknowledges that the absence of any clear proposal from the plaintiff does present a difficulty, but submits that it is not insurmountable.  Counsel submits that the plans previously advanced by the plaintiff at VCAT demonstrate its general intentions, and that the absence of a specific proposal is of less consequence where the restriction is as to materials only.[82]

   [82]T 268.20- T 269.20.

1. The plaintiff submits that the nub of the issue is whether a difference in building material, being the only relevant difference if the restriction was removed, would occasion an injury that is substantial i.e. real.  The plaintiff says that in that regard the defendants’ subjective views are not the end of the matter.  Viewed objectively, their expressed preference for external building material to be brick or stone is not reasonable.  In particular, the plaintiff relies on the current mix of building materials in the neighbourhood; the range of quality building materials now available; and that the defendants have ‘demonstrated their willingness to selectively enforce materials covenants, and selectively tolerate, and even ignore, non-compliance with them.’[83]  The plaintiff also submits that it is likely that a development on this site is ‘likely to use materials that are not unattractive in an objective sense’[84] and that it is likely that any development of the subject land will require a planning permit, and so finishes will be subject to regulation.[85]

   [83](Plaintiff’s closing) Submissions dated 30 May 2014 at [69].

   [84](Plaintiff’s closing) Submissions dated 30 May 2014 at [73].

   [85]T 280.6-12.

1. The plaintiff submits that concern about removal of the restriction setting a precedent is misconceived, because the concern is really about  the building of apartments, and the covenant does not restrict the use to single dwellings.   Further, there is already considerable departure from brick or stone evident in the neighbourhood.

Defendants

1. The defendants do not seek to counter the plaintiff’s case by competing expert evidence.  What they essentially contend is that on its own evidence the plaintiff has failed to prove its case.  

1. The defendants’ starting proposition in respect of both grounds is that the Court approaches modification or removal of a restriction with caution, where the modification or removal is opposed by a person benefited by it, because restrictions in covenants running with land create proprietary rights.  They submit that the burden on the plaintiff of proving the grounds relied on is not discharged for the following reasons.

Obsolescence

1. First, the defendants submit that the plaintiff has failed to show that the neighbourhood identified by Mr Barber is appropriate, because the plaintiff has not identified all the beneficiaries of the covenants.  The defendants submit that the plaintiff fails at the outset in relation to obsolescence, because it cannot show that the restriction is obsolete without a reference point against which its continuing usefulness can be assessed.[86]  The defendants do not proffer an alternative neighbourhood.[87]

   [86](Defendants’) Written (Closing) Submissions at [27].

   [87]T 302.1-5.

1. The defendants submit that, in any event, there are more brick buildings than non-brick within the neighbourhood identified by Mr Barber.

1. The defendants also submit that the plaintiff has failed to show a change in character of the neighbourhood, because of the absence of evidence as to the construction dates of buildings not in brick or stone.  They submit that the change in building materials since the covenants were created, which is not denied, is irrelevant.  As noted, the plaintiff did not rely on change in quality building materials as a distinct relevant circumstance justifying obsolescence.

1. Further, the defendants submit that the restriction to brick or stone is not obsolete because a purpose of the covenants was to require the use of a particular building material for appearance.  The defendants, beneficiaries of the restriction, consider that appearance desirable and the plaintiff’s experts accept that that is a preference that may be legitimately held.  Further, this preference is not just a matter of neighbourhood character, but directly relates to views of the subject land from the defendants’ land.

1. The defendants finally submit that the restriction on building material is not shown to be obsolete because it may confer an additional benefit on the defendants by ‘discouraging the construction of taller apartments that may compromise neighbourhood character or even a beneficiary’s sea views’.[88]  In this regard, they submit that the evidence of Mr McLaughlin supports the conclusion that brick or stone would require deeper foundations for an apartment building than lighter weight materials, at greater cost, and so the restriction acts as a discouragement to taller or more substantial construction.

   [88](Defendants’) Written (Closing) Submissions at [45].

No substantial injury

1. The defendants say that they would suffer substantial, meaning real, injury from the removal of the brick or stone restriction because of their strong preference for that building material.  The injury to them would be direct, because they view the subject land from their own properties. 

1. The defendants also submit that they would suffer injury by reason of the precedential effect of removal of the restriction.  In the defendants’ submission, removal of the restriction on the basis of a change in building materials could have a very great effect, because covenants containing this restriction are widespread in the neighbourhood and indeed throughout Victoria. 

1. The defendants submit that the absence of any firm proposal from the plaintiff as to development of the subject land, let alone plans, makes it very difficult for the plaintiff to prove the negative required by s 84(1)(c), because the impact of removal of the restriction cannot be properly understood. If the restriction is removed, they would lose the proprietary interest conferred by the covenants without any certainty as to the impact. Counsel for the defendants noted (somewhat presciently) that it cannot be assumed that the plaintiff would build in accordance with the plans previously submitted to VCAT, as counsel for the plaintiff asked the Court to infer, and a further possibility is that it may sell.[89]

   [89]T 286.22- T 287.4.

1. I find that the defendants have a genuine preference for the use of brick as a building material, in addition to their concerns about high density development of the subject land.  Their preference for brick is not dependent on the visual appearance of exposed brick, because they regard brick as an indicator of quality.  If the brick or stone restriction on the subject land is retained, that indicator to the defendants of quality will remain in the neighbourhood, and the defendants will continue to observe brick or stone on the subject land in the lines of sight from their properties.  

1. It is not enough that the defendants hold these views subjectively, however, for their views to be significant.  If their subjective views are unreasonable, then removal of the restriction despite their views will not constitute a real injury to them.  A desire for the covenant to remain when on a reasonable view it no longer has work to do would also not be a reason for retention.

1. The plaintiff says that that preference is unreasonable in this case for a number of reasons as follows:

·     the fact that quality building materials other than brick or stone are now available;

·     the eclectic mix of building materials in the neighbourhood, including in 8, 14 and 16 Davies St, which are directly opposite their properties;

·     the opinion of the defendants that the lightweight building material on the upper storey of the Grech/Matina home complies, and so is presumably satisfactory to them;

·     the unlikelihood that substandard materials will be used for an apartment block on the subject site; and

·     the corresponding likelihood that attractive materials would be used on such an advantageous site, close to the beach and the city.

1. In my view, these factors, whether singly or in conjunction with one another, do not show that the defendants’ preference for brick is unreasonable.  As to the first factor, as noted, both Mr Barber and Mr McLaughlin conceded that some people may still prefer brick, notwithstanding their own views that other quality building materials are now available.[134] Mr Barber in his report had expressed the opinion that community perceptions had changed towards building materials, and non-brick or stone buildings were no longer considered inferior.  In oral evidence, he qualified this opinion, stating that his expertise as to optimum or preferred material was that of a town planner i.e. based on neighbourhood character and the planning scheme, not on assessment of community perception.[135]  Neither expert expressed the view that a continued preference for brick was unreasonable due to the availability of other quality materials, and there is no other evidence to suggest that that is so.

   [134]T 110; T 149.

   [135]T 127.12- T 128. 11.

1. As to the second factor, I accept that the neighbourhood exhibits an eclectic use of building materials.  Brick is the most common material, but it is not the only one.  Nor is there a uniformity of appearance.  Buildings vary greatly in style, age and, to some degree, material.  I accept Mr Barber’s evidence on that point, in preference to the opinions expressed by the defendants.

1. It is also correct that from the defendants’ properties they view not only brick buildings, but also the houses directly opposite them, which are not brick, and are also non-adherent to the covenants burdening those properties.  Further, as noted earlier, the incidence of non-brick in the neighbourhood may be greater in the immediate proximity of the defendants’ properties than in the neighbourhood as a whole.  Brick is still the most common material, however, and against that background, it is not unreasonable to maintain a preference for it.  This is particularly so in respect of Davies St itself.  If the current houses on 8, 14 or 16 are demolished and a planning permit is required for new development, that new development will have to be in brick, unless the covenants burdening those properties are removed.  Thus the incidence of brick will increase in the immediate proximity of the defendants’ properties.

1. The Grech/Matina home is substantially brick.  I noted earlier that I did not consider absence of objection by the defendants to the use of lightweight material on the upper third storey showed that their expressed preference for brick was not genuine.  Nor does it show it to be unreasonable in my view.  Removal of a brick or stone restriction would permit a whole range of building materials, not just the use of lightweight material for upper walls, rendered to be of the same appearance as rendered brick lower walls.

1. Finally, I do not consider the plaintiff has proved either of the last two dot points.  First, the plaintiff’s first expressed intention at the second VCAT proceeding was an apartment building in masonry[136] (which includes concrete blocks)[137].  The plaintiff’s intention in June 2013 was to build an apartment building in concrete.[138] Whether or not these are substandard or attractive materials is a matter of subjective opinion, not objective opinion. The clear inference from the circumstances in which the proposed external material was changed to brick from masonry in the revised plans presented at the second VCAT proceeding is that this was to defeat refusal of the permit solely on the ground of the covenant, rather than any genuine desire to use brick.[139]  Mr Zheng said that he was not even aware of the change.[140]  I am not persuaded that this history shows any commitment to attractive or quality materials.

   [136]Exhibit PHZ-17 to the further affidavit of Pin Hua Zheng sworn 24 April 2014.

   [137]Mr Zheng T 71.19-20; Mr Barber T 119.28- T 120.20.          

   [138]Exhibit E.

   [139]Exhibit 1.

   [140]T 75.10-17; T 76.12-15.    

1. Further, and most tellingly, Mr Zheng said he had no current intentions in relation to the subject land, and was awaiting rezoning.  The first plaintiff subsequently sold the subject land.  Against that background, any conclusion as to the likelihood of the use of attractive materials in an entirely unknown possible development can only be speculation.

1. I conclude that the defendants’ opposition to the use of external building material other than brick or stone is genuine, and objectively reasonable. It follows that removal of the restriction would occasion a substantial, in the sense of real, injury to them. This is sufficient to defeat the plaintiff’s case on s 84(1)(c), but for completeness I will deal with the remaining submissions.

Benefit by way of limitation on height?

1. Counsel for the defendants submits that maintenance of the restriction would have the further benefit for these defendants, and possibly other beneficiaries, of minimising the height of any development on the subject land.  I accept that there is authority, as noted earlier,[141] for the proposition that a new benefit not in contemplation, or unlikely to have been in contemplation, at the time of the covenants may nevertheless provide a restriction with sufficient work to do that it is not obsolete, even if it can no longer effect its original purpose.

   [141]Greenwood at 65,198; Re Callanan and the Conveyancing Act [1970] 2 NSWLR 127 at 132 per Helsham J.

1. As I conclude that the restrictions are not obsolete in relation to their original purposes it is not necessary to reach a conclusion on this submission.  I think it appropriate to make the following comments, however.

1. As discussed earlier, the covenants do not impose any restriction on number of dwellings on the subject land, height or bulk.  They do not confer a proprietary right of objection (as opposed to rights under planning law) on any of those grounds.  Nevertheless, if it were shown that removal of the brick or stone restriction would make a taller building less likely that may be a further benefit conferred by the restriction and so further reason why the restriction is not obsolete.

1. I do not consider, however, that the evidence goes this far.  Counsel for the defendants sought to obtain from Mr Zheng a concession that some building materials are more expensive than others, in particular that pre-fabricated concrete is cheaper than brick or stone.  Mr Zheng, who indicated that he is also registered builder, said that that was incorrect, and precast concrete is more expensive in almost all cases than brick or stone. [142]

   [142]T 63.12- T 64.12.

1. Counsel for the defendants also sought to obtain from Mr McLaughlin a concession in cross examination that a tall building built out of brick would be more expensive than a tall building built out of a lighter weight material, because the foundations would need to be deeper.  Mr McLaughlin agreed that deeper foundations were ‘generally’ more expensive than more shallow foundations, but did not agree that that was the reason why lighter weight material is often used for the upper levels of buildings.  He said that the first step was the choice of material, and the foundations follow from that. [143] In re-examination he said that he had seen four storey buildings whose exterior walls were brick or stone, and even higher.[144]

   [143]T 151. 12-26.

   [144]T 156.5-6.

1. For the defendants to show that a requirement of brick makes a tall building less likely they needed to show two things not proved by this evidence.  First, that heavier material required deeper foundations.  This was not expressly put, but perhaps may be assumed.  The critical omission, however, is a link between cost of construction and likelihood of construction.  A prestige building may be more expensive to build, but still likely to be built because it is anticipated that it will ultimately generate a better return for the developer than a more cheaply built construction, that may be less appealing to the desired demographic of purchasers.

1. The defendants have also failed to show that brick is more expensive than pre-cast concrete.

1. For these reasons, I do not accept the contention by the defendants that removal of the brick or stone construction makes construction of a larger development, perhaps in concrete, less likely.  More evidence was required to establish that link.

Uncertainty

1. The defendants assert that the absence of any specific proposal advanced by the plaintiff for the Court to consider means that the plaintiff cannot show that no substantial injury would be caused to them if the restriction was removed.  This is because, to ascertain the injury that would flow from removal of a restriction, the Court compares the situation as it applies with the restriction, and what may or might occur if it is removed.  In the absence of a proposal, the defendants say that what might occur on removal is entirely unknown.

1. Counsel for the plaintiff accepts that this is a difficulty on the authorities, but submits that the difficulty is not here insurmountable.  Counsel for the plaintiff first asserts that the Court can have regard to the earlier plans submitted to VCAT by the plaintiff for guidance as to what might occur if the restriction is removed.  I reject that submission.  It is not appropriate, given that Mr Zheng expressly disavowed any particular intention in his evidence.  He said he had no current intention. 

1. The plaintiff next relies on the fact that the covenant is a materials covenant, not a single dwelling covenant.  The thrust of this submission is that removal of the restriction will remove only the requirement that the external walls of whatever is built on the subject land be brick or stone.  Removal will have no effect on the bulk, height, density, or otherwise the appearance of the development.  If a permit is required, those matters will be the subject of permit consideration.

1. I have accepted the plaintiff’s submission that this is the proper way to view the covenant.  It does not follow, however, in my view that the absence of any proposal is therefore sufficiently addressed.  The absence of any proposal at all means that a range of possible outcomes could follow on removal of the restriction, including a single dwelling in a non-brick material, which would not require a permit.  If that were to occur, the defendants would lose their current right to require a certain building material, without any opportunity to be heard on what material is in fact used.   There was debate in closing submissions as to whether or not the possibility of sale was a detriment to the defendants in the absence of plans.  The plaintiff submitted, in my view correctly, that sale could occur even if the plaintiff’s application was considered in the light of a definite proposal.  However, what has occurred here is that the first plaintiff has sold the subject land prior to judgment.  That gave an opportunity to the purchaser to put forward a proposal, and so attempt to cure the current deficiency in the plaintiff’s case.  The second plaintiff has not done so. It has agreed to be joined but has not sought to re-open the hearing, and its intentions in respect of the subject land have not been disclosed to the Court.  The uncertainty is not cured.

1. This uncertainty itself is in my view an injury, and a real, not fanciful one.  The defendants would be placed in a situation of complete uncertainty as to building material and so, possibly, external appearance compared with the current certainty of brick.

Creation of a precedent

1. The defendants assert that removal of the restriction would also occasion substantial injury to them because it would set a precedent, that would not be confined just to this covenant. It was put that this precedential effect could be wide, indeed state wide. I consider this aspect of the submission too broad. The issue is injury to the persons entitled to the benefit of the restriction, not change in the character of building elsewhere in the state. The test in s 84(1)(c) confines consideration of precedential effect at most to the neighbourhood, not a broader area.

1. The submission as put may respond to what appeared to be the plaintiff’s case prior to closing- that the change in building materials justifies removal of the covenant.  If that were how the plaintiff put its case, and the restriction were removed on that basis, it may perhaps have had some precedential effect in other geographical areas. In closing, however, the plaintiff explicitly confined its case to change in the neighbourhood, not change in building materials.  For this reason as well, the precedential effect of removal would be confined to this neighbourhood.

1. I do accept, however, that within this neighbourhood, removal of the restriction to brick or stone could have a broader precedential effect.  Mr Barber conceded as much.[145]  It is plain that there are many properties in the neighbourhood currently burdened with such a covenant.  The reasons given in the second VCAT proceeding suggest that higher density development in the neighbourhood is likely in the near future.  Developers other than the plaintiff may well wish to take advantage of removal of this covenant in relation to other properties currently equally burdened.

   [145]T 118.5-11.

1. If that were to occur in relation to the properties in Davies St opposite the defendants’ properties, the defendants would be potentially directly affected not just by removal of the restriction in relation to the subject land, but also in relation to removal of the restriction on the properties facing theirs.  They are not beneficiaries of the covenants on the Davies St properties, which were created outside their own parent title, and so could be affected by removal of the covenant, against their preference for brick, without any right to be heard on the issue.

1. I find that removal of the restriction would also cause injury to the defendants by reason of its possible precedential affect in the neighbourhood.

Conclusion

Obsolescence

1. It follows from the preceding discussion that I do not consider the plaintiff has shown that the restriction to brick or stone is obsolete.   The plaintiff’s case is that the purpose of the restriction was never achieved, or can no longer be achieved.  That case is not made out in respect of the subject covenants- the buildings on the subject land are both brick.  Nor is it made out if the submission was intended to relate to like covenants in the neighbourhood.  The like covenants on the defendants’ land arising from the same parent title are complied with, or substantially complied with.  Mr Nixon’s search of titles in the area proximate to the subject land certainly shows some non-adherence to a like covenant, but it also shows adherence.  And above all, brick is the most common building material in the neighbourhood, despite the variety of other building materials used, and the variety of architectural styles and construction periods.  Certainly the neighbourhood is not uniform in appearance, as some heritage neighbourhoods may be, but the restriction is directed to construction in brick or stone and it is not shown that this purpose has failed or can no longer be achieved. 

1. The restriction has a continuing role to play in giving effect to both of its original purposes- quality construction, and the appearance or presentation of brick.   The restriction is no longer necessary to achieve the original purpose of good quality construction, because I accept that there are now other good quality building materials.  It still plays, however, a role in avoiding poor quality construction because brick and stone remain good quality building materials.   Further, the restriction still has a role to play in maintaining a neighbourhood that is principally constructed in brick and with that presentation, and may be essential for that purpose, given the now common use of other building materials and development pressures.

1. It also has work to do directly in relation to these defendants, in respect of the material used in buildings in the sight line from their land.  The retention of the restriction in these covenants will retain the use of brick or stone on the subject land, and will not set a precedent for removal of that restriction in like covenants in the neighbourhood, including those covenants that burden the land directly opposite the defendants. 

1. The plaintiff has also entirely failed to prove the necessary change over time that

   
   

   s 84(1)(a) requires. For all these reasons, the plaintiff’s application under s 84(1)(a) fails.

No substantial injury

1. The plaintiff’s case under s 84(1)(c) had more prospect of success, given that it is clear that the defendants’ concerns include amenity interests not protected by the covenants. The plaintiff’s counsel has correctly identified that the case on no substantial injury really turns on assessment of the defendants’ expressed preference for brick. The other injuries that I consider would be occasioned if the restriction was removed, of uncertainty and precedential effect, are really consequential on injury that would be occasioned by reason of a reasonable preference for brick.

1. However, if I had found that the defendants’ expressed preference for brick was either not genuine or not reasonable, the failure of the plaintiff to properly identify all beneficiaries of the covenants may have assumed more significance.

1. The plaintiff submits that the preference for brick is not reasonable for reasons including the use of other building materials in the neighbourhood, and what was said to be toleration by the defendants of breaches of like covenants.  That latter was not shown.  The first limb also fails given that brick is the most common building material in the neighbourhood, and by a significant margin.  I have discussed the other matters put on reasonableness in the body of these reasons.

1. For these reasons, the plaintiff also fails under s 84(1)(c). The right protected by the covenant is a right to require construction in brick or stone. The defendants consider that right to be of value- they have a genuine, and reasonable, preference for brick or stone construction to other forms of construction. Section 84(1)(c) only permits removal of that right if it would not occasion substantial injury to the defendants. Substantial means real and not fanciful. In my view, it would be substantial injury to the defendants to remove their current right to insist on a certain quality building material on a property immediately adjacent (in the case of the third and fourth defendants) and at one remove and in a direct line of sight (in the case of the first and second defendants) without compensation, and without any certainty as to what building material would be used instead. Removal of the restriction would also cause injury, that is not fanciful, by its likely precedential effect in the immediate proximity of the defendants’ land, and in the neighbourhood generally.

Discretion

1. There is no discretion to discharge or modify a covenant unless one or other of the grounds under s 84(1) are first proved. The discretion is only to refuse to modify or discharge, if a ground to do so is made out. Accordingly, the question of discretion does not here arise.

1. Had I been satisfied that the defendants’ only genuine or reasonable concern was as to loss of amenity interests not protected by the restriction, then the plaintiff may have been successful in establishing the ground for removal under s 84(1)(c), at least in relation to these beneficiaries of the covenants. Had that been the case, however, I would still have had real concern at the entire absence of any proposal which would enable consideration of the effect of removal of the restriction. These concerns could not have been fully allayed by the regulatory control of a planning permit, because such a permit would not automatically be required. The precedential effect would also have been a concern. A real question would have arisen as to whether the application should nevertheless be refused in the discretion of the Court because of the uncertainty as to outcome, and its precedential effect.

Orders

1. I will dismiss the application and give judgment for the defendants.  I will ask the parties to draw orders to give effect to these reasons, and will hear them further if those orders cannot be agreed.

ANNEXURE: IDENTIFICATION OF BENEFITED LAND

1.This annexure sets out my detailed reasons for concluding that in all probability all benefited land was identified for the purposes of notification of the application, and orders made for direct notification to all registered proprietors and mortgagees of that benefited land.

2.Reliance on the plan of subdivision rather than the parent title to identify benefited land could potentially have caused a failure to identify benefited land because the geographical areas included in the parent title and the plan of subdivision are not the same.  They are not the same even if consideration of the plan of subdivision is limited to sheet 4. 

3.There is land in the plan of subdivision which is not in the parent title.  The northern boundary of both parent title and sheet 4 of the plan of subdivision is Railway St South.   The western and eastern boundaries, Bent and Davies Sts respectively, are also the same.  However, the southern boundary of the parent title is Queen St, and the southern boundary of sheet 4 of LP 7931 is the Esplanade.  Accordingly, the land along the Esplanade which is in the plan of subdivision but not in the parent title cannot benefit from these covenants, although it may be benefited or burdened land in respect of other similar covenants.   There is also land in the parent title within both the blocks north and south of Blyth St that is not included in LP 7931. 

4.The land in the parent title that is not in LP 7931 is contained in other subdivisions, as identified on the plan attached to the parent title.  They may be the lots that were intended to be encompassed as Lots 72, 79 and 130 in the notification order, wrongly described by the plaintiff in the table, and so in the order, as being lots in LP 7931.  It is plain from comparison of those lot numbers in LP 7931 and the parent title that the lots with those numbers in LP 7931 are not in the parent title.  For example, the land described as Lot 79 LP 7931 in the table is said to be 107 Queen St, Altona, which is said in Mr Nixon’s further affidavit to abut the rear of the subject land i.e. to the west on Queen St.  That location makes it highly relevant to this application.  Scrutiny of LP 7931 shows, however, that Lot 79 of that plan is in fact far to the north and west of the subject land, being north of the railway line and facing onto Romani St (on sheet 2 of LP 7931).  The lot with number 79 that may be in the parent title (poor copying makes it difficult to tell) is, as is identified on the plan in that title, part of LP 2102. 

5.I do not think that this error in description of the relevant lot number and subdivision is likely to have in fact, however, caused error in the identification of the benefited land.  This is because comparison of the land details in the table (leaving aside the incorrect subdivision) with the land transferred out of the parent title after the first covenant suggests that all the benefited land was identified in the table.

6.Mr Nixon correctly identifies that 107 Queen St originates from LP 2102 in his further affidavit.[146]  It is, as the table states, nevertheless land that benefits from the first of the subject covenants, as it was transferred out of the parent title Vol 4316 Folio 125 in August 1924 i.e. after the first of the covenants.  This is correctly identified in the table, and clearly shown in the title searches exhibited to Mr Nixon’s further affidavit,[147] in which he also correctly identifies that it is burdened by a similar covenant to those burdening the subject land.  The lot has been further subdivided, and now contains three units. Their titles are similarly burdened by a materials covenant, and benefited by the first of the subject covenants.  It would also follow, although neither Mr Nixon nor counsel for the plaintiff make this submission, that the covenant on the units at 107 Queen St would benefit all the defendants as their respective land was transferred out of the parent title later than the land known as 107 Queen St.

[146]Further affidavit of Simon Nixon sworn 5 May 2014 at [10].

[147]SN-10 to the further affidavit of Simon Nixon sworn 5 May 2014.

7.It seems that the table, and so the order which adopted it, made similar errors of identification of the relevant plan of subdivision made in relation to the land which has lot numbers 72 and 130 on the plan attached to the parent title, but are not in LP 7931. 

8.According to the table, Lot 72 is known as 40 Blyth St and was transferred out of the parent title, becoming Vol 4922 Folio 360 after the first covenant, but before the second. If that is correct, it has the benefit of the first covenant (over 99 Queen St).  Comparison to the parent title suggests that this may be correct, although in the absence of the title search I cannot be certain.  Mr Nixon has not exhibited that search to his further affidavit.  If it is correct, then it may be that 40 Blyth St is also burdened by a similar materials covenant, that would also benefit all the defendants.

9.The table states that Lot 130 LP 7931 was originally known as 50 Railway St, and has now been subdivided into three units.  There is no Lot 130 in LP 7931.  There are portions of Railway St South in the parent title, and the Volume and Folio number given in the table corresponds to the last transfer out of the parent title.  If it is correct that the land now known as 1-3/50 Railway St is thus benefited land, it is possible that it is also burdened by a similar materials covenant.  I cannot say in the absence of the title searches.  Mr Nixon has not exhibited these title searches to his further affidavit. 

10.There are further indications that the plaintiff did correctly identify the remaining benefited land, notwithstanding reference to the subdivision rather than the parent title.  As noted, Lots 29 (9 Davies St) and 30 (11 Davies St) are conceded to be benefited land.  The table did not identify Lots 31, 32, 33 in the stretch of Davies St running further north to Railway St South as benefited.  This appears correct.  Mr Nixon, the solicitor for the plaintiff deposes in his further affidavit (upon which he was not cross examined and to which there is no contradictory evidence) that Lot 31 (13 Davies St), 32 (15 Davies St) and 33 (since further subdivided) are all burdened by a similar covenant, but as they were transferred out of the parent title prior to the first of the subject covenants, they not a beneficiary of them.[148] 

[148]Further affidavit of Simon Nixon sworn 5 May 2014 at [5(d)].

11.Lot 34 was identified on the table as a benefited lot.  That is probably  correct.  The table identifies the certificate of title corresponding to Lot 34 as Vol 5530 Folio 819.  The parent title shows that Lot 34 LP 7931 was transferred out of the parent title after the subject transfers, and became Certificate of Title Vol 5530 Folio 819.   That is the title reference recorded in the table, although the actual title is not in evidence. Mr Nixon has searched the certificates of title of land on a north/south and east/west axis around the subject site for his further affidavit, but did not go further north than Blyth St.  Lot 34 LP 7931 is in the block north of Blyth St.  According to the table, it now corresponds to 19 Davies St, 21 Davies St, and 45 Blyth St. 

12. Lot 36 was also identified on the table as a benefited lot.  According to the parent title, it was transferred out after the subject covenants and became Certificate of Title Vol 4990 Folio 898.  That is how it is shown on the table.   According to the table, it is known as 29 Davies St.  It is also in the block north of Blyth St, and so the certificate of title is not in evidence in the trial. 

SCHEDULE OF PARTIES

S CI 2012 05752

GARDENCITY ALTONA PTY LTD (ACN 113 976 935)	Firstnamed Plaintiff
SONNY AUSTRALIA INVESTMENTS PTY LTD (ACN 603 071 101)	Secondnamed Plaintiff
- and -
DENNIS GRECH	Firstnamed Defendant
DOMINICA MATINA	Secondnamed Defendant
PETER FAGIOLI	Thirdnamed Defendant
SILVANA FAGIOLI	Fourthnamed Defendant

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