Jeshing Property Management Pty Ltd v Yang

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST

S ECI 2020 00998

IN THE MATTER of an application under section 84 of the Property Law Act 1958 (Vic)

- and -

IN THE MATTER of an application for the modification of two restrictions arising in Instruments of Transfer No. 674226 and 703483 affecting the land at 16 St Georges Road, Toorak more specifically described in Certificate of Title Volume 9700 Folio 219

BETWEEN:

JESHING PROPERTY MANAGEMENT PTY LTD (ACN 617 076 338)	First Plaintiff
XIAOYAN BAO	Second Plaintiff
v
QI YANG & ORS (according to the attached Schedule)	Defendants

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JUDGE:	Matthews AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	15–18 February 2022, 23–24 February 2022; written closing submissions 3 March 2022 (defendants) and 10 March 2022 (plaintiffs)
DATE OF JUDGMENT:	8 June 2022
CASE MAY BE CITED AS:	Jeshing Property Management Pty Ltd & Anor v Yang & Ors
MEDIUM NEUTRAL CITATION:	[2022] VSC 306

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REAL PROPERTY – Restrictive covenants – Application for a declaration that land not affected by any purported restriction in the covenants – Property Law Act 1958 (Vic), s 84(2) – Westfield Management Ltd v Perpetual Trustee Co Ltd (2007) 233 CLR 528 – Deguisa v Lynn (2020) 268 CLR 638 - Phoenix Commercial Enterprises v Canada Bay Council [2010] NSWCA 64.

REAL PROPERTY – Restrictive covenants – Application for modification of covenants – Property Law Act 1958 (Vic), s 84(1)(a) and (c) - Re Stani (Unreported, Full Court of the Supreme Court of Victoria, Young CJ, Barber and Nelson JJ, 7 December 1976) - Vrakas & Anor v Registrar of Titles & Ors [2008] VSC 281 - Prowse v Johnstone [2012] VSC 4 – Re Cook [1964] VR 808.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr S R Horgan QC with Ms E Delany	JT Lawyers
For the First and Second Defendants	Mr T J North QC with Ms E Peppler	Sutton Laurence King Lawyers
For the Third and Fourth Defendants	Mr J Gobbo QC with Mr A A Walker	Best Hooper Lawyers
For the Fifth to Seventh and Tenth to Fifteenth Defendants	Mr I G Munt	Rigby Cooke Lawyers

TABLE OF CONTENTS

Introduction....................................................................................................... 1

Material............................................................................................................... 2

Background........................................................................................................ 5

Description and history of the Land......................................................... 5
The Proceeding.......................................................................................... 12
Plaintiffs’ proposal........................................................................... 12
The Parties......................................................................................... 16

Issues................................................................................................................. 18

Preliminary matter: the Plaintiffs’ interest in Land or proceeding.... 20

Application for a declaration pursuant to s 84(2) of the PLA................ 22

Content of the Declaration Application................................................. 22
Plaintiffs’ submissions.............................................................................. 23
Defendants’ Submissions......................................................................... 28
First and Second Defendants’ Submissions................................. 31
Third and Fourth Defendants’ Submissions................................ 32
Fifth to Seventh and Ninth to Fifteenth Defendants................... 34

Consideration............................................................................................. 35
Applicable principles and admissible material........................... 35
The use of extrinsic material............................................. 36
Contra proferentem and other presumptions................ 40
Consideration of prior cases.............................................. 42

Construction of the Covenants....................................................... 45

The Modification Applications................................................................... 49

Applicable Principles................................................................................ 50
Provisions of s 84(1)(a) of the PLA................................................ 50
Section 84(1)(a): Changes in the character of the property or the neighbourhood..................................................................... 50
Section 84(1)(a): Impeding reasonable use................................... 53
Section 84(1)(a): Securing practical benefits, and s 84(1)(c) causing substantial injury................................................... 57
Discretionary factors........................................................................ 59

My approach to the Modification Applications.................................... 62
Evidence...................................................................................................... 63
Consideration of witnesses who attended to give oral evidence................................................................................................. 63
Plaintiffs’ witnesses............................................................ 63
Defendants’ witnesses........................................................ 65

Purpose and original benefits of the Covenants.......................... 65
Subsequent developments within the Beaulieu Estate............... 68
Present character of the Land and neighbourhood..................... 73
Character and changes in the wider neighbourhood................. 75
Potential impacts of a single dwelling on the Land.................... 77

Potential impacts of the Plaintiffs’ proposal.......................................... 81
Town Planning Expert Opinion..................................................... 81
Valuation........................................................................................... 85
Traffic impacts.................................................................................. 89
Other evidence.................................................................................. 90

Submissions................................................................................................ 92
Plaintiffs’ submissions..................................................................... 92
Defendants’ submissions................................................................ 95
First and Second Defendants’ submissions.................................. 99
Third and Fourth Defendants...................................................... 101
Fifth to Seventh and Tenth to Fifteenth Defendants’ submissions............................................................................................... 102

Consideration........................................................................................... 103
Purpose and benefits of the covenant......................................... 103
The extent to which the Defendants continue to enjoy the benefits of the Covenants................................................................. 104
Whether the Plaintiffs have shown that the Defendants will not suffer substantial injury.................................................... 108
General observations........................................................ 108
First and Second Defendants.......................................... 115
Third and Fourth Defendants......................................... 117
Fifth to Seventh and Tenth to Fifteenth Defendants.... 118

Conclusion as to the s 84(1)(c) Application......................................... 119

The s 84(1)(a) Application........................................................................... 121

Whether the Covenants impede the reasonable user of the Land............................................................................................... 121
Whether the Covenants do not confer practical benefits......... 125
Conclusion as to the s 84(1)(a) Application................................ 125

Conclusion..................................................................................................... 126

HER HONOUR:

Introduction

This proceeding concerns the land at 16 St Georges Road, Toorak in the State of Victoria, being the land more particularly described in Certificate of Title Volume 9700 Folio 219 as Lot 1 on Title Plan 888511F (‘Land’).

In brief, the Plaintiffs intend to subdivide the Land into five vacant residential lots, and to sell those lots. There are two restrictive covenants recorded on the title to the Land. The Plaintiffs seek declarations pursuant to s 84(2) Property Law Act 1958 (Vic) (‘PLA’) that the Land is not burdened by those covenants; and in the alternative, orders pursuant to s 84(1)(a) or (c) of the PLA that those covenants be modified to permit construction of five dwellings in accordance with the subdivision proposal and with a proposed development envelope annexed to the Originating Motion.

For the reasons which follow, I am not satisfied that:

(a) the declarations sought pursuant to s 84(2) of the PLA ought to be made;

(b) the covenants impede the reasonable user of the Land, and for that reason would not make an order for the modification of the covenants pursuant to s 84(1)(a);

(c) the covenants do not secure a practical benefit to other persons and would not make an order for the modification of the covenants pursuant to s 84(1)(a); and

(d) further and in the alternative, the proposed modification of the covenants will not substantially injure the persons entitled to the benefit of the restriction, and would not make an order for the modification of the covenants pursuant to s 84(1)(c).

Material

At the trial of the Originating Motion the Plaintiffs tendered the following evidence:

(a) Affidavits of Andrew Jia, the Plaintiffs’ solicitor, affirmed 25 February 2020 (‘First Jia Affidavit’); 18 March 2020 (‘Second Jia Affidavit’); 11 May 2020 (‘Third Jia Affidavit’, part of exhibit only);[1] 29 July 2020 (‘Fourth Jia Affidavit’); 16 December 2020 (‘Fifth Jia Affidavit’); and 12 March 2021 (‘Sixth Jia Affidavit’), and exhibits to each.
[1]The Plaintiffs relied only on part of an exhibit to this affidavit, being one page located at CB240, such that this was the only part of the Third Jia Affidavit which was tendered at trial.

(b) Affidavit of Grace Baliviera sworn 19 November 2020 (‘Baliviera Affidavit’) and exhibits thereto.

(c) Expert Reports of Robert Milner, town planning consultant, being the exhibits to the affidavits of Robert Milner affirmed 17 March 2020 (‘First Milner Report’); 15 December 2020 (‘Second Milner Report’); and 29 July 2021 (‘Third Milner Report’).

(d) Expert Reports of Brian Dudakov, certified practicing valuer, being the exhibits to the affidavits of Brian Dudakov sworn 27 November 2020 (‘First Dudakov Report’) and 21 July 2021 (‘Second Dudakov Report’).

(e) Expert Report of Oliver Garratt, drone pilot photographer, being the exhibit to the affidavit of Oliver Garratt affirmed 21 July 2021 (‘Garratt Report’).

(f) Expert Report of Michael Rogers, arborist and arboricultural consultant, being the exhibit to the affidavit of Michael Rogers sworn 27 July 2021 (‘Rogers Report’).

(g) Affidavit of Xiao Yan Bao, the Second Plaintiff, affirmed 30 September 2021 (‘Bao Affidavit’) and exhibits thereto.

The First and Second Defendants tendered the following evidence:

(a) Expert Report of David Barnes, town planning consultant, being the exhibit to the affidavit of David Barnes affirmed 11 June 2021 (‘Barnes Report’).

(b) Expert Report of Charmaine Chalmers Dunstan, traffic engineering and traffic planning consultant, being the exhibit to the affidavit of Charmaine Dunstan affirmed 11 June 2021 (‘Dunstan Report’).

(c) Expert Report of Bryce Raworth, conservation consultant and architectural historian, being the exhibit to the affidavit of Bryce Raworth affirmed 11 June 2021 (‘Raworth Report’).

(d) Expert Report of Michael Schuh, certified practicing valuer, being the exhibit to the affidavit of Michael Schuh sworn 11 June 2021 (‘Schuh Report’).

(e) Expert Report of Johnny Wilkinson, 3D artist, being the exhibit to the affidavit of Johnny Wilkinson sworn 11 June 2021 (‘Wilkinson Report’).

The Third and Fourth Defendants tendered:

(a) Affidavits of David Neil Prior, the Third Defendant, affirmed 15 June 2021 (‘First Prior Affidavit’) and 29 September 2021 (‘Second Prior Affidavit’), and exhibits thereto.

(b) Affidavit of Tania Louise Cincotta, solicitor for the Third and Fourth Defendants, affirmed 15 June 2021 (‘Cincotta Affidavit’) and exhibits thereto.

(c) Expert Report of Marco Negri, town planning consultant, being the exhibit to the affidavit of Marco Negri affirmed 15 June 2021 (‘Negri Report’).

(d) Expert Report of Kim Stapleton, architectural visualiser, being the exhibit to the affidavit of Kim Stapleton affirmed 15 June 2021 (‘Stapleton Report’); and the further affidavit of Kim Stapleton affirmed 4 November 2021 (‘Second Stapleton Report’).

(e) Expert Report of Geoffrey Brown, certified practicing valuer, being the exhibit to the affidavit of Geoffrey Brown affirmed 25 June 2021 (‘Brown Affidavit’).

Each of the deponents listed in paragraphs 4 to 6 above, save for Ms Baliviera, Mr Garratt, Ms Dunstan, Mr Wilkinson and Ms Cincotta were cross-examined at trial.

The Fifth to Seventh and Tenth to Fifteenth Defendants tendered the following affidavits, the deponents of which were not cross-examined:

(a) Affidavit of Darryl Lindsay Washington affirmed 10 June 2021 (‘Washington Affidavit’).

(b) Affidavit of Mary-Ann Mitrakas sworn 11 June 2021 (‘Mitrakas Affidavit’).

(c) Affidavit of Peter Philip White affirmed 11 June 2021 (‘White Affidavit’).

(d) Affidavit of Georgina Caroline Peele affirmed 11 June 2021 (‘Peele Affidavit’).

In the course of the trial agreed objections to the above evidence were recorded.

Further, I proposed to take an unaccompanied view of the Land and surrounding neighbourhood from the publicly accessible street level, and all parties assented to this. I conducted the view on 21 February 2022 during a break in the trial.

Finally, each party has provided written outlines of opening submissions. The Plaintiffs have provided a further written outline of opening submissions in reply. At the close of the trial, following oral submissions from each party,[2] the parties were permitted to provide supplementary written closing submissions. In accordance with orders made at the conclusion of the trial, the Defendants filed and served their supplementary written closing submissions on 3 March 2022 and the Plaintiffs on 10 March 2022.
[2]Counsel for the First and Second Defendants also provided a written closing submission at the time of making oral closing submissions.

All of the evidence and submissions enumerated above have been taken into account.

Background
Description and history of the Land

Most of the evidence described below regarding the description and history of the Land was uncontentious.

The Land is contained in Certificate of Title Volume 9700 Folio 219, as Lot 1 in Title Plan 888511F.[3] It is a regularly shaped parcel of land of 4,256m² in area, abutting St Catherines Lane on the northern and eastern boundaries, St Georges Road at the western boundary and the land at 14 St Georges Road and 5&6 Teringa Place at the southern boundary.
[3]First Jia Affidavit [3] (Court Book reference p 48 (‘CB’)); Exhibits AJ-1 (CB52) and AJ-2 (CB54).

The Land was created upon the transfer of the whole of the land in Certificate of Title Volume 3693 Folio 518 (‘Parent Title’), which in turn was created upon the transfer of the whole of the land in Certificate of Title Volume 3678 Folio 427 (‘Grandparent Title’).[4] The Grandparent Title was created by the consolidation of part of Certificate of Title Volume 3557 Folio 376 (‘First Great Grandparent Title’), containing what is called ‘Parcel B’, and the whole of Certificate of Title Volume 3670 Folio 972 (‘Second Great Grandparent Title’) containing what is called ‘Parcel C’.[5]
[4]First Jia Affidavit [4]–[5] (CB48); Exhibits AJ-3 (CB57) and AJ-4 (CB63).
[5]First Jia Affidavit [6] (CB48).

Parcel B is a regularly shaped plot of land of approximately 3,902m². Parcel C is a 3.05m wide strip of land along the Land’s northern boundary, bordering St Catherine’s Lane, being an area of approximately 325.37m².[6] It is a peculiar product of the pattern of transfers and consolidations described in this section.

Excerpt of Title Plan 888511F[7]

[6]First Milner Report [6] (CB148).

[7]First Jia Affidavit, Exhibit AJ-1 (CB52).

The First and Second Great Grandparent Titles were each created upon their transfers from Certificate of Title Volume 1997 Folio 399334 (‘Great Great Grandparent Title’). The Great Great Grandparent Title described a very large parcel of land owned by Mr Mars Buckley, of Buckley & Nunn department store, on which he and his wife Mrs Marion Buckley lived in a stately home known as ‘Beaulieu’, which they acquired in 1863 (‘Beaulieu Estate’).[8] For convenience I will use the term ‘Beaulieu Estate’ to describe all of the land within the Great Great Grandparent Title, and the lots transferred out of it from time to time.
[8]Raworth Report [21] (CB1479). Beaulieu remains standing on what is now the site of St Catherine’s School, the property of the 15^th Defendant, and is called ‘Sherren House’.

At the time of the Buckleys’ acquisition of the Beaulieu Estate, and until 1874, the Governor of Victoria resided at Toorak House immediately across St Georges Road, and the neighbourhood was characterised by substantial mansion estates.[9]
[9]See Raworth Report, annexure 10 (CB1606).

Following the passing of Mr Buckley in 1905, in or around 1912 Mrs Buckley entered into an arrangement with Mr Lauchlan Kenneth Scobie MacKinnon – described in Mr Raworth’s report as a ‘notable solicitor, company director and horse racing enthusiast’ – for the subdivision and sale of lots in the Beaulieu Estate to various purchasers, and for Mr MacKinnon to retain a substantial parcel containing the house Beaulieu.[10] The lots were sold between 1912 to 1915.[11]

Excerpt of Certificate of Title Volume 1997 Folio 399334 ‘Great Great Grandparent Title’[12]

[10]Raworth Report [27]–[28] (CB1481).

[11]Raworth Report [28] (CB1481).

[12]First Jia Affidavit, Exhibit AJ-7 (CB76).

The First and Second Great Grandparent Titles were created, respectively, by the following instruments of transfer, each of which contained a covenant:

(a) Instrument of Transfer 674226 registered 3 February 1912; and

(b) Instrument of Transfer 703483 registered 19 December 1912.[13]

[13]First Jia Affidavit [10] (CB49).

Instrument of Transfer 674226 contains a covenant in the following terms (‘Major Covenant’) in respect of Parcel B:

I Elizabeth Marion Buckley of “Beaulieu” Toorak widow 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 …. DO HEREBY at the request and by the direction of the [solicitor] TRANSFER to the said Robert McDonald ALL my estate and interest in ALL THAT piece of land being … particularly described in Certificate of Title … Volume 1997 Folio 399334 and more particularly delineated and colored red on the plan drawn in the margin hereof TOGETHER with a right of carriage way over the land … AND the said Robert McDonald for himself his executors administrators and transferees hereby covenants with the said Elizabeth Marion Buckley and her transferees the registered proprietor or proprietors for the time being of the land in Certificate of Title Volume 1997 Folio 399334 that no shops laundries factories works schools almshouses or churches shall be or be allowed to be erected on the said land nor shall any halls or buildings of any kind to be used wholly or partly for any religious educational or charitable purposes or for public entertainment of any kind whatsoever or any hoarding for advertisement be erected or be allowed to be erected on the said land and that no quarrying operations shall at any time hereafter be carried on in or upon the said land and no marl stone earth clay gravel or sand shall at any time hereafter be dug carried away or removed from the said land and that not more than one dwelling house shall be erected on the said land and no dwelling house except one constructed at a cost of not less than One thousand five hundred pounds (exclusive of all architects fees and the cost of erecting any out-buildings and fences) shall be erected or allowed to be erected on the said land.[14]

[14]First Jia Affidavit, Exhibit AJ-8 (CB86). The plan drawn in the margin illustrates a portion of the Beaulieu Estate, with Parcel B coloured in red.

Instrument of Transfer 703483 contains a covenant in similar but more limited terms (‘Minor Covenant’), in respect of Parcel C. It relevantly provides:

I Elizabeth Marion Buckley of “Beaulieu” Toorak widow 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 …. DO HEREBY at the request and by the direction of the [solicitor] TRANSFER to the said Robert McDonald All my estate and interest in ALL THAT piece of land being … particularly described in Certificate of Title … Volume 1997 Folio 399334 and more particularly delineated and colored red on the plan drawn in the margin hereof TOGETHER with a right of carriage way over the land … AND the said Robert McDonald for himself his heirs executors administrators and transferees hereby covenants with the said Elizabeth Marion Buckley and her heirs executors, administrators and transferees the registered proprietor or proprietors for the time being of the balance of the land in the said Certificate of Title Volume 1997 Folio 399334 as follows: _
(a) No shops laundries factories works schools almhouses or … churches shall be or be allowed to be erected on the said land nor shall any halls or buildings of any kind to be used wholly or partly for any religious educational or charitable purposes or for public entertainment of any kind whatsoever or any hoarding for advertisement be erected or be allowed to be erected on the said land.
(b) No quarrying operations shall at any time hereafter be carried on in or upon the said land and no marl stone earth clay gravel or sand shall at any time hereafter be dug carried away or removed from the said land.[15]

[15]First Jia Affidavit, Exhibit AJ-9 (CB92). The plan drawn in the margin illustrates a portion of the Beaulieu Estate, with Parcel C coloured in red.

The Major Covenant and the Minor Covenant (together, ‘Covenants’) each seek to restrict ‘quarrying operations’ and the nature or use of buildings and structures built on the Land (‘Quarrying Restrictions’). The Major Covenant contains additional provision seeking to restrict the number and value of dwellings built on the Land (‘Dwelling Restrictions’).

As noted, the First and Second Great Grandparent Titles were consolidated into the Grandparent Title, which then passed into the present title to the Land without disturbance of the Covenants.

The benefit of the Covenants was conferred on ‘the said Elizabeth Marion Buckley and her transferees the registered proprietor or proprietors for the time being of the land in Certificate of Title Volume 1997 Folio 399334’, being the Great Great Grandparent Title describing the Beaulieu Estate. It was not contested that the benefit of the Covenant runs with that land and the parts subdivided out of it, subject to the proper view on whether the Covenant burdens the Land at 16 St Georges Road in a continuous way. Given that the transfers of the Parcel B and Parcel C land occurred at different times, there is a slightly different network of beneficiaries, however it was not suggested that anything turned on this.

The transfers of Parcel B and Parcel C formed part of a wholesale subdivision in 1912 of the Beaulieu Estate by Mrs Buckley at the direction of Mr MacKinnon. Almost all of the parcels of land transferred out of the Beaulieu Estate were made subject to restrictive covenants in a similar form to the Major Covenant. The outcome is a network of covenants within the boundaries of the Beaulieu Estate, each sharing a similar burden and similar benefits in respect of the surrounding land, though not every parcel is burdened by a covenant or takes the benefit of each other covenant. Most, but not all, of the land in the Beaulieu Estate takes the benefit of either or both of the Covenants.[16]
[16]See First Milner Report [20] Figures 5 and 6 (CB153).

The figure below indicates the transfers out of the Beaulieu Estate, where each pink lot is a lot transferred out of the Estate subject to a restrictive covenant, and where the green space is the lot retained in the title and not transferred. The Land is marked by the relevant instrument of transfer numbers, being 674226 in respect of the larger Parcel B and a barely legible 703483 in respect of Parcel C across the top of Parcel B.

The parcel of land in green immediately to the north of the Land was later transferred out of the larger part of the land retained by Mr MacKinnon by instrument of transfer 780744, and is now 18 St Georges Rd and 1 St Catherines Lane. A restrictive covenant in similar terms to the Major Covenant was included in the transfer of that land, for the benefit of the land now forming the site of St Catherine’s School, 15 and 15A Heyington Place, and the northern and western part of Crestmont Court.[17]
[17]Fifth Jia Affidavit, Exhibit AJ-17 (CB1177); Barnes Report [24] (CB1381).

There was further subdivision of the Beaulieu Estate subsequent to the initial transfers out of the Great Great Grandparent Title. The characterisation of this subdivision was in dispute, and I will therefore address it later in this judgment.

Diagram of subdivision and transfers out of Great Great Grandparent Title, from Certificate of Title Volume 1997 Folio 399334[18]
The Proceeding
[18]First Jia Affidavit, Exhibit AJ-7 (CB78).
Plaintiffs’ proposal

The Plaintiffs seek to subdivide the Land into five lots and sell them, with the result that as many as five dwellings may be constructed on the Land. By their third further originating motion dated 24 February 2022 (‘Originating Motion’), the Plaintiffs seek the following, in the alternative:

(a) a declaration pursuant to s 84(2) of the PLA that the Land is not affected by the Covenants on the grounds that the burden of the said covenants does not extend to bind any interest in the Land beyond the interests of Robert McDonald his heirs, executors, administrators or the direct transferees taking an interest in the Land from Robert McDonald.

(b) orders pursuant to ss 84(1)(a) or (c) of the PLA:

(i) that the Major Covenant burdening the Land be modified as follows:

… no shops laundries factories works schools almshouses or churches shall be or be allowed to be erected on the said land nor shall any halls or buildings of any kind to be used wholly or partly for any religious educational or charitable purpose or for public entertainment of any kind whatsoever or any hoarding for advertisement be erected or be allowed to be erected on the said land and that no quarrying operations shall at any time hereafter be carried on or in or upon the said land and no marl stone earth clay gravel or sand shall at any time hereafter be dug carried away or removed from the said Land and that no more than ~~one~~ five dwelling houses be allowed, and developed ~~generally~~ in accordance with the plan set out at Annexure A, the construction of which shall cost no less than four million dollars per dwelling and no part of any building or structure shall exceed a height of 9 metres above natural ground level no dwelling house except one constructed at a cost of not less than One thousand five hundred pounds (exclusive of all architects fees and the cost of erecting any outbuildings (i) and fences) shall be erected or be allowed to be erected on the said land.[19]
[19]I note that the Originating Motion does not recite the exact terms of the Major Covenant, as it excludes the terms ‘shall be erected on the said land and’ following ‘one dwelling house’; however that is immaterial to the present application, as it would be struck out if the Plaintiffs were successful.

(ii) that the Minor Covenant burdening the Land be modified as follows:

No shops laundries factories works schools almshouses or churches shall be or be allowed to be erected on the said land nor shall any halls or buildings of any kind to be used wholly or partly for any religious educational or charitable purposes or for public entertainment of any kind whatsoever or any hoarding for advertisement be erected or be allowed to be erected on the said land.
No quarrying operations shall at any time hereafter be carried on in or upon the said land and no marl stone earth clay gravel or sand shall at any time hereafter be dug carried away or removed from the said land.

On the basis that the continued existence of the restrictions would unless modified impede the reasonable user of the land without securing practical benefits to other persons; or alternatively, that the proposed modifications will not substantially injure the persons entitled to the benefit of the restrictions.

Annexure A to the Originating Motion is the following diagram labelled ‘Building Envelope Development Plans’ (‘Proposed Envelope’):

Annexure A to the Originating Motion

The Proposed Envelope indicates the rough horizontal dimensions for the proposed subdivision and dwellings on the subdivided lots, including their setback from St Georges Road, St Catherines Lane and the boundary with 14 St Georges Road and 5&6 Teringa Place. According to the Proposed Envelope, the proposed subdivision would result in:[20]

(a) two lots of approximately 940m² each with frontage to St Georges Road; and

(b) three lots of approximately 800m² each with frontage to St Catherines Lane.

[20]First Milner Report [60] (CB170).

The trial commenced on the basis of a prior version of the Originating Motion, dated 5 March 2021, which was substantially the same but did not provide for modification of the Major Covenant in a manner which would restrict the height of the buildings, and provided for building ‘generally’ in accordance with the Proposed Envelope.[21] The Second Milner Report had included a recommendation of a 9 metre height limit,[22] which the Plaintiffs suggested that they ‘relied upon’,[23] but which had not been incorporated into an amended originating motion until the matter was pressed at trial and acceded to on the second last day of trial. Leave was granted for the present Originating Motion to be filed on 24 February 2022. For this reason, much of the evidence adduced by all parties addresses a potential maximum building height of 9 metres, as well as a potential maximum of 12 metres being the maximum height under the relevant planning controls.[24] However, the Court is to determine the application on the present Originating Motion which incorporates the 9 metre building height limit.
[21]The proposed modification of the Major Covenant as set out at paragraph 30(b)(i) above shows, in red, the changes to the 5 April 2021 version of the originating motion by the third further amended originating motion.
[22]Second Milner Report, 7 (CB1016).
[23]I will say more about this issue later in these reasons.
[24]Second Milner Report, 7 (CB1016).

The Plaintiffs’ proposed modifications to the Covenants in respect of the Quarrying Restrictions are intended to cover the earthworks involved in the construction of the dwellings. The Defendants do not object to the removal of the Quarrying Restrictions from the Covenants. It is of historical interest that the purpose of the Quarrying Restrictions appears to be the protection of neighbourhood safety and amenity from the practice of quarrying building materials on-site, which Mr Raworth states was ‘common in the suburbs of Melbourne in earlier periods’.[25] Given our removal from that state of affairs, and the agreement of all parties, I would have no difficulty making orders for the removal of the Quarrying Restrictions pursuant to ss 84(1)(a) or (c) of the PLA.
[25]Raworth Report [17] (CB 1477).

In the context of the Proposed Envelope, it does not appear that anything of importance turns on the distinction between Parcel B and Parcel C land, or between the Major and Minor Covenants. Put another way, it is immaterial in the context of the Proposed Envelope that there is a small part of the Land which is not subject to the Dwelling Restrictions.

The Parties

The Second Plaintiff became the registered proprietor of the Land on 3 March 2014.[26] At that time, the Land was occupied by a single large dwelling and amenities. That dwelling was demolished in 2015, and the Land is currently undeveloped.[27]
[26]First Jia Affidavit, Exhibit AJ-2 (CB54).
[27]First Milner Report [24]–[26] (CB155).

On 28 September 2018 the Second Plaintiff granted a power of attorney to the First Plaintiff, pursuant to a management agreement executed earlier that month, in relation to the management of the Land including powers to manage the commercial use of the Land and to deal with disputes in relation to the Land.[28] In accordance with the powers granted by the Second Plaintiff, the First Plaintiff commenced this proceeding by originating motion filed 26 February 2020. At that time, the Second Plaintiff was not a party to the proceeding.
[28]Affidavit of Xiao Yan Bao affirmed 30 September 2021 [5]-[7] (CB1318).

On 19 March 2020, Derham AsJ made orders for postal notice of the proceeding to be given to each person being a registered proprietor of land identified as having the benefit of the Covenants, and for public notice of the proceeding.

On 13 May 2020, his Honour noted the inquiries and objections received in response to those notices and made orders for the joinder of the following persons as Defendants:

(a) Qi Yang of 18 St Georges Road;

(b) Xiaoyu Zhu of 1 St Catherines Lane;

(c) David Neil Prior of 14 St Georges Road;

(d) Philip Harry Goodman of 5&6 Teringa Place;

(e) Joyce Marks of 8A St Georges;

(f) Mary-Ann Mitrakas of 3 Crestmont Court;

(g) Darryl Lindsay Washington and Julia Washington of 4 Crestmont Court;

(h) Erica Margaret Marriott of 4A Crestmont Court;

(i) Jeremy Ashley Carp of 5 Crestmont Court;

(j) Simon Kessel and Julie Miriam Kessel of 3 Heymount Close;

(k) Fannie Man Ying Wong and Hoi To Wong of 15 Heyington Place;

(l) DFP Investment Group Pty Ltd of 4 Glendye Court and 1 Heymount Close; and

(m) St Catherine’s School of 15A Heyington Place and 17-25 Heyington Place.

On 7 August 2020, his Honour made orders for the Second Plaintiff to be joined, at the request of the First Plaintiff and with the consent of the Second Plaintiff and the Defendants.[29]
[29]Order of Derham AsJ in Re Jeshing Property Management Pty Ltd (Supreme Court of Victoria, S ECI 2020 00998, 7 August 2020); Fourth Jia Affidavit [4]–[6].

On 30 October 2020, his Honour granted leave to the Eighth and Ninth Defendants, being Ms Erica Marriott and Mr Jeremy Carp, to withdraw their appearances in the proceeding.

The Defendants remaining in the proceeding have conducted the proceeding in three ‘camps’:

(a) The First and Second Defendants are the registered proprietors of 18 St Georges Road and 1 St Catherines Road, respectively. 18 St Georges Road is a large lot of approximately 5,170m²immediately across St Catherines Lane to the north of the Land, on which a large single dwelling is currently being constructed. 1 St Catherines Lane is a small lot of around 246 sqm, located at the rear south‑east corner of 18 St Georges Road. It is occupied by a dwelling that is presently being used as a site office for the new dwelling being constructed on 18 St Georges Road.[30]

(b) The Third and Fourth Defendants are the registered proprietors of 14 St Georges Road and 5&6 Teringa Place, respectively. 14 St Georges Road is a large lot adjoining the Land along most of the south boundary.[31] 5&6 Teringa Place is also a large lot abutting the Land at the south-eastern boundary, consolidated into a single title under Plan of Consolidation 379224A.[32]

(c) The Fifth to Seventh and Tenth to Fifteenth Defendants are registered proprietors of properties in Crestmont Court, Heymount Court, Heyington Place and Glendye Court, being properties generally to the east and south-east of the Land across St Catherines Lane.[33] The Fifteenth Defendant is St Catherine’s School, which occupies a large lot to the north-east of the Land across St Catherines Lane.[34]

[30]Barnes Report [23].

[31]Negri Report [49].

[32]Negri Report [54]; Cincotta Affidavit, Exhibit TLC-1.

[33]Second Jia Affidavit, Exhibit AJ-12.

[34]First Milner Report [38].

Each of the above ‘camps’ of Defendants adduced evidence and made submissions in respect of their particular properties, as well as evidence and submissions of more general application concerning matters such as the neighbourhood character or the proper construction of the Covenants. Where the Defendants are substantially in agreement or make overlapping submissions, I will refer to them as ‘the Defendants’, but will otherwise refer to each ‘camp’ of Defendants.

Issues

The Plaintiffs seek a declaration pursuant to s 84(2) of the PLA that the Land is not affected by the Covenants, on the basis that the burden of the Covenants does not extend to bind any interest in the Land beyond the interests of the original transferee (Robert McDonald) and/or certain related parties, and the direct transferee of Mr McDonald (‘Declaration Application’).

In the alternative, the Plaintiffs seek orders pursuant to s 84(1) of the PLA for the modification of the Covenants in the manner set out in the Originating Motion, namely (together, ‘Modification Applications’):

(a) orders pursuant to s 84(1)(a) of the PLA on the basis that the continued existence of the restrictions imposed by the Covenants would impede the reasonable user of the Land without securing practical benefits to other persons or would unless modified so impede such user (‘s 84(1)(a) Application’). I note that the Plaintiffs do not seek to rely on the power in s 84(1)(a) of the PLA to make orders on the grounds that the restrictions in the Covenants ought to be deemed obsolete; or

(b) alternatively, orders pursuant to s 84(1)(c) of the PLA on the basis that the proposed modification will not substantially injure the persons entitled to the benefit of the restriction (‘s 84(1)(c) Application’).

The Declaration Application is a matter of the proper construction of the Covenants, and its disposition in favour of the Plaintiff would make it unnecessary to address the Plaintiffs’ alternative Modification Applications. It is convenient to set out the parties’ submissions and my consideration of the Declaration Application before addressing the Modification Applications.

As noted at paragraph 34 above, there is no dispute as to the modification of the Covenants to remove the Quarrying Restrictions. The Modification Applications are therefore only disputed in relation to the Dwelling Restrictions contained in the Major Covenant, and in particular the restriction of the number of dwellings to a single dwelling, though I am required to be satisfied of the elements of s 84(1) in respect of both Covenants.

There is a preliminary matter concerning the Plaintiffs’ interest in the Land or in the proceedings which I will first briefly address.

Preliminary matter: the Plaintiffs’ interest in Land or proceeding

Section 84(1) of the PLA provides that the Court shall have power ‘on the application of any person interested in any land’ to make orders in respect of covenants over that land. Section 84(2) similarly conditions the Court’s declaratory power on an application ‘of any persons interested’, presumably referring to an interest in the land or in the proceeding (ie. the applicant or a beneficiary to the covenant joined as a defendant to the proceeding).

The First and Second Defendants raise questions about the interest of the Plaintiffs, and in particular the First Plaintiff which commenced the proceeding. Their cross‑examination of Mr Jia and Ms Bao was substantially dedicated to this issue. Ms Bao gave evidence that she had intended on living in a single dwelling on the Land upon acquiring it, and had briefly lived there, but later authorised the First Plaintiff by a power of attorney and management agreement to make decisions in respect of it and is no longer involved in decisions about the Land.[35]
[35]Bao Affidavit [5]–[8] (CB1318); Transcript of proceedings, Re Jeshing Property Management Pty Ltd (S ECI 2020 00998, Matthews AsJ, 15-18, 23-24 February 2022) (‘Transcript’) 131.3–26, 132.17–18.

Mr Jia’s evidence was that he does not receive instructions from Ms Bao and only acts for her through the power of attorney given to the First Plaintiff.[36] Mr Jia said that he does not have a separate direct retainer or costs agreement with the Second Plaintiff. Mr Jia also accepted that the power of attorney originally executed between the Plaintiffs was invalid by reason of non-compliance with the Powers of Attorney Act 2014 (Vic), and that a further power of attorney in substitution dated 13 February 2020 was later executed.[37] Mr Jia was pressed on which power of attorney was relied upon for the commencement of the proceeding by the First Plaintiff, and said in relation to the 13 February 2020 instrument that ‘this power of attorney wouldn’t have existed back then.’[38] I will return to the issue of the timing of the power of attorney shortly.
[36]Transcript 95.13–18, 102.25.
[37]Transcript 95.21–31, 98.11–14.
[38]Transcript 98.11–14.

Drawing from this evidence, the First and Second Defendants submit that Ms Bao, as Second Plaintiff, has ‘little idea what is going on with this application’, and queried the precise nature of her interest and involvement in the proceeding. The First and Second Defendants describe the arrangements between the Plaintiffs, and the flow of instructions from the First Plaintiff only, as ‘very curious’. Further, the First and Second Defendants submit that neither of the Plaintiffs have an ‘interest in the long term interests of the area’ and intend only to subdivide and sell the Land.

The First and Second Defendants’ submissions in this regard rise no higher than insinuation, as they do not clearly articulate a basis upon which they say that the Plaintiffs do not have a sufficient interest to bring the applications. It was not entirely clear what use the First and Second Defendants sought to make of this submission. It was not squarely put that this meant that the Plaintiffs (or one of them) lacked standing to bring the proceeding. Rather, as will become clearer, the gist of the First and Second Defendants’ submissions seemed to be that this should be a factor weighing in their favour when it comes to whether the Court should exercise its discretion to modify the Covenants.

It is telling that nothing is made in the First and Defendants’ closing submissions as to the validity or otherwise of the power of attorney by which the First Plaintiff is said to have commenced this proceeding, despite the not inconsiderable amount of time spent cross-examining Mr Jia on this topic. That is because the invalid power of attorney was rectified on 13 February 2020, and the proceeding commenced on 27 February 2020. There is no evidence other than Mr Jia’s statement on cross‑examination that the rectified power of attorney was not the document upon which the First Plaintiff relied when commencing the proceeding, and I am prepared to accept that this was a simple mistake on Mr Jia’s part. Even if that is not correct, in circumstances where the power of attorney was later re-done and that one has not been impugned, I do not see how that casts doubt over the commencement of the proceeding when the later document was operative at the relevant time. There is no evidence of any impropriety as to the execution of the power of attorney dated 13 February 2020 and the First and Second Defendants properly make no submissions in that regard.

On the evidence, Ms Bao as registered proprietor of the Land has granted a power of attorney to the First Plaintiff, which then commenced this proceeding in that capacity and has instructed its solicitors accordingly. There is nothing at all ‘curious’ about that arrangement, nor is it surprising or even relevant in that context that Ms Bao would not be directly involved in the conduct of the proceeding. I address whether the Plaintiffs’ intentions in respect of dealing with the Land are relevant to the exercise of the Court’s discretion at paragraphs 171-177 below. For present purposes it suffices to say that it has never been a requirement to establish a sufficient interest in land that an applicant intend to live on the land for any length of time, or at all.

Application for a declaration pursuant to s 84(2) of the PLA
Content of the Declaration Application

Section 84(2) of the PLA provides as follows:

The Court shall have power on the application of any person interested—
(a)to declare whether or not in any particular case any land is affected by a restriction imposed by any instrument; or
(b)to declare what upon the true construction of any instrument purporting to impose a restriction is the nature and extent of the restriction thereby imposed and whether the same is enforceable and if so by whom.

The Plaintiffs seek a declaration under this provision that the Land is not affected by the Covenants, on the grounds that the burden of the Covenants does not extend to bind any interest in the Land beyond the interests of Robert McDonald, his heirs, executors, administrators, or the direct transferees taking an interest in the Land from Robert McDonald.

Plaintiffs’ submissions

The Plaintiffs submit that a restrictive covenant recorded on the title to property is susceptible to the making of a declaration pursuant to s 84(2)(a) where the covenant does not comply with the applicable equitable requirements.[39] In the old case of Tulk v Moxhay it is said that equity requires:[40]
[39]See Re Dennerstein [1963] VR 688, 695-6; the notification of restrictive covenants as encumbrances on the Register not creating a legal or indefeasible status to such covenants. See also Fitt v LuxuryDevelopments Pty Ltd [2000] VSC 258 at [178] (Gillard J); Randell v Uhl [2019] VSC 668 at [51] (Derham AsJ); cf Gosford RSL Club Ltd v. Gosford Race Club Ltd (unreported Supreme Court of New South Wales, Bryson J, 18 December 1997) 28-31.
[40][1843-60] All ER Rep 9. See also Equity, Doctrines and Remedies, Heydon Leeming and Turner (5th Ed) at [44‑050].

(a) a covenant (that is, an enforceable agreement between parties); which

(b) is restrictive (that is, negative in character); and

(c) ‘touches or concerns’ the land either retained by the covenantee or the subject of a common building scheme; and

(d) is intended to be annexed to the retained land (or to land under a common building scheme) or to ‘run with’ that land.

As well as these requirements, there is also a requirement that the burden of the covenant attaches to land which is intended to run with that land.[41] The Plaintiffs submit that this is a question of proper construction of the covenant. If such an intention is not evident, then as a matter of construction the original covenantor’s successors in title are not bound by the covenant.[42] It is submitted that on their proper construction, the Covenants do not evince an intention that the burden of the covenant runs with the Land in a continuous way, and that the present registered proprietors are therefore not bound by it.
[41]Re Royal Victoria Pavilion, Ramsgate [1961] Ch 581, 588-9 (‘Re Royal Victoria Pavilion, Ramsgate’).
[42]Re Royal Victoria Pavilion, Ramsgate, 588-9.

The Plaintiffs note that as the Covenants were created in 1912, they are not affected by the provision now at s 79 of the PLA deeming the burden of covenants to run with the Land unless a contrary intention is expressed. Section 79 of the PLA operates only on covenants made ‘after the commencement of this Act’. Section 2(3) of the PLA provides that that expression shall be construed so as to include a reference to the commencement of the Property Law Act 1928 (Vic). The 1928 Act was the first Act to introduce a provision deeming the burden to run, derived from section 79 of the Law of Property Act 1925 (UK).[43]
[43]cf s 78 of the 1928 Act which is annotated with the genesis of its provision to be found in the Conveyancing Act 1915 (Vic), s 64. See also Morrells of Oxford Ltd v Oxford United Football Club Ltd [2001] Ch 459, [12]-[13] (‘Morrells’).

The Plaintiffs rely primarily on the text of the Covenants. The Major Covenant provides that ‘the said Robert McDonald for himself his executors administrators and transferees hereby covenants with’ the transferor, Ms Buckley. The Minor Covenant is in substantially the same form, except that it includes the ‘heirs’ of Mr McDonald. The Plaintiffs submit that the proper construction of the Covenants in this respect is that the Covenants ran with the Land only so far as Mr McDonald’s executors administrators, transferees, and additionally in respect of the Minor Covenant heirs, and so was entitled to be notified; but was limited only to the immediate transferees or heirs of Mr McDonald and did not run with the Land when the Land passed to the subsequent executors, administrators, transferees or heirs. In other words, the Covenants run with the Land but, relevantly, only for such period of time as the registered proprietor of the Land was Robert McDonald and/or his immediate transferee.

The Plaintiffs submit that the construction of the terms of the Covenants begins with consideration of their ordinary meaning in ‘common vernacular use’, read in context, with the objective of ascertaining the intention of the parties.[44] The Plaintiffs submit that the expression ‘his … transferees’ ordinarily means only the direct transferees of Mr McDonald, and would not include subsequent transferees as they would not be ‘his’ (ie Mr McDonald’s) transferees, emphasising the use of the possessive ‘his’. In this sense the word ‘his’ is said to modify and limit the meaning of the word ‘transferees’ such that its plural form refers only to the potential for several direct transferees, and not to several successive transferees.
[44]Prowse v Johnstone [2012] VSC 4 at [52] (Cavanough J) (‘Prowse [2012]’).

This is submitted to be entirely consistent with the burden of the Covenants resting on Mr McDonald’s ‘executors [and] administrators’, and in the case of the Minor Covenant ‘heirs’. As a matter of construction, it is submitted that the expressions ‘his executors, administrators and transferees’ and ‘his heirs executors administrators and transferees’ conjunctively identify persons taking an interest in the Land directly from Mr McDonald, and do not provide, for example, for any transferees of Mr McDonald’s administrators. In the same way, it is submitted that the Covenants do not express an intention to bind transferees of Mr McDonald’s transferees.

The Plaintiffs submit that restrictive covenants are not to be interpreted with reference to any extrinsic material, following the decisions of the High Court of Australia in Westfield Management Ltd v Perpetual Trustee Co Ltd[45] (‘Westfield’) and Deguisa v Lynn[46] (‘Deguisa’). In Deguisa, in particular, the Court concluded in relation to a building scheme which was referred to, but not wholly disclosed by, the certificate of title:[47]

A person who seeks to deal with the registered proprietor in reliance on the State’s guarantee of the title of the registered proprietor disclosed by the certificate of title in the Register Book (or its electronic equivalent) is not to be put on inquiry as to anything beyond that which is so notified.

[45](2007) 233 CLR 528.

[46](2020) 268 CLR 638.

[47]Deguisa [88]

The Plaintiffs submit that this authority requires the Court to ‘shut its eyes to everything except the bare bones of the instrument containing the restrictive covenant’.[48] It is said that the Court should place itself in the shoes of an individual, such as a prospective purchaser of the land, reading the register afresh and ascertaining the meaning of instruments recorded on the register on their face.
[48]Citing Prowse [2012] [58].

The Plaintiffs acknowledge that the principle of construction drawn from Westfield and Deguisa distinguishes between extrinsic evidence of ‘objective’ matters (such as the nature of a surface over which the grant of an easement applied, or technical terms and abbreviations used in surveying) and evidence going to the intentions and expectations of the parties to the instrument.[49] The Plaintiffs submit that the case of Phoenix Commercial Enterprises v Canada Bay Council[50] upheld this distinction in construing a registered lease by reference to ‘objective’ extrinsic material.[51] It is submitted that the expression ‘his transferees’ is not such a technical surveying or legal term requiring reference to extrinsic material, and that evidence in relation to its meaning is evidence of the intention or contemplation of the parties to the covenant and as such is inadmissible for those purposes.
[49]Westfield [40]–[41], see also [44]-[45].
[50][2010] NSWCA 64 (‘Phoenix Commercial Enterprises’).
[51]See especially [175].

The Plaintiffs also appeared to accept that considerations of common or commercial sense may be relevant to the construction of the Covenants. On the Plaintiffs’ view, there is commercial sense to the time-limit in the Covenants, as they grant Mr McDonald’s transferees the flexibility to impose or withhold the Covenants in their subsequent transfers, and it may have been Mr McDonald’s hope that the transferees would pay a premium for that flexibility.

According to the Plaintiffs, the principle of construction in Deguisa displaces any other presumption or the application of the doctrine of contra proferentem. Save for matters of ‘objective fact’ and matters of common or commercial sense, it is said that Deguisa prohibits reference to any material which is extrinsic to the register of titles.

Nevertheless, in support of their preferred construction, the Plaintiffs submit that it is the ‘usual course’ for covenants intended to run with the burdened land to be expressed as being made by the covenantor on behalf of themselves and successors in title.[52] The Plaintiffs similarly submit that it is common practice for covenants to include a saving provision whereby the parties express their intention that the covenants run with the land.[53] It is submitted that the absence of such clarifying statements in the Covenants supports the view that the parties did not intend for the Covenants to burden successors in title or to run with the Land.
[52]Morrells [17], [28] and [29].
[53]Citing Prowse v Johnstone [2015] VSC 621 [149]–[160] (‘Prowse [2015]’).

Similarly, the Plaintiffs refer to evidence of Mr Raworth, an architectural historian who gave expert evidence in the proceeding, indicating that other covenants such as those in respect of 17 Heyington Place, Toorak, and 19 Monaro Road, Toorak had also been time-limited,[54] and that a similar approach (albeit with a different mechanism) could have been taken in respect of these Covenants. 17 Heyington Place is part of the Beaulieu Estate, and now forms part of St Catherine’s School.[55]
[54]Transcript 402.11-13, 25-30.
[55]Fifth Jia Affidavit, Exhibit AJ-13 (CB1139-40).

The Plaintiffs’ written submissions filed prior to the trial contend that their proposed construction is consistent with historical decisions in relation to Covenants in the same or very similar form in respect of properties transferred out of the Great Great Grandparent Title:

(a) SCV Ref 1959 No 3373, Re L Randerson Pty Ltd (‘Randerson’): This decision deals with the covenant contained in instrument of transfer 673900. The text relevantly read: “Arthur Frederick Hooper for himself his executors administrators and transferees hereby covenants with the said Elizabeth Marion Buckley and her transferees registered proprietor or proprietors of the land in …”. Smith J on 20 April 1959 made a declaration that the land was not affected by the covenant in the transfer. The Plaintiffs submit that the declaration of Smith J was made following evidence that the relevant land had been transferred from Mrs Buckley to Mr Hooper to a Marjorie Cross Turnbull and that the applicant L Randerson Pty Ltd had lodged a caveat over it; all land was transferred out of parent title by 4 June 1915; and that there was no evidence of a building scheme.[56]

(b) SCV Ref 1959 No 3558, Re The Trustees Executors and Agency Company Limited (‘Trustees’): This decision deals with the covenant contained in instrument of transfer 674618. The text relevantly read “Maurice Howard Lawrence Baillieu doth hereby for himself his executors administrators and transferees covenant with the said Elizabeth Marion Buckley her executors administrators and transferees as follows ….” Duffy J on 8 October 1959 declared that the subject land was not affected by the covenant in the transfer. The Plaintiffs submit that the declaration of Duffy J was made following evidence that the land had been transferred to Edward Yencken and then the Trustees Executors and Agency Company Ltd, and an explanation of the decision of Justice Smith in Randerson.[57]

[56]Baliviera Affidavit, Exhibit GB-3 (CB333-365).

[57]Baliviera Affidavit, Exhibit GB-3 (CB366-394).

The Plaintiffs’ submission also acknowledges the decision and declaration in SCV 1961 No M4132, Re Edward Leo Curtis and Elvira Lillian Curtis (‘Curtis’),[58] but submits that it was made on a different basis, that is on the basis of the decision of the Full Court of this Court in Re Arcade Hotel Pty Ltd (‘Arcade Hotel’).[59] That decision stood as authority for a requirement that a restrictive covenant be expressed to be annexed to, and for the benefit of, ‘the whole or any part thereof’ of the land in question, such that a restrictive covenant would no longer be enforceable where it referred only to ‘the whole of’ a parcel of land which had since been subdivided and parts transferred out.[60] That footing for a declaration was removed, retrospectively as well as prospectively, with the commencement of s 79A of the PLA in 1964.
[58]Baliviera Affidavit, Exhibit GB-3 (CB395-426).
[59][1962] VR 274.
[60]Arcade Hotel, 277–8 (Lowe J, with whom Gavan Duffy J agreed).

Senior counsel for the Plaintiff properly conceded in his oral opening that there is no record of written reasons for the Court’s decisions in Randerson or Trustees obtained from the archived file or put into evidence in this proceeding, and the Plaintiffs could not say why the declarations were made in those proceedings.[61] As such, the Plaintiffs’ submission was narrowed to a contention that the construction of the Covenants put forward by the Plaintiffs is at least not a novel one, in the sense that it had been proposed by applicants in respect of similar covenants.
[61]Transcript, 51.14-20.

Defendants’ Submissions

The Defendants made some submissions in common, and generally endorsed one another’s submissions.

The starting point of each of the Defendants’ submissions was the statement of principle by Gillard J in Fitt v Luxury Developments Pty Ltd[62] that ‘if the wording [of a covenant] is that it is made by the covenantor for himself his heirs and assigns then as a general proposition the burden will normally run with the land.’[63] Each Defendant relied on this passage to some extent, though the Third and Fourth Defendants described it as raising a ‘presumption’ that covenants framed in such a way run with the land in question. The Defendants agree that the proper approach is to determine whether the Covenants evince an intention that they will run with the Land, and that the above passage in Fitt is authority for the proposition that it is sufficient for a covenant to be expressed in respect of the covenantor and his or her heirs or assigns.
[62][2000] VSC 258 (‘Fitt’).
[63]Fitt [157].

The Defendants generally accept that reference to extrinsic material in aid of construction of the Covenants is constrained by Westfield and Deguisa. Each of the Defendants criticise the Plaintiffs for reliance on that principle while seeking to adduce extrinsic evidence in their favour – for example, the historic decisions of this Court in Randerson and Trustees, or even evidence for the uncontested fact that the parties to the Covenants were also parties to contracts of sale for the Land. As is discussed below, the Third and Fourth Defendants also seek to narrow the approach to those principles taken by the Plaintiffs.

Further, each of the Defendants deny that the ordinary meaning of the terms of the Covenants, and in particular the expressions ‘his transferees’, limits the burden of the Covenants to the direct transferee of Robert McDonald. Each of the Defendants point to the plural form ‘transferees’ as an indication that more than a single transfer was intended to be covered by the Covenants. The Defendants also dispute that the term ‘his’ is limiting in the manner the Plaintiffs contend, on the basis that each subsequent transferee to whom an interest passes could be described as a ‘transferee’. The First and Second Defendants make the additional submission that the term ‘his’ in the Covenants more properly attaches to ‘executors [and] administrators’, which are evidently limited to the executors and administrators of Mr McDonald himself; and that the word ‘and’ in ‘executors administrators and transferees’ is disjunctive rather than conjunctive.

The Defendants point to decisions concerning similarly worded covenants, which they submit provide no support for the construction of the Covenants contended for by the Plaintiffs. It is convenient to address the particular submissions in respect of each of these in my consideration, in order to avoid unnecessary repetition of the relevant terms of the covenants and to identify the particular points of relevance to this application. Each of the Defendants refer to Fitt and to Prowse [2015]. The First and Second Defendants additionally referred to Blue Concept Pty Ltd v Christine Farnan[64] and Re Ferraro.[65] Appropriately, the First and Second Defendants also referred me to the matter of Pollard v Registrar of Titles,[66] which may not assist their case and in any event was submitted to be distinguishable on its facts. The Third and Fourth Defendants helpfully set out as an annexure to their written submissions a schedule of authorities to make this point,[67] and also refer to ReRoyal Victoria Pavilion, Ramsgate and Morrells as examples of cases of covenants where there was a manifest intention for the covenants to be personal only. The Fifth to Seventh and Ninth to Fifteenth Defendants refer specifically to Vrakas v Mills,[68] and to several other cases more generally, for the proposition that the Court has never found that the use of the first or third person possessive pronoun evinces an intention for ‘transferees’ to be limited only to those who take a direct transfer from the covenantor.[69]
[64][2015] VSC 125 (‘Blue Concept’).
[65][2021] VSC 166 (‘Re Ferraro’).
[66][2013] VSC 286 (‘Pollard’).
[67]The cases cited by the Third and Fourth Defendants are Conlan v Benton [2017] VSC 244 (‘Conlan v Benton’); Rosenwald v Hogg [2015] VSC 199 (‘Rosenwald v Hogg’); Freilich v Wharton [2013] VSC 533 (‘Freilich v Wharton’); Re Comdain Homes Pty Ltd [2013] VSC 487 (‘Re Comdain Homes’); and Langdale Pty Ltd v Sollas [1959] VR 634.
[68](2007) V ConvR 54-733 (‘Vrakas v Mills’).
[69]Relevantly, the Fifth to Seventh and Ninth to Fifteenth Defendants also cite Bohn v Miller Brothers Pty Ltd [1953] VLR 354, 357; Re Dennerstein [1963] VR 688; Re Comdain Homes [7]; Oostemeyer v Powell [2016] VSC 491 [16]; Randell v Uhl [2019] VSC 668 [7]; and Stockfeld v Hendon s [2021] VSC 133 [5].

Further, the First to Fourth Defendants refer to material concerning contemporary practices in the Land Titles Office which is consistent with the terms of the Covenant. This material is in two texts (‘Titles Office Practice Material’):

(a) ‘Manual of Titles Office Practice in Victoria’ by Mr Norman Currey, Registrar of Titles in Victoria from 1922 to 1932; and

(b) ‘Transfer of Land Acts 1915-1921 and other Acts affecting the Transfer of Land, Commentary, Notes of Australasian Decisions, Forms in General Use and Rulings and Practice of the Office of Titles’ by Dallas Wiseman, Barrister, in 1925.

Each of the Titles Office Practice Materials state as a general rule or practice of the Titles Office at the time that a restrictive covenant will not be notified as an encumbrance on the title unless the covenant is, inter alia, ‘express to be entered into by the transferee, his heirs, executors, administrators and transferees, with the transferor, as registered proprietor of other land retained by him, his heirs, executors, administrators and transferees’. The First to Fourth Defendants submit that these are relevant to the approach taken to framing the Covenants in 1912 and in interpreting them in the present day,[70] and indicate that the terms of the Covenants are sufficient and do not require further words of annexation such as an express indication of intent for the instrument to be recorded on the title and run with the land. The Third and Fourth Defendant make submissions concerning the admissibility of this evidence which I set out below, and upon which I understand the First and Second Defendants also rely.
[70]The first of these materials was referred to by Ginnane J in Prowse [2015] [40]–[41], [153].

Each of the Defendants submitted that the Plaintiffs’ reliance on the historic cases of Randerson and Trustees is misguided, as there was no record of the Court’s findings or the basis of its decisions and, in any event, the material in Randerson equally points to a decision on the same basis as the later decisions of Curtis and Arcade Hotel, which is no longer good law.

First and Second Defendants’ Submissions

The First and Second Defendants submit that the Plaintiff’s preferred construction is ‘novel’ and flies in the face of approximately a century of interpretation of the Covenants, including by the Plaintiffs, their solicitors, and their expert witnesses, all of which appeared to accept that the Covenants ran with the Land into the present, at least until the originating motion was first amended to include the Declaration Application on 5 March 2021. The First and Second Defendants point to the recording of the Covenants on the title to the Land as evidence that they were ‘recorded to be continuous over time and not limited to one transfer’, and that they were not interpreted on their making in 1912 as limited to one transfer.

The First and Second Defendants further submit that the Plaintiffs have not pointed to anything concrete within the Covenants themselves to suggest that the intention of the parties was to limit the passing of the burden of the Covenants to only Mr McDonald and his direct transferee. It is further submitted that the covenant in respect of 17 Heyington Place, to which the Plaintiffs referred as an example of a time‑limited covenant, does not assist the Plaintiffs as it contains a very clear limiting device of ten years, and is in that sense not comparable to the construction proposed by the Plaintiffs for the present Covenants. The First and Second Defendants further contend that the Plaintiffs’ hypothesis as to the commercial rationale for limiting the Covenants in the manner proposed is not based on any evidence, and is speculative and wholly unconvincing.

Third and Fourth Defendants’ Submissions

The Third and Fourth Defendants rely on the ‘presumption’ raised by Gillard J in Fitt, that a covenant expressed to bind the covenantor, his heirs and assigns will run with the land, unless there is some clearly stated intention to the contrary. It is submitted that there is no such clear contrary intention in the text of the covenant; and that, in the context of this presumption being enlivened and not displaced, the meaning of the word ‘transferees’ is clear. On this basis it is said that it is not necessary to have regard to extrinsic materials in order to properly construe the Covenants.

It is also submitted that the fact of notification of the Covenants on the title is evidence of the parties’ intention that it be so notified, which evidence is intrinsic to the certificate of title. This is said to indicate that the parties to the Covenants intended that the Covenants run with the Land.

Further, and in the alternative, the Third and Fourth Defendants submit that the principles in Westfield and Deguisa are not so restrictive as the Plaintiffs contend, and there are exceptions to those principles.[71]
[71]These submissions are implicitly relied upon by the First and Second Defendants in respect of certain of their submissions.

First, the Third and Fourth Defendants submit that those principles do not exclude all extrinsic materials, and permit at least the following categories of materials:

(a) evidence to assist the Court ‘make sense of that which the register identifies by terms or expressions found therein’ such as surveying terms or abbreviations;[72]

(b) documents which can be found by searching other parts of the register, such as a copy of the relevant plan of subdivision and corresponding covenants affecting other parts of the estate;[73] and

(c) instruments expressly referred to in the memorial on the certificate of title.[74]

[72]Westfield [44].

[73]Prowse [2012] [58].

[74]Deguisa [88].

Further, the Third and Fourth Defendants submit that the New South Wales Court of Appeal in Phoenix Commercial Enterprises recognised that Westfield does not exclude the approach whereby a document recorded on the register will be construed as having the meaning that a reasonable reader, with such knowledge of the surrounding circumstances as is available to them, would attribute to it.[75] It is said that materials concerning the contemporary practice of the Land Titles Office is material to which a reasonable reader would have regard to, and is therefore capable of assisting in the interpretation of the Covenants.
[75]Phoenix Commercial Enterprises [158].

Second, the Third and Fourth Defendants submit that the Court in Westfield and Deguisa did not consider the question whether the contra proferentem principle applies in the construction of restrictive covenants, and do not provide support for the Plaintiffs’ assertion that the principle has no application. The Third and Fourth Defendants point out that in Prowse [2012], a decision relied upon by the Plaintiffs for their preferred construction of the Covenants, Cavanough J engaged in an extensive consideration of Westfield and Phoenix Commercial Enterprises,[76] and proceeded on the basis that earlier authorities in respect of the contra proferentem rule continued to apply.[77] It is submitted that his Honour would no doubt have commented on any inconsistency had he perceived any. It is further submitted that the contra proferentem rule is a general rule of construction, and does not offend the principle of indefeasibility of title upon which the Court in Westfield and Deguisa based their approach, or the more specific conclusions of the Court in those decisions in respect of extrinsic material.
[76]Prowse [2012] [57]–[58].
[77]Prowse [2012] [86].

The Third and Fourth Defendants also submit that the Plaintiffs’ submission as to the commercial basis or benefit of their proposed construction is a ‘leap of faith’, as it is highly speculative, internally contradictory, and is in any event not the most probable or sensible approach which the parties to the Covenants were likely to have adopted. In particular, it is submitted that there is no basis for an inference that a premium would be forthcoming for land which was not to be burdened in an ongoing way, as compared to the likelihood of greater value in a consistent and certain outcome for all parties. This is especially so in the context of each lot in the Beaulieu Estate having been transferred with a similar covenant. Further, it would seem inconsistent with the suggested purpose of the Major Covenant (discussed below), that a neighbourhood of stately homes and gardens be maintained, that a restriction intended to achieve that purpose could survive only a single transfer.

Fifth to Seventh and Ninth to Fifteenth Defendants

These Defendants primarily relied on their submissions concerning the lack of clear intention in the Covenants for their burden to be limited to the immediate transferees only, and the lack of authority for the construction preferred by the Plaintiffs, having regard to the authorities concerning similarly worded covenants. I have outlined these above.

The Fifth to Seventh and Ninth to Fifteenth Defendants acknowledge that the Covenants do not contain an explicit reference to the burden running with the Land, in contrast to some of the authorities referred to. However, they submit that the Covenants nonetheless evince that intention, relying on the ‘general proposition’ stated in Fitt. Further, it is submitted that the conceptual basis for this ‘general proposition’ can be identified in the following relevant passages from Fitt:

In 1848 in the historic case of Tulk v Moxhay equity intervened and provided remedies which were not available at common law in respect to the enforcement of a restrictive covenant against a subsequent transferee of land from the original covenantor.
… the burden is imposed upon successors to the covenantor “upon the same principle that the grantee of a guilty trustee ... is bound to convey the res to the cestui que trust”. There would be “the like injustice, if the purchaser with notice, or the volunteer, were allowed to profit at the expense of the cestui que trust or [the covenantee] by ignoring the trust ... or the restrictive agreement”. Accordingly, equity imposes upon the successor to the covenantor “a constructive duty” which is “coextensive” with the express duty of the covenantor to the covenantee. The position of successors to the covenantor with respect to the burden of the covenant thus rests not upon any legal principle of privity of estate but upon “the equitable principle of privity of conscience”.[78]

[78]Fitt [65] and [75] (citations omitted), citing Forestview Nominees Pty Ltd & Silkchime Pty Ltd v Perpetual Trustees WA Ltd (1998) 193 CLR 154, [23].

It is submitted that the utility of restrictive covenants relies on their capacity to transmit restrictions as to the use of land across time, irrespective of the doctrine of privity of contract.

Consideration
Applicable principles and admissible material

As the Third and Fourth Defendants submit, the parties appear to be in substantial agreement as to the principles of construction of Covenants save for two issues. However, those two issues are substantial, and contain a number of subordinate issues of principle and in respect of the admission of evidence which must be considered before I turn to the construction of the Covenants. First, the application of Westfield and Deguisa in general and in the present case, in particular with respect to the use of extrinsic material. Second, whether the contra proferentem or any other presumptions apply.

The use of extrinsic material

I accept the Third and Fourth Defendants’ submissions at paragraph 87 above as to the ‘exceptions’ to the rule in Westfield and Deguisa, though I doubt whether the second and third are properly ‘exceptions’ rather than elements of the rule, broadly expressed. The fundamental proposition in Westfield is that a person encountering the register of titles is entitled to understand the state and condition of a title from the information contained in the register, which includes documents found on the register or expressly referred to in the memorial. The Plaintiffs do not appear to disagree with these submissions and do not press the, respectfully, rather broad comment of Cavanough J in Prowse [2012] that the Court should ‘shut its eyes to everything except the bare bones of the instrument containing the restrictive covenant’.[79]
[79]Prowse [2012] [58].

A little more should be said about the principles in Westfield and Deguisa. In Westfield, the Court unanimously held that:

The third party who inspects the Register cannot be expected, consistently with the scheme of the Torrens system, to look further for extrinsic material which might establish facts or circumstances existing at the time of the creation of the registered dealing and placing the third party (or any court later seized of a dispute) in the situation of the grantee.[80]

[80]Westfield [39].

In Phoenix Commercial Enterprises, the New South Wales Court of Appeal said that the view expressed in that passage ‘is not dependent upon any considerations of the extent of indefeasibility, but rather on the inherent probabilities concerning the inquiries that a purchaser of Torrens title land will make.’[81] The Court may not have intended to restate the test in terms of probabilities at large, as it went on to discuss the permissible inquiries into ‘objective matters’ such as the physical layout of the locus in quo and its surrounds at the time of the grant.[82]
[81]Phoenix Commercial Enterprises [162].
[82]Phoenix Commercial Enterprises [162].

The High Court in Deguisa affirmed a stricter test:

A person who seeks to deal with the registered proprietor in reliance on the State’s guarantee of the title of the registered proprietor disclosed by the certificate of title in the Register Book (or its electronic equivalent) is not to be put on inquiry as to anything beyond that which is so notified…. Anything less is inconsistent with the natural and ordinary meaning of the text of s 69 [of the Real Property Act 1886 (SA)] and the purpose of the Act.[83]

[83]Deguisa [88].

One basis on which this conclusion was reached was the conceptual incoherence in requiring ‘generalised searches beyond that of the current certificate of title’ to the standard of a ‘prudent conveyancer’, as had been accepted by the Court of Appeal of South Australia.[84] The Court was there concerned with a submission that the relevant encumbrance ought to have been identifiable by a search of the more unusual surname of one of the vendors of the parent title from which the encumbered lot had been transferred, and did not refer to Phoenix Commercial Enterprises at any point. However, the Court’s rejection of the standard of a ‘prudent’ search of the register in favour of a standard governed by the information appearing on title is clearly inconsistent with a test of ‘inherent probabilities’ that may be drawn from Phoenix Commercial Enterprises. Rather, in Deguisa, the Court affirmed the view of Barwick CJ in Bursill Enterprises Pty Ltd v Berger Bros Trading Co Pty Ltd[85] that what is ‘notified’ for the purposes of Torrens land encumbrances is limited to the instruments themselves, and ‘instruments referred to in such instruments which were themselves registered.’[86]
[84]Deguisa [85].
[85](1971) 124 CLR 73.
[86]Deguisa [58].

On this basis, the parties were in agreement that I could have regard to other covenants contained in instruments of transfer out of the Great Great Grandparent Title, as corresponding covenants affecting other parts of that estate. I agree that this is consistent with the approach taken in Deguisa.[87] I note that Deguisa also makes clear that the principle is not so wide that any document on the register is available as an aid, but consider that the covenants in respect of properties transferred out of the Great Great Grandparent Title are admissible as material referred to in the relevant instrument or instruments referred to in that instrument. In this way it is possible to trace the benefit of the Covenants back to the Great Great Grandparent Title and identify covenants within the network in the Beaulieu Estate. I do not consider that other covenants, such as that said by the Plaintiffs to be imposed in respect of 19 Monaro Road, Toorak, are admissible. Nothing in respect of that covenant is to be found in the register pertaining to the Land or is able to be derived from instruments referred to in respect of the Land.
[87]Deguisa [58] and [72]; See also Prowse [2012] [58].

To this will be compared a realistic worst-case scenario for a single dwelling on the Land, in compliance with the Covenants and the relevant planning requirements. As noted I consider that the dwelling under construction at 18 St Georges Road is a useful example of such a realistic worst-case scenario, though I have approached the comparison with a degree of flexibility as to the siting, configuration, built form and other aspects of the hypothetical single dwelling.

A comparison between the likely outcome under the Plaintiff’s’ proposal, and the realistic worst-case scenario for a single compliant dwelling, will be conducted in respect of each Defendants’ property to the extent appropriate. As a general observation, however, I accept that the total site coverage of built form in the two scenarios, expressed as a percentage of site area, may be similar. Mr Barnes’ estimate of site coverage under the Plaintiffs’ proposal, of between 37% and 45%, is not out of the question for a single very large dwelling on the Land. Nevertheless there are important differences in the distribution and configuration of built form on the Land, its height and bulk, and the use of the dwelling or dwellings on the Land.

In respect of valuation, Mr Dudakov says that it is ‘difficult’ to identify property sale data which can be used as a basis of comparison with the subject Land and the Defendants’ land. There was substantial agreement between the valuation experts on this point, though there was some conflict as to the relevance and treatment of available data. Mr Dudakov conceded that he had not assessed properties affected by neighbouring intense development on the basis of a ‘before and after’ analysis, as Mr Brown had sought to do in respect of 2 St Georges Road at least. Instead, Mr Dudakov’s analysis of the sales data he collected appears to me to proceed on the basis of whether he considered that the price per square metre achieved for the various properties was reasonable or in line with his expectation, given the lot size, location, improvements and other factors. This methodology does not seek to isolate the impact of intense neighbouring development on value, and goes no further than an expression of Mr Dudakov’s opinion as to whether a certain sale price was affected by neighbouring development.

Given the evidentiary challenges, it is appropriate to consider the Defendants’ valuation evidence with some caution as well. Mr Schuh very clearly acknowledged that his opinion was impressionistic and based on his expertise, rather than on research conducted for the purposes of his report. While Mr Brown undertook to analyse the impacts of intense neighbouring development on 2 St Georges Road on a ‘before and after’ basis, he properly concedes that several factors are relevant in the analysis of that sale. Likewise Mr Dudakov’s critiques of Mr Brown’s conclusions, as being based on properties which are not comparable to the Defendants’ land and being entirely explicable by matters such as location, lot size, market conditions and improvements to the land, have some force. However that does not assist the Plaintiffs. Rather, it points to the gap in concrete and empirical evidence in assessing the valuation impact of the Plaintiffs’ proposal.

Ultimately, each of the valuation experts were in agreement as to the fundamental principles to be applied and factors to be considered in determining a valuation, and in assessing the impact of neighbourhood factors on value. Based on this, the experts also appear to agree that intense neighbouring development will have some impact on the value of a property. Indeed, Mr Dudakov’s conclusion that a ‘Toorak address’ and the ‘premier location’ of the Defendants’ land ‘more than counterbalances any perceived detriment arising from being located in close proximity to more intense development’[272] proceeds on the basis that there will be a detriment perceived in the market. That may be consistent with an assessment of whether the Defendants could achieve considerable value for their properties upon a sale, but it is not consistent with Mr Dudakov’s final statement that there would be no difference in value if the Land is developed with five dwellings as compared to a single dwelling. That statement is not supported by the evidence and is therefore speculative. Further, Mr Dudakov’s opinion is heavily reliant upon the conclusions set out in Mr Milner’s reports, as is evident from Mr Dudakov’s reports, and I do not consider that to be a sufficient basis for the conclusions as to valuation reached by Mr Dudakov.
[272]First Dudakov Report, 22 (CB736).

I would treat Mr Schuh’s and Mr Brown’s estimates as to difference in value with some caution and will not make a finding as to the particular loss in value likely to be incurred by any of the First to Fourth Defendants as a result of the Plaintiffs’ proposal. This is primarily because I do not consider there to be sufficient reliable evidence to enable me to make such a specific finding, though I am satisfied that there is likely to be a decline in value. However I accept their approach to the assessment of value, and in particular Mr Brown’s formulation of the factors to be taken into account at paragraph 249 above. I note that they are substantially the same as the benefits generally conferred by the Covenants. To that extent, where I find that there will be impacts on the Defendants in respect of their enjoyment of those benefits, I will consider whether the cumulative effect of those impacts indicates that there may be a substantial impact in value terms.

Finally, the Plaintiffs rely on the Rogers Report concerning the current distribution and condition of trees on and adjoining the Land, and an assessment of the impact of the Plaintiffs’ proposal on them. Mr Rogers largely confined his evidence to matters of arboricultural value and encroachment of the Proposed Envelope on the tree protection zone, but also offered an opinion as the procedures undertaken by a developer when seeking to remove trees or plant new trees. To paraphrase his evidence, a great deal depends on the approach taken by a council arborist and planning officers in consideration of permits to remove trees, on further and more detailed assessments of trees, on the precise parameters and design of buildings encroaching on the trees, and the particular preferences of the developer and occupier of the Land. Mr Rogers also said that the Defendants would have no opportunity to intervene in the planning process in respect of trees. The density or quality of vegetation on the Land is not, in itself, a benefit conferred by the Covenants, but may be related to amenity benefits such as overlooking, overshadowing and visual bulk, and perhaps to the ‘special mood’ of the neighbourhood insofar as ‘substantial garden settings’ are maintained in the Estate. At most, the amount and type of vegetation on the Land may be an indirect benefit of the Covenants. In this context, Mr Rogers’ evidence as to the likely fate of specific trees carries limited weight.

It remains to assess the evidence in respect of each of the Defendants’ properties. The above general observations concerning the evidentiary foundation of the Plaintiffs’ application are made to reinforce the point that the onus rests with the Plaintiffs. The task before the Court is to determine whether there will be no substantial injury, and it is not required that the Defendants establish, on the balance of probabilities, that there will be a substantial injury. Nevertheless the Defendants will succeed if I am satisfied that there is likely to be a substantial injury.

First and Second Defendants

I am satisfied that the First Defendant, and to a lesser extent the Second Defendant, are likely to suffer substantial injury as a result of the Plaintiffs’ proposal. The evidence in respect of 1 St Catherines Lane by itself is quite slim, and all parties have treated it pragmatically as a part of 18 St Georges Road. I am content to do so and note that the analysis is substantially the same if assessed from the perspective of a standalone lot.

The First and Second Defendants continue to enjoy substantial benefits from the single-dwelling restriction in the Major Covenant, in terms of spaciousness and low built form density, limited overlooking and overshadowing, and low population density and associated amenities such as more limited noise and traffic. According to the plans for the dwelling at 18 St Georges Road, the First Defendant will not make significant use of St Catherines Lane for vehicle access. That access likely will still be required for 1 St Catherines Lane. The First and Second Defendants also enjoy the high prestige and property values associated with the location and the above benefits.

If the Plaintiffs’ application were to be successful, and subject to subdivision permit approval, there would be three dwellings of two storeys each, facing and with upper storey north-facing windows overlooking the rear garden of 18 St Georges Road. The prospect of overlooking is mitigated but not entirely diminished by the intervention of St Catherines Lane and the boundary walls. Obversely, from the rear garden of 18 St Georges Road, the southern aspect would be obscured by three large dwellings of likely incoherent architectural style. Mr Wilkinson’s visualisations demonstrate that even at a height of 9 metres, and allowing for some further articulation of the dwellings, the three rear dwellings on the Land would be very prominent. When compared with the realistic worst-case scenario for a single dwelling, I consider that there is a likely and significant increase in the prospect of overlooking from the Land and of the visual bulk and corresponding loss of spaciousness when viewing across the Land at the rear of 18 St Georges Road.

I accept that the size and configuration of the dwelling under construction at 18 St Georges Road is likely to mitigate the effects of overlooking and visual bulk when viewed from the dwelling. However that has little relevance to the impacts to be experienced from the rear garden. I do not accept that it is incumbent on the First and Second Defendants to screen their southern boundaries with vegetation to mitigate any impacts from the Plaintiffs’ proposal.

While the First Defendant may not be directly substantially affected by the increased traffic in St Catherines Lane according to the current plans for the dwelling on 18 St Georges Road, it is likely to experience an increase in noise as a result of that traffic. I also accept that there may be a more limited impact on the First and Second Defendants in terms of noise given the proximity to St Catherine’s School, but note that five dwellings on the Land are more likely to generate noise outside of school hours, and particularly at night. There was little direct evidence as to any increase in noise.

I consider that the First and Second Defendants are likely to experience a loss in the overall prestige at a streetscape level as a result of the two dwellings proposed to be constructed at the St Georges Road frontage of the Land. This is particularly the case given that they will likely be separately owned and designed, such that there is no guarantee, for example, that they will present from St Georges Road as a single unified building or as coherent side-by-side dwellings. This and the impacts described above – in particular, the overlooking and corresponding visual intrusion in respect of the private space in the rear of 18 St Georges Road – are impacts which are likely to impact the value of the First and Second Defendants’ land. I decline to make a finding as to the likely magnitude of impact but accept the Defendants’ general submission that, in the context of the prestige residential property market in Melbourne and the high value of the property, any small impact in percentage terms will be substantial in dollar terms.

Third and Fourth Defendants

The Third and Fourth Defendants similarly enjoy all of the benefits of the Covenants, and in particular the sense of spaciousness and privacy in the rear of their properties. I accept Mr Prior’s evidence that he placed great value on the private use of his garden when purchasing the property at 14 St Georges Road, and continues to place value on that aspect. As noted, there is no evidence that either of the Third or Fourth Defendants derive any benefit from the use of St Catherines Lane.

The Plaintiffs’ proposal is likely to result in a significant reduction in spaciousness, visual amenity and privacy at the rear of the Third and Fourth Defendants’ land. The prospect of overlooking and visual intrusion is greater than for the First and Second Defendants, due to the immediate proximity of the Third and Fourth Defendants to the Land. Further, due to the orientation of the lots, the Third and to a lesser extent Fourth Defendant are likely to experience substantial overshadowing of their properties in the winter months.

I consider that these impacts are likely to be substantially greater than similar impacts from a realistic worst-case single dwelling, which is likely to have a significantly smaller total footprint and built form bulk and could be positioned in only one location on the Land. To the extent that it was positioned precisely adjoining the Third Defendant’s private space (which is unlikely), the impacts on the Fourth Defendant would be substantially less than the impacts of the Plaintiffs’ proposal. In the very remote scenario that a single large dwelling were located adjoining the Fourth Defendant’s land, the same is true as for the Third Defendant.

The Third and Fourth Defendants are likely to experience an increase in noise from five lots adjoining their properties. I do not accept that the large dwelling at 18 St Georges Road will offset any of the noise from those dwellings, considering the remoteness of the Third and Fourth Defendants from 18 St Georges Road and the intervention of the row of two storey dwellings on the Land.

The same observations concerning prestige and overall value made in respect of the First Defendant may be made in respect of the Third and Fourth Defendants. The impact on the Third and Fourth Defendants’ privacy and visual amenity to the rear of their land and the diminution of the overall character of the neighbourhood, in the context of Melbourne’s prestige residential market, is likely to have a negative impact on the value of the Third and Fourth Defendants’ properties. As already noted, even a small percentage reduction in value is significant in dollar terms.

Fifth to Seventh and Tenth to Fifteenth Defendants

The Sixth and Seventh Defendants, and to a lesser extent the Fifth Defendant, are immediately across St Catherines Lane to the subject Land, and are oriented away from the Land. However, their private rear space and, in the case of the Sixth and Seventh Defendants at least, bedroom windows face the lane and the rear of the Land. They thereby enjoy the benefit of open and unoccupied space at the rear of the Land, as well as a more limited use of St Catherines Lane.

It is more likely than not that there will be significant injurious impacts to these Defendants in terms of their use of St Catherines Lane for vehicle and pedestrian access. While it is difficult to determine, at the very least the Plaintiffs have not satisfied me that there will not be such a substantial injury. It is likely that there will be increased noise in St Catherines Lane, especially out-of-school hours.

The prospect of overlooking from the rear dwelling in the subdivided lots on the Land is slightly more limited than the prospect in respect of the First to Fourth Defendants, but is nonetheless real. Likewise the imposition of visual bulk and loss of a sense of spaciousness when viewing across the Land from the Fifth to Seventh Defendants’ properties is less than in respect of the First to Fourth Defendants, but is real.

The Fifteenth Defendant, St Catherine’s School, is also relatively proximate to the Land, but its primary complaint concerns the use of St Catherines Lane. To the extent that the Major Covenant is relevant to the level of activity in the lane, I accept that the Fifteenth Defendant enjoys the benefit of more convenient and safe transit of staff, students and other persons to and from the School. It is possible that the School will suffer injury as a result of the diminished utility and overall safety of the lane arising from the increase in traffic. On its own, I do not consider the potential injury to St Catherine’s School in this regard to be substantial.

The Tenth, Eleventh and Fourteenth Defendants own properties in cul-de-sacs off Heyington Place with access to St Catherines Lane to the south of the subject Land. As noted, there is very limited evidence as to their current use of St Catherines Lane, such that it is difficult to determine to what extent these Defendants derive a benefit from the Major Covenant in terms of the activity in St Catherines Lane. While I am prepared to accept that there is some benefit so enjoyed, I am not satisfied that the impact of the Plaintiffs’ proposal would be substantial.

The Twelfth and Thirteenth Defendants are proprietors of 15 Heyington Place, at the northern corner of Heyington Place and Crestmont Court. The property is separated from the Land by St Catherines Lane, the crook of Crestmont Court, and two other properties. It has no access to St Catherines Lane or St Georges Road. While I accept that these Defendants may gain a general benefit from the Covenant in terms of neighbourhood character, there is little to indicate that they enjoy any material benefits. I do not consider that the Plaintiffs’ proposal would cause them substantial injury.

Conclusion as to the s 84(1)(c) Application

For the reasons given above, I am not satisfied that there will be no substantial injury to any of the Defendants as a result of the Plaintiffs’ proposal. As a consequence, the s 84(1)(c) Application will be refused.

Before moving on, I wish to say something further about the way that the Plaintiffs put their case in respect of the Modification Applications, and it is convenient to do so here. The Plaintiffs clearly made a decision to pursue the Modification Applications without providing detailed drawings or plans of their proposal; rather, the detail of the proposal was confined to the Proposed Envelope. That was their choice, and they were entitled to run their case that way if they saw fit. As noted earlier, having made that choice, they then have to bear the consequences of it in terms of not being able to clearly articulate the changes which may occur and whether they will be substantially injurious to the Defendants.

Similarly, the Plaintiffs also clearly made a decision to pursue the modifications without an explicit height limit for the proposed new dwellings. Instead, they relied on the limitation in the relevant planning scheme of 12 metres. Their own town planning expert, Mr Milner, recommended a height limit of 9 metres rather than 12 metres. After receiving the Second Milner Report containing this recommendation, in December 2020 the Defendants attempted to have the Plaintiffs clarify their position as to what height limit they were proposing, and invited them to amend the originating motion to reflect a 9 metre height limit. The Plaintiffs refused to do so. Unsurprisingly and understandably, the Defendants had their experts opine on the impact of the proposal at both height limits, including the provision of drawings and photo montages. The Plaintiffs opened their case and presented their evidence at trial without stating in clear terms that their proposal was based on a 9 metre height limit. Under cross-examination by the Plaintiffs’ Senior Counsel, Mr Barnes was asked why he had included an opinion based on a 12 metre height limit when he ‘understood that [the Plaintiffs] were advancing Mr Milner’s evidence of nine metres high’.[273] Not only was that implied criticism of the witness unfair in the circumstances, it also lacked a proper foundation as there was no evidence at all that the Plaintiffs had accepted that recommendation. It was also not particularly fair to the Plaintiffs’ own witnesses: at the conclusion of Mr Milner’s evidence, I asked him whether his opinion that there was no substantial injury would be different if the height limit was 12 metres rather than 9 metres, to which he responded that the issue was not ‘black and white’ but that the recommendation of 9 metres provided a ‘greater level of comfort’ to the Defendants.[274] Mr Horgan then remarked that the Plaintiffs ‘rely upon’ Mr Milner’s evidence ‘and always have’, and that if I were to accept Mr Milner’s evidence ‘that would result in a height limitation’.[275]
[273]Transcript, 343.5–6.
[274]Transcript, 229.29–230.14.
[275]Transcript, 230.16–20.

While the Plaintiffs relied on Mr Milner’s evidence, it was far from clear at the outset and during presentation of their case that they had adopted the 9 metre height restriction. Mr Horgan’s comment to me as set out above was leaving open the prospect of there being no height limitation expressed in the modified covenant. It seemed to me that the Plaintiffs were trying to have a bet each way. The Court and the Defendants can only approach the Plaintiffs’ application in the manner in which it is put, which at that time did not include any express limitation on height. It was not until just prior to the Third and Fourth Defendants presenting their evidence that the Plaintiffs nailed their colours to the mast and indicated that they intended to seek leave to amend the originating motion to include a 9 metre height limit. This was because Mr Gobbo stated that the Defendants were entitled to know the case they were responding to before adducing evidence, a proposition which is hardly surprising.

In respect of both the lack of detailed plans or drawings and the failure to be clear about a height limit, the Plaintiffs effectively approached the Modification Applications by coming to the Court to see what they could get. That is all very well, but having cast their net wide, their applications have to be assessed on that basis and not on what changes may be able to be made to the Proposal to possibly make it more palatable.

The s 84(1)(a) Application
Whether the Covenants impede the reasonable user of the Land

As I have already discussed, the first part of the second limb of s 84(1)(a) of the PLA requires that the Plaintiffs show that the Covenants impede any and all reasonable user of the Land. It may be accepted that the Plaintiffs’ proposal is ‘reasonable’ as a use of land at large, but this is not wholly relevant to whether the Covenants ‘impede the reasonable user of the Land’ for the purposes of s 84(1)(a) of the PLA.

Mr Milner conceded that ‘the continued existence of the restriction would not impede the user of [the Land] from using the Land for a single dwelling’.[276] Mr Milner expressed the view that the restriction would nonetheless impede the development of the Land in a manner similar to that permitted in other parts of the estate, and that ‘matters of fairness and equity’ weigh in favour of modification to align with those other, reasonable, users of their own land.[277] Mr Barnes and Mr Negri each opine that the use of the Land for a single dwelling is not unreasonable, especially in light of the many other substantial single dwellings on large lots in the neighbourhood and the fact that the Second Plaintiff will have purchased the Land with knowledge of the restriction.[278]
[276]Second Milner Report, 5 (CB1014).
[277]Second Milner Report, 5-6 (CB1014-5).
[278]Barnes Report [117]–[120] (CB1407); Negri Report [149]–[156] (CB2442).

Mr Negri also refers to and exhibits a planning permit obtained by or on behalf of the Second Plaintiff in 2018, for the proposed construction of a large single dwelling on the Land with a swimming pool, tennis court and outbuilding for a proposed cost of $19.8 million.[279] The First and Second Defendants further tendered as an exhibit the drawings of the proposed dwelling to be built pursuant to that permit.[280] While the Second Plaintiff was uncertain about the permits and other procedures, she confirmed that at the time the Land was purchased she had intended to live there in a large single dwelling.[281]
[279]Negri Report, Exhibit MN-2 (CB2470-1).
[280]Exhibit 2 – drawings of proposed dwelling
[281]Transcript 131.3–26, 132.17–18.

The Plaintiffs rely substantially on their submissions as to the proper construction of the First Limb of s 84(1)(a), which I have rejected. The Defendants’ submissions are in agreement that in the circumstances of the neighbourhood and the many large single dwellings on broadacre lots, the use of the Land for a single large dwelling is not an unreasonable one. For that reason, it is said that the Covenants do not impede the reasonable user of the Land for the purposes of s 84(1)(a).

The Plaintiffs refer to the Knox Modifications, outlined at paragraph 200(a) above, and make the following submissions:

(a) In SCV Ref 1964 No M5087 the applicants successfully argued in relation to, relevantly, a single dwelling covenant in respect of what is now 5 Heyington Place and 1-3 Glendye Court, that its existence impeded the reasonable use of the land without securing practical benefit. The applicant succeeded on the basis of the following evidence:

(iii) Valuation evidence from Gerald Letts, real estate agent and valuer, that the cost of maintenance involved in a single residence on a block of that size often led to neglect; there was no demand for blocks of the size of the land except for sub-division or flats, but there was a large demand for smaller blocks; that the covenant was obsolete and oppressive, was “not calculated to preserve the present character of the area and in terms prevent[ed] its proper development”, and was unreasonable; that to modify the covenant to permit four dwelling houses would preserve the character and amenity of the neighbourhood.[282]
[282]Exhibit GB-3 to the Baliviera Affidavit, pp 145-147 [4]–[8] (CB477-479).

(iv) Valuation evidence from Henry Seddon, real estate agent, that the subdivision would “enhance the value of the land in the surrounding area” and would not detrimentally impact the amenity of immediately adjoining land.[283]
[283]Exhibit GB-3 to the Baliviera Affidavit, pp 150-151 [4]–[7] (CB482-473).

(b) In SCV Ref 1964 No 5089, the applicant successfully argued in relation to, relevantly, a single dwelling covenant in respect of what is now 8 and 8A St Georges Rd and part of Greenknowe Court, that its existence impeded the reasonable use of the land without securing practical benefit. The applicant succeeded on the basis of the following evidence:

(i) From Mr Seddon, that there was “practically no market” for a single dwelling on a lot of that size, it would be extremely costly to maintain, there was large demand for smaller allotments, houses on such large blocks in the area were an “anachronism”, and the proposed subdivision would preserve the character of the area in that “every such development … establishes more firmly the character of the area as it now is”.[284]

(ii) From Mr Letts, that the covenants were “obsolete and ... oppressive” and were “not calculated to preserve the present character of the area and in terms prevent its proper development;” and the subdivision would not affect the amenity of nearby land.[285]

[284]Exhibit GB-3 to the Baliviera Affidavit, 217-221 [3]-[5], [8]-[10], [12] (CB549–553).

[285]Exhibit GB-3 to the Baliviera Affidavit, 224-225 [6]-[7] (CB556-7).

It is apparent that the evidence of Mr Letts and Mr Seddon in the Knox Modifications concerning the burden of upkeep of the substantial lots, and the market for those lots, was designed to address the question of whether the covenants impede the reasonable user of the land. It is apparent that the evidence also concerned the elements of practical benefit and substantial injury in ss 84(1)(a) and (c) respectively.

There is no evidence of the reasons for the Court’s decision to modify the covenants in either case, including whether the Court accepted that the covenants impeded the reasonable user of the land. Where there is also evidence on the file in relation to the lack of substantial injury in modification of the covenants, the inference that the evidence concerning reasonable user was accepted or was determinative is questionable and I decline to draw it.

In any event, it is unnecessary for me to speculate. That is because there is no evidence in this case of an equivalent nature to the evidence in the Knox Applications concerning the burden of the existing large lot comprising the Land or the non‑existence of a market for such a lot. I accept the evidence given by the valuation experts that the market for such a lot is limited, at least in the sense that there are few prospective purchasers with the means and intention to purchase residential land at the scale and in the context of 16 St Georges Road. There is nonetheless such a market. Moreover, the saleability of the Land is not the only relevant use to which s 84(1)(a) directs attention.

In the circumstances of this case, the Second Plaintiff acquired the Land with a large single dwelling on it, with the intention of living in a large single dwelling and did in fact occupy that large single dwelling for a brief time.[286] She subsequently demolished that dwelling and there were plans drawn up for her to build and occupy another large single dwelling. It is also evident from the large single dwelling under construction on 18 St Georges Road, commenced after its purchase in 2017 by the First Defendant, and the many large single dwellings in the wider neighbourhood, that occupation of a single large dwelling in this neighbourhood is not unusual, and by no means unreasonable. The Second Plaintiff herself and the Plaintiff’s own expert were forced to concede as much. There can be no suggestion that the single dwelling restriction in the Major Covenant impedes the reasonable user of the Land for the purposes of s 84(1)(a) of the PLA.
[286]Transcript, 131.9-11.

Whether the Covenants do not confer practical benefits

It is not necessary to address this question due to my conclusion that the Plaintiffs have not established that the presence of the Covenants impede the reasonable user of the Land. However, for the reasons given in respect of the s 84(1)(c) Application, I consider that the Covenants do confer practical benefits on the same Defendants who would suffer substantial injury, which practical benefits would be significantly impacted upon by the Plaintiffs’ proposal.

Conclusion as to the s 84(1)(a) Application

For these reasons, I do not accept that the Covenants impede the reasonable user of the Land or that the Covenants do not confer practical benefits on their beneficiaries. Accordingly, the s 84(1)(a) Application will be refused.

Conclusion

For all of the reasons given above, I will dismiss the Plaintiffs’ Originating Motion, as I have refused:

(a) the Declaration Application;

(b) the s 84(1)(a) Application; and

(c) the s 84(1)(c) Application.

The proceeding will be listed for hearing and the making of orders to give effect to this Judgment, and in respect of costs and any other matters, on 24 June 2022. The parties are invited to confer and agree on a form of order and provide it to my Chambers in advance of that hearing. If agreement cannot be reached, then each party should provide to my Chambers their preferred form of order and a short submission of no more than three pages in respect of costs. In either scenario, the proposed form of order and (if there is no agreement) written submissions should be provided to my Chambers by 12.00pm on 22 June 2022.

SCHEDULE OF PARTIES

S ECI 2020 00998
BETWEEN:
JESHING PROPERTY MANAGEMENT PTY LTD (ACN 617 076 338)	First Plaintiff
XIAOYAN BAO	Second Plaintiff
- v -
QI YANG	First Defendant
XIAOYU ZHU	Second Defendant
DAVID NELL PRIOR	Third Defendant
PHILIP HARRY GOODMAN	Fourth Defendant
MARY-ANN MITRAKAS	Fifth Defendant
DARRYL LINDSAY WASHINGTON	Sixth Defendant
JULIA WASHINGTON	Seventh Defendant
~~ERICA MARGARET MARRIOTT~~	~~Eighth Defendant~~
~~JEREMY ASHLEY CARP~~	~~Ninth Defendant~~
SIMON KESSEL	Tenth Defendant
JULIE MIRIAM KESSEL	Eleventh Defendant
FANNIE MAN YING WONG	Twelfth Defendant
HOI TO WONG	Thirteenth Defendant
DFP INVESTMENT GROUP PTY LTD	Fourteenth Defendant
ST CATHERINE’S SCHOOL	Fifteenth Defendant

[2022] VSC 306

8 June 2022