Jiang v Monaygon Pty Ltd
[2017] VSC 591
•3 October 2017
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
property list
S CI 2016 02814
IN THE MATTER of an Application pursuant to s 84 of the Property Law Act 1958 for the modification of a restrictive covenant
| PEI YAO JIANG | Plaintiff |
| v | |
| MONAYGON PTY LTD (ACN 005 621 161) | Defendant |
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JUDGE: | DERHAM AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 21 & 22 September 2017 |
DATE OF JUDGMENT: | 3 October 2017 |
CASE MAY BE CITED AS: | Jiang v Monaygon Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2017] VSC 591 |
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PROPERTY – Restrictive covenant – Two covenants over two separate properties – Application to discharge or modify restrictions in covenants pursuant to the Property Law Act1958 (Vic), s 84 – Modification of both covenants to allow for excavation works to be carried out ‘for residential development or use of the land’ – One covenant contains single dwelling restriction – Whether discharge or modification will not substantially injure the persons entitled to the benefit – Application granted – Applicable legal principles – Property Law Act1958, s 84(1)(c) & (2)(b).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr W Rimmer | Aughtersons Lawyers Pty Ltd |
| For the Defendant | Mr T Alexander with Mr H Kirimof | Dandanis & Associates |
TABLE OF CONTENTS
Introduction........................................................................................................................................ 1
The covenants..................................................................................................................................... 1
The plaintiff’s evidence.................................................................................................................... 3
The objector......................................................................................................................................... 3
The location of the subject land...................................................................................................... 5
The neighbourhood........................................................................................................................... 6
The proposed development............................................................................................................. 8
Planning and building controls...................................................................................................... 9
Applicable law.................................................................................................................................. 10
The construction of restrictive covenants................................................................................ 10
Discharge or modification......................................................................................................... 10
Section 84(1)(c)................................................................................................................... 10
Submissions and consideration.................................................................................................... 13
The single dwelling restriction.................................................................................................. 13
The other beneficiaries............................................................................................................... 24
The quarrying restriction........................................................................................................... 26
Residual Discretion......................................................................................................................... 28
Conclusion......................................................................................................................................... 29
HIS HONOUR:
Introduction
The plaintiff is the sole registered proprietor of the land situate at and known as 31 High Street Road, Ashwood, Victoria (‘31 High’)[1] and 33 High Street Road, Ashwood (’33 High’).[2] The plaintiff applies by amended originating motion[3] to modify covenants over the properties under s 84(1) of the Property Law Act 1958 (‘the PLA’) to enable their consolidation and the construction on the consolidated land of a three storey apartment building with a basement car park.
[1]Certificate of Title Volume 6715 Folio 845.
[2]Certificate of Title Volume 11638 Folio 177 (this was purchased on 22 August 2016, the date of settlement, although the contract of sale was entered into on 7 May 2016).
[3]Filed on 8 December 2016 to add the defendants, pursuant to the orders of Derham AsJ made 6 December 2016. The initial originating motion was filed 19 July 2016.
The covenants
31 and 33 High (‘the subject land’) are lots 20 and 21 on Plan of Subdivision 12951 (‘Plan of Subdivision’). Both properties were created out of a larger parcel of land described in Certificate of Title Volume 5807 Folio 224 (‘the Parent Title’).
The covenant over 31 High was created by Instrument of Transfer 1923252[4] (‘the first covenant’). The substance of the restriction in the covenant is twofold:
(a) that the registered proprietor for the time being will not, and will not permit, any earth, clay, stone, gravel or sand to be excavated, carried away or removed from the land ‘except for the purpose of excavating for the foundations of any building to be erected thereon’ (‘the quarrying restriction’); and
(b) that the registered proprietor for the time being will not erect any building or hoarding for advertisement nor any forge nor timber yard upon the land, nor allow the land to be used for the storage of timber (‘the hoarding, forge or timber yard restriction’).
[4]Dated 2 August 1944, affecting Lot 20 on the Plan of Subdivision.
The plaintiff seeks to modify the exception in the first limb of the covenant so that instead of the words ‘except for the purpose of excavating for the foundations of any building to be erected thereon’ there is inserted ‘except in connection with the residential development or use of the land.’
The covenant over 33 High is contained in Instrument of Transfer 1623360[5] (‘the second covenant’). This covenant also has the same quarrying restriction as the first covenant and two further restrictions, namely that the registered proprietor for the time being:
(a) shall not use or permit or allow the land to be used for the manufacture or winning of bricks, tiles or pottery-ware (‘the brick making restriction’); and
(b) shall not erect more than one dwelling house on the land (‘the single dwelling restriction’).
[5]Dated 19 August 1936 affecting Lot 21 on the Plan of Subdivision.
The plaintiff seeks to make a similar modification to the quarrying restriction as for the first covenant. In addition, the plaintiff applies to delete the single dwelling restriction and instead provide a restriction that the registered proprietors for the time being ‘shall not erect more than one residential building’.
Both properties have single storey brick veneer dwellings constructed on them. The plaintiff cannot apply for planning approval for the construction of the proposed apartment building because the quarrying restriction may prevent the construction of a basement car park and the single dwelling restriction will prevent the construction of more than one apartment on 33 High.[6]
[6]Affidavit of Glen Andrew Egerton filed 19 July 2016, 3 [14].
The plaintiff relies on the ground for discharge or modification in s 84(1)(c) of the PLA and contends that the proposed modifications will not substantially injure those persons entitled to their benefit.[7]
[7]Ibid 4 [16].
The plaintiff’s evidence
The plaintiff relies on two reports of Robert Walter Easton (‘the Easton Reports’).[8] Mr Easton’s evidence is referred to below in the background facts and in my consideration of the evidence and submissions.
[8]The Easton Reports are exhibit “RWE-1” to the affidavit of Robert Walter Easton sworn 10 August 2016 (‘First Easton Report’) and exhibit “RWE-2” to the affidavit of Robert Walter Easton sworn 24 July 2017 (‘Supplementary Easton Report’).
The plaintiff also relied on the affidavit of Glen Andrew Egerton.[9] Mr Egerton’s unchallenged evidence concerned the plaintiff’s ownership of the subject land, the history of the titles and the covenants (including who has the benefit of them).
[9]Affidavit sworn 14 July 2016.
The objector
Notice was given to the landowners and mortgagees of the properties having the benefit of the covenants in the usual way, and two persons gave notice of objection to the modifications sought, Maria Cristina Rigby and Monaygon Pty Ltd (ACN 005 621 161) (‘Monaygon’). The originating motion was amended adding these objectors as defendants to the application. Ms Rigby withdrew her objection and did not continue as a defendant. She has been removed as a defendant.
Monaygon is the registered proprietor of a neighbouring property at 453 Warrigal Road, Ashwood, Victoria (‘453 Warrigal’). Monaygon has entered into long-standing leases with various telecommunications carriers as tenants, who have used the roof space to erect three telecommunications towers.[10] No leases were initially proffered, but shortly before the trial they were the subject of a late affidavit which also gave evidence of the current rents received.[11] Monaygon contends that the proposed development of a three storey apartment building on the subject land may interfere with the existing use of 453 Warrigal in that it may detrimentally interfere with the telecommunication companies’ signals. In particular, the antennae heights may be impacted by the proposed development and shadowing will occur which will significantly reduce the coverage. This will cause Monaygon to breach its obligations under the leases,[12] or, more likely, result in termination of the leases under provisions that enable termination where there is interference with reception of telecommunication signals.[13]
[10]Affidavit of Peter Lambropoulos sworn 16 February 2017, 2 [3] (‘Lambropoulos First Affidavit’). There are in fact 6 or more communications antennas on the roof.
[11]Affidavit of Peter Lambropoulos sworn 19 September 2017 (‘Lambropoulos Second Affidavit’).
[12]Lambropoulos First Affidavit, 2 [3].
[13]Lambropoulos Second Affidavit, [5]-[6].
Monaygon relies on the following expert reports:
(a) a technical expert report of Lawrence J Derrick (‘the Derrick Report’);[14] and
(b) a further report of Mr Derrick (‘the Second Derrick Report’).[15] This Second Derrick Report exhibited a report by Johnny Lim, Technical Services Manager of Radhaz Consulting Pty Ltd, concerning the radio frequency hazard exclusion zones applicable to the antennae on the roof of 453 Warrigal (‘the Radhaz Report’). There was no objection to the admissibility of this (or any) expert report.
[14]Affidavit of Lawrence J Derrick sworn 15 February 2017, exhibit LJD-1.
[15]Affidavit of Lawrence J Derrick sworn 30 March 2017, exhibit LJD–S1
Monaygon also relied on the affidavit of Michael Gerard Bede Gwynne.[16] Mr Gwynne is a Telstra regional manager and a Site Acquisition Officer in Victoria and Tasmania. His affidavit deals with the positioning of Telstra’s facilities on the roof or 453 Warrigal. He exhibits leases entered into between Telstra and Monaygon (in 2008 and 2013), and notes that Telstra has six antennas on the roof, and has spent $340,000.00 since June 2017 upgrading the facility on the site and that:
(a) if the elevation of the surrounding properties was to change, this may impact the operation of the facility; and
(b) if those changes interfered with the performance of the facility, Telstra may elect to terminate the lease or consider not exercising an option to renew which arises in February 2018.
[16]Affirmed 19 September 2017.
Monaygon contends that the plaintiff’s application to modify the covenant will substantially injure it as a landowner entitled to the benefit of the restrictions and the continued existence of the covenants would not impede the reasonable use of the land by the plaintiff, while securing practical and substantial benefits to the adjoining landowners.[17]
The location of the subject land[18]
[17]First Lambropoulos Affidavit, 3 [5].
[18]The section is drawn from the First Easton Report and the Supplementary Easton Report and an unaccompanied view undertaken with the consent of the parties.
The subject land is a generally rectangular shaped parcel comprising two adjacent residential lots both located on the north side of High Street Road, Ashwood, approximately 40 metres east of its intersection with Warrigal Road. It has a combined area of approximately 1,500 square metres and a frontage to High Street Road of about 39 metres.
Immediately to the west of 31 High is a laneway extending the full length of the western boundary which provides access to the rear of the shops fronting on Warrigal Road. 33 High is located on the corner of High Street Road and Kennett Street. Opposite the subject land is a large Woolworths supermarket complex (on the south side of High Street Road). The property at 453 Warrigal is one of the shops fronting Warrigal Road, one up from the corner of the intersection of Warrigal Road and High Street Road. It backs onto the laneway adjacent to the subject land.
The subject land is on a very busy road with a relatively low level of residential amenity at its frontage. It abuts a commercially zoned area of land with the frontage to Warrigal Road which is also a major highway. Given the attributes of the subject land, in Mr Easton’s opinion, it is unlikely that either existing dwelling would be replaced by another single dwelling. It is more likely that the replacement would be apartments or town houses, covenants permitting. This opinion of Mr Easton seemed, having regard to my unaccompanied view of the subject land and surrounds, to be highly likely because of the closeness of the intersection of Warrigal and High Street Roads, the shopping centre opposite the subject land and the proximity of the Warrigal Road shopping strip. It is a very busy and noisy area with zero tranquillity. See Figure 7 below.[19]
[19]First Easton Report, p.7.
The neighbourhood
Mr Easton says that the best definition of the neighbourhood is the land originally contained within the parent title, together with several other lots scattered throughout the subdivision which were excluded from the parent title by virtue of their earlier transfer. The neighbourhood was created in 1929 when the Plan of Subdivision was first registered. This area originally comprised 30 residential lots of comparable size to the subject land, and 19 shop sites. Covenants were not placed consistently on all of the lots in the Plan of Subdivision.
Seventeen of the residential lots were subject to a covenant limiting the number of dwellings to one. The remaining 13 residential lots did not have any restriction on the number of dwellings, while one of the lots was not subject to any form of covenant. The shop sites were also subject to covenants but these were limited to the quarrying restriction and other restrictions on industrial types of uses. Below is an extract from the First Easton Report showing the distribution of the covenants. The lots coloured green were subject to a single dwelling covenant and the lots coloured pink have no such reference. The subject land is marked with an ‘S’.[20]
[20]First Easton Report, p. 27.
The general character of the area is now substantially different to that envisaged in 1936. Both Warrigal Road and High Street Road frontages are now major roads.
I find it impossible, having undertaken a view of the subject land and its surrounds,[21] to exclude from the neighbourhood the commercial development on the south side of High Street Road, occupied by a Woolworths store and car park. It is also noteworthy that the commercial developments on the shop sites along Warrigal Road (within the Plan of Subdivision) have an immediate impact on the subject land. Below is a photograph of the Woolworths store taken from Mr Easton’s First Report.[22]
[21]The view was held on the morning of 21 September 2017 unaccompanied by the parties with their consent.
[22]First Easton Report, p. 8.
The proposed development
The plaintiff proposes to consolidate the subject land into a single-parcel and then construct a three-level apartment building with a basement car park. Up to 25 apartments are anticipated, but this may alter during the planning process. Mr Easton’s opinion is that the number of dwellings is not significant as they must all fit within the building proposed. Preliminary concept plans attached to the First Easton Report show the upper level will be stepped in away from the northern, eastern and western boundaries.[23] This is in response to standards in ‘Rescode’ requiring walls to be further from boundaries as the height increases. The building is generally symmetrical in shape. However, due to the location of the lane abutting the western boundary, it is possible that during the detailed design process the building could be altered to a more asymmetrical shape to place greater bulk in the area adjacent to the lane, being the western boundary of 31 High, which is not subject to any restriction on the number of dwellings. It is anticipated that the building height will not exceed 10-11 metres which is the standard maximum height now accepted within the general residential zone.
[23]First Easton Report, A21-A25.
A proposed 30 car basement car park will be accessed via the existing cross over from Kennett Street.
Only one property, 7 Kennett Street, has a common boundary with the subject land. and also has the benefit of the covenant burdening 33 High (the single dwelling covenant). 7 Kennett Street has a single dwelling with garage on the common boundary with the subject land. The balance of the dwelling is set back about 1.2 metres from that boundary. Both the basement and the ground floor level of the proposed development on the subject land will be set back at least 2.5 metres from the boundary with 7 Kennett Street. There has been no objection from the owner of 7 Kennett Street.
It is noted that the second covenant containing the single dwelling restriction does not regulate the height, size or any other aspect of the dwelling erected on 33 High.
Planning and building controls
Although town planning controls and considerations are not directly relevant to the application for the discharge or modification of a restrictive covenant, they do provide a backdrop and establish a framework to assess how the subject land may be developed subject to or in the absence of the restrictions in the covenants. In the Supplementary Eastern Report, Mr Easton notes that since the First Easton Report, provisions of the general residential zone (‘GRZ’) planning laws have been amended as part of a State‑wide review. These amendments commenced on 13 April 2017.
At the time of the First Easton Report, there were no mandatory height restrictions in the general residential zone. Clause 32.08-9 of the GRZ now specifies a maximum building height which limits the height to 11 metres and no more than three storeys, not including a basement. It would be possible to build a three storey single dwelling on 33 High without obtaining a planning permit and without modifying the single dwelling covenant. Mr Easton opines that such dwellings are relatively rare but there is a tendency for the height of dwellings to increase towards the 11 metre maximum to satisfy other provisions now introduced requiring a mandatory 35 per cent of the site to be set aside as garden area. Such dwellings do not require a planning permit.
Applicable law
The construction of restrictive covenants
I have recently set out the relevant principles of interpretation applicable to restrictive covenants in Clare & Ors v Bedelis.[24]
[24]See Clare & Ors v Bedelis [2016] VSC 381 [31].
In summary, subject to certain qualifications, it is necessary to discover the parties’ intention revealed by the language of the relevant document, giving words their ordinary meaning and construing them in their context, with regard to the purpose or object of the restriction from the eyes of a reasonable reader. If the meaning of the covenant is ambiguous, then it ought be interpreted against the covenantor.
Discharge or modification
Section 84(1)(c)[25]
[25]The summary that follows is partly taken from the recent decision of Riordan J in Oostemeyer v Powell & Ors [2016] VSC 491 [47]-[51].
The plaintiff relies on s 84(1)(c) of the PLA, and therefore has the burden of proving as a matter of fact[26] that the proposed discharge or modification will not substantially injure those with the benefit of the covenant. As the person carrying the burden, the plaintiff must prove the negative[27] and the failure by the plaintiff to establish its plans with specificity may result in the Court not being satisfied that the conditions of the section have been fulfilled.[28]
[26] Vrakas v Registrar of Titles [2008] VSC 281 [40] (Kyrou J) and the cases cited (‘Vrakas’).
[27]Ibid [42].
[28]Ibid.
The following guiding principles apply to determine whether those entitled to the benefit of the covenant will not be substantially injured:
(a) a substantial injury must be a detriment that is real and not fanciful.[29] The requirement that the injury must be substantial was intended ‘to preclude vexatious opposition cases where there is no genuineness or sincerity or bona fide opposition on any reasonable grounds’;[30]
[29]Ibid [36].
[30]Ridley v Taylor (1965) 1 WLR 611, 622 (Russell LJ); referred to with approval in Re Stani (Unreported, Supreme Court of Victoria, Young CJ, Barber and Nelson JJ, 7 December 1976) 10.
(b) the substantial injury relates to practical benefits, being any real benefits to the person entitled to the benefit of the covenant.[31] It is not sufficient for a plaintiff to merely prove that there will be no appreciable decrease in the value of the property that has the benefit of the covenant;[32]
[31]Vrakas [2008] VSC 281, [30], [34] and the cases cited.
[32]Re Parimax (SA) Pty Ltd (1956) 56 SR (NSW) 130, 133 (Myers J).
(c) substantial injury may consist of the order for modification of the covenant being ‘used to support further applications resulting in further encroachment and in the long run the object sought when the covenant was imposed [being] completely defeated’.[33] This consideration is referred to as the ‘precedent value’;[34] and
[33]Re Stani (Unreported, Full Court of the Supreme Court of Victoria, Young CJ, Barber and Nelson JJ, 7 December 1976) 11.
[34]Vrakas [2008] VSC 281 [39] and the cases cited.
(d) whether there will be substantial injury is to be assessed by comparing:
(i) the benefits initially intended to be conferred and actually conferred by the covenant; and
(ii) the benefits, if any, which would remain after the covenant has been discharged or modified.[35]
[35]Ibid [35].
If the evidence establishes that the difference between the two will not be substantial, the plaintiff has established a case for the exercise of the Court’s discretion under s 84(1)(c) of the PLA.[36]
[36]Re Cook [1964] VR 808, 810-811 (Gillard J); approved in Freilich v Wharton [2013] VSC 533 [25] (Bell J).
In Prowse v Johnstone,[37] Cavanough J considered that in assessing the benefits actually conferred by the covenant, the Court should have regard to ‘the realistic probabilities of the plaintiff actually bringing about the worst that could be done under the existing covenant.’[38] His Honour was prepared to ‘assume, without deciding’ that in assessing the benefits which would remain, if the covenant is removed or modified, the Court could consider the protections afforded to neighbouring properties by statutory planning provisions. It is relevant to consider evidence of statutory planning provisions to the extent it shows what realistically will be the result of the removal or modification of the covenant because ‘it would be artificial and wrong to pay no heed at all to the reality of the situation’.[39]
[37][2012] VSC 4 (‘Prowse’).
[38]Ibid [104].
[39] Ibid.
In considering whether the plaintiff has satisfied the Court that there will not be substantial injury:
(a) town planning principles and considerations are not relevant;[40]
(b) the absence of objectors to the discharge or modification of a covenant will not necessarily satisfy the onus of proof;[41] and
(c) each case must be decided on its own facts,[42] and each covenant should be construed on its own terms and having regard to the particular context in which it was created.[43]
[40]Vrakas [2008] VSC 281 [41] and the cases cited.
[41]Ibid [43].
[42]Ibid [44].
[43]Prowse [2012] VSC 4 [52].
If the plaintiff satisfies the Court that there will be no substantial injury to the relevant persons, the Court has a residual discretion to refuse the application.[44] The Court in exercising its discretion, may consider town planning principles and the precedent value.[45]
[44]Re Cook [1964] VR 808, 810; Re Robinson [1972] VR 278, 285-6; Re Stani (Unreported, Full Court of the Supreme Court of Victoria, Young CJ, Barber and Nelson JJ, 7 December 1976) 7; Greenwood (1992) V ConvR 54-444, 65,192, 65,200; Stanhill (2005) 12 VR 224, 239.
[45]Vrakas [2008] VSC 281 [45]–[46].
There has been a tendency in applications under s 84(1)(c) of the PLA to refer to the observations of Adam J in Re Robinson,[46] where his Honour referred to the purpose of s 84(1)(c) of the PLA identified in Ridley v Taylor,[47] which was to preclude vexatious opposition to cases where there is no genuineness or sincerity or bona fide opposition on any reasonable grounds. It is worth emphasising what was said in MacLurkin v Searle,[48] about this notion that s 84(1)(c) of the PLA is restricted to dealing with vexatious or frivolous objections. That is not, in my opinion, the proper interpretation. As Eames J observed in Greenwood & Anor v Burrows & Ors,[49] although the restriction of s 84(1)(c) of the PLA to ‘substantial’ injury would enable the weeding out of vexatious objections to the modification or removal of a covenant, the dichotomy in the section is not between vexatious and non-vexatious claims but is between cases involving some genuinely felt but insubstantial injury, on the one hand, and cases where the injury may truly be described as substantial, on the other.
[46][1972] VR 278, 284-285.
[47][1965] 1 WLR 611.
[48][2015] VSC 750 [54]-[56].
[49](1992) V Conv R 54-444, 65, 199.
Submissions and consideration
The single dwelling restriction
A single dwelling covenant has been described as imposed for the purpose of ensuring one residence only was to be erected on each block so that there would be a reasonable density of population giving a reasonably quiet residential atmosphere, attractive in that it would provide a tranquil, quiet existence.[50] The general suggestion is that this living environment would be reduced by higher density housing, leading to a reduction of open space, a greater congestion of people and traffic and an increased demand on municipal amenities. The judgment to be made about ‘substantial injury’ turns on the nature and degree of the injury to those benefits.[51]
[50]Re Stani (Unreported, Full Court of Supreme Court of Victoria, 7 December 1976) 8; See also Re Miscamble’s Application [1966] VR 596, 601; MacLurkin v Searle [2015] VSC 750 [59]; and Re Morihovitis [2016] VSC 684 [38] (‘Morihovitis’).
[51]Morihovitis [38].
The plaintiff submitted that Mr Easton’s evidence shows that there will be no substantial injury to lots in the hinterland of the neighbourhood generally because the single dwelling restriction applies only to 33 High and that property is on a busy main road not far from the corner of the busy intersection of High Street Road and Warrigal Road and directly opposite a major commercial development. The plaintiff further submitted that:
(a) any contribution the single dwelling restriction affecting 33 High once made to the tranquil, peaceful and spacious neighbourhood in which other beneficiaries live is no longer achieved by this covenant; and
(b) any development on High Street Road will not substantially injure the tranquillity or sense of spaciousness of the hinterland, to the extent those benefits presently continue to exist.
Monaygon made no submission directed to the purpose of the covenant being to restrict the density of development on the land so as to lead to ‘a reasonably quiet residential atmosphere’. Its submissions were directed to the proposition that the central consideration in relation to the substantial injury test in this case is the identification of the proper comparator: when comparing the pre and post-covenant situations, does the pre-covenant situation require consideration of the ‘worst possible’ case (the worst the plaintiff could do) or ‘what is realistically probable’ case (what the plaintiff is realistically likely to do).[52] In so doing, Monaygon by-passed any consideration of the purpose of the restriction in the single dwelling covenant. I will return to this submission below.
[52]Prowse [2012] VSC 4; Wong v McConville & Ors [2014] VSC 148 (‘Wong v McConville’); Hermez v Karahan [2012] VSC 443 (‘Hermez’).
As Riordan J found in Oostemeyer v Powell & Ors,[53] the purpose of the single dwelling restriction in this case is substantially identical to that found to be the purpose in respect of similar single dwelling covenants in previous applications under s 84(1)(c) of the Act. The restriction is imposed:
[53][2016] VSC 491 [53].
(a) to ensure for its beneficiaries a ‘reasonable density of population giving a reasonably quiet residential atmosphere, attractive in that it would provide a tranquil, quiet existence’;[54]
(b) to prevent the erection on the subject land of more than one dwelling house, and ‘thereby to preserve the area in question as an area of spacious homes and gardens’;[55] and
(c) for ‘the maintenance of reduced population numbers in the area’.[56]
[54]Re Stani (Unreported, Supreme Court of Victoria, Young CJ, Barber and Nelson JJ, 7 December 1976) 8.
[55]Re Miscamble’s Application [1966] VR 596, 601 (McInerney J).
[56]Greenwood v Burrows (1992) V ConvR ¶54-444, 65,197 (Eames J).
Having regard to Mr Easton’s evidence, and my view of the neighbourhood of the subject land, I agree with the plaintiff’s submission that there will be no substantial injury to lots in the hinterland of the neighbourhood generally because the single dwelling restriction applies only to 33 High and that property is on a busy main road not far from the corner of the busy intersection of High Street Road and Warrigal Road and directly opposite a major commercial development. On the view I undertook of the area around the subject land, I observed the character of the surrounds, including the traffic on High Street Road and the intersection of that road and Warrigal Road in addition to the Woolworths development and car park opposite the subject land. There is a distinct lack of any sense of ‘tranquillity’, let alone an environment that permits a quiet existence.
The plaintiff also submitted that the single dwelling covenant does not impose any height restriction on developments on the subject land. For this reason, the modification to enable a three storey apartment building will cause no adverse impact on any existing benefit of a kind protected by the single dwelling restriction, such as views, aspect or radio transmission facilities above a specified height (e.g. from mobile phone towers located at particular heights on nearby buildings). To the extent the plaintiff’s proposal has any such impact on nearby properties, it is a matter to be taken up with the responsible authorities in the planning application process.
Mr Easton was called to supplement his evidence in minor respects, without objection. He confirmed the purpose of the quarrying restriction being to stop the quarrying for clay, sand and the like for the construction of dwellings and the like in the neighbourhood. He also gave evidence that under the current zoning of 31 High, the most probable form of development would be a small apartment building and that the Council encourages larger rather than smaller projects on very major roads like High Street Road, so the development is highly likely to be a two or three storey building (noting the height limit of 11 metres) with or without a basement.
The relevance of this evidence is, of course, that there is no single dwelling covenant on 31 High and no need to obtain a modification of the covenant over that land to build an apartment building three storey’s high, and subject to the interpretation of the quarrying restriction, to include a basement as well. That such a building could be built now that might interfere with the radio signals from the facilities on the roof of 453 Warrigal shows, it is suggested, that such a development is realistic.
Monaygon submitted that when determining whether it will suffer a substantial injury, the Court ought to consider the realistic probable benefits practically, if not expressly, conferred by the restrictive covenants. The restrictive covenants confer upon it the practical benefit of realistically and probably preventing the construction of a large residential development next door, and its concomitant benefits, including the maintenance of clear airspace for its tenants’ telecommunications towers to transmit signals unimpeded.
Monaygon accepted that neither of the restrictive covenants expressly restrict the total height of any building built upon the burdened land. However, it contended that is not the end of the inquiry. In assessing the benefits actually conferred by the restrictive covenants, the Court may and should consider the benefits intended to be conferred and actually conferred. Since the assessment of whether the modification would cause ‘substantial injury’ to Monaygon requires a comparison between two situations - the situation before and after the modification of the covenant – a question arises as to whether the situations compared must be actual or may be hypothetical.
In this regard Monaygon relies on the observations of Cavanough J in Prowse as follows:[57]
[57][2012] VSC 4 [103]-[104].
Turning to another aspect of s 84(1)(c), in Vrakas Kyrou J rightly said that the provision requires a comparison between the benefits initially intended to be conferred and actually conferred by the covenant, and the benefit, if any, which would remain after the covenant has been discharged or modified. However, a question has arisen in the present case which is not expressly dealt with by Kyrou J. The question is: what situation should be compared with the situation that will result from the discharge or modification of the covenant? The plaintiff submits that the relevant comparator is or may be a hypothetical one, namely the situation which would obtain if full advantage had been taken or were now to be taken of such liberty as is allowed to the proprietor of the burdened property under the existing covenant. For example, if the existing covenant would not have prevented, or would not now prevent, a three storey, single house being built on the site as close as possible to all four boundaries, then, according to the plaintiff, any objection based on bulk, loss of views, overlooking or the like is to be assessed as though such a house were now standing or could now be built on the burdened property. On the other hand, the defendants submit that the court should look at the actual present physical state of the burdened property (and of the benefited properties) and then take into account the realistic prospects or chances of alterations to the burdened property in the foreseeable future under the existing covenant. [emphasis added]
In my view, the true position lies between these two approaches. As Coghlan J said in Fraser v Di Paolo,[58] the injury which must be looked at is injury to the benefit of the restriction. If that is to be established, the comparison must be between the benefit originally enjoyed and the effect that the modification will have upon it. In Re Ulman[59] McGarvie J observed that:
[58][2008] VSC 117 [36].
[59](1985) V ConvR ¶54-178, 63,420.
The proper approach is to compare what the covenant before modification permits to be done on the land which it binds with what it would permit to be done after modification.
Indeed, in a New South Wales case referred to by McGarvie J, Re Mason and the Conveyancing Act,[60] Jacobs J said, albeit in connection with issues arising under the equivalent of s 84(1)(a) rather than s 84(1)(c), that the applicant
is entitled to approach the matter by taking, as it were, the worst that could be done under the restrictions imposed by the covenant and to compare that with the effect that the proposed block of home units would have … .[61]
On the other hand, as Jacobs J himself recognised in that very case, the benefit of a restrictive covenant is a right of property and can be very valuable, and there is no general power given to the court to extinguish such rights.[62] A comparable point was made by the High Court in Cumerlong Holdings Pty Ltd v Dalcross Properties Pty Ltd [63] in relation to the interaction of town planning provisions and rights under restrictive covenants. In that light, it seems to me that it would be artificial and wrong to pay no heed at all to the reality of the situation.[64] So, even though the plaintiff is entitled to ask the Court to take into account the “worst” that could be done under the existing covenant, the defendant is also entitled to invite the Court to consider the realistic probabilities of the plaintiff actually bringing about the “worst” that could be done under the existing covenant. [emphasis added]
[60](1960) 78 WN(NSW) 925, 927-928.
[61]Ibid 927.
[62]Ibid 929.
[63][2011] HCA 27.
[64]And see Re Callanan [1970] 2 NSWR 127, 133 (Helsham J) (doubting whether a “theoretical exercise” was permissible); Re Shelford Church of England Girls Grammar, (Unreported, Supreme Court of Victoria, Lush J, 6 June 1967), 12-13 (where Lush J assessed the chances as to what might happen under the existing unmodified covenant).
Monaygon then contrasts the decision in Wong v McConville and Hermez, where modification of the single dwelling covenant was allowed on the basis that the covenantee would suffer no substantial injury, with Prowse, where the application to modify the restrictive covenant was dismissed on the basis that the covenantee would suffer substantial injury. It was submitted that distinction between the two groups of cases appears to have been the nature of the modification sought. In Prowse, the applicant sought to erect a three storey building comprising 18 residential apartments, together with a basement car park for 36 cars on two lots of land. On the other hand, in Hermez the application was to modify a single dwelling restriction to allow two dwellings. Similarly, in Wong, the applicants sought to modify a single dwelling restriction to allow the erection of one additional two storey dwelling. Then it was submitted that the current case was comparable to Prowse, and not to Hermez or Wong v McConville.
It is worth recalling the context in which Cavanough J was considering the issue. In Prowse, the subject land was in the Coonil Estate in Malvern, which was initially laid out as a residential neighbourhood and which was largely still a residential neighbourhood retaining its original character. As Cavanough J observed:[65]
…the Estate has generally consisted of good quality residential properties presenting as detached houses together with, from time to time, the odd vacant allotment…
[65]Prowse [2012] VSC 4 [1].
The 30 defendants all owned residential properties within the Estate. They enjoyed the usual benefits conferred by a single dwelling covenant, being the protection of the quiet and spacious residential neighbourhood that was originally intended and achieved by the developer. When they invited the Court to consider the realistic probabilities of the plaintiff building a single three storey dwelling to the boundaries, as against the theoretical possibility that the plaintiff in that case could build such a dwelling, they were still directing the Court’s inquiry to the relevant legal test - the effect of the relaxation of the single dwelling restriction on the benefit to them as beneficiaries of it.
Monaygon’s submission based on the observations of Cavanough J in Prowse invites the Court to consider the realistic probabilities of the plaintiff building a three storey apartment block on 31 High alone (the covenant on that land not preventing that use at present) or a three storey single dwelling on 33 High, for the purpose of preserving benefits unrelated to the residential use of 33 High and unrelated to the use of 31 High or 33 High for quarrying and other industries.
Monaygon’s submission shows a misunderstanding of the ‘injury’ against which the covenant provides protection to the covenantees and their successors in title. What s 84(1)(c) of the PLA requires is that the Court assess the nature of the injury protected by first determining the benefits initially intended to be conferred and in fact (or actually) conferred by the covenant on the benefitted land, and only then to compare it with what the plaintiff could do once the covenant is modified.[66] As the plaintiff submitted in reply, what then needs to be determined is whether there is injury to the benefit conferred by the restriction.[67]
[66]Re Cook [1964] VR 808, 810-11 (Gillard J).
[67]Fraser v Di Paulo [2008] VSC 117 [36].
Monaygon’s submission amounts in substance to the proposition that if the modification of the covenant to enable the proposed development of the plaintiff’s land will injure Monaygon’s current use of the land in any substantial way (in this case by threatening its leases for mobile telecommunications) then that is a substantial injury. In my opinion, that completely misconceives the applicable test.
The test as stated by Sir Oliver Gillard in Re Cook[68] is worth repeating:
Such injury can only be properly assessed by a comparison between the benefits intended to be conferred and actually conferred by the covenant initially on the persons entitled thereto and the resultant benefits if any remaining to such persons after the covenant has been modified. If from the evidence it appears that the difference between the two will not be substantial, then the applicant will have established a case for the exercise of the court’s discretion under paragraph (c). In order to make this comparison it is proposed to consider what benefits the covenant over the subject land may have conferred upon the persons entitled thereto, and then to assess whether the modification of such covenant would or would not substantially diminish the benefit so discovered. [emphasis added]
[68][1964] VR 808, 810.
The Derrick Report and the Second Derrick Report give evidence that mobile telephone transmission towers on the roof of 453 Warrigal Road at heights between 10.8 and 14 metres will be adversely affected by buildings on the subject land above approximately 10 metres. Expert evidence is given of the impact on the effective operation of these towers that might be expected if buildings of particular heights were constructed on the subject land.
Mr Derrick was called to supplement his evidence, without objection. He produced a plan and diagram to show the potential interference of a building 11 metres high on 31 High, the plaintiff’s parcel of land closest to 453 Warrigal.[69] His evidence made it clear that it was only one Telstra aerial and one Vodafone aerial that would encounter any interference from such a building. They each emitted signals (and presumably picked up signals) in an arc of 120 degrees so that three such aerials cover 360 degrees. Not all of that arc would be interfered with by a building constructed up to 11 metres in height either on 31 High or on both 31 and 33 High. Even then, the degree of interference depended on the materials of which the building will be constructed, it being inherent in the signal that it penetrated buildings and vehicles to some extent, depending on the strength of the signal. He agreed that even a low rise building interferes with the signals and that the amount of power ‘pumped’ into the antennas is determined by the amount of ‘clutter loss’ of signal due to the buildings and things in the environment. He said that in his belief, raising the antenna above the level of the building to be constructed would not be sufficient to restore that transmission to the level required. He also explained the evidence in the Radhaz Report and its significance for a development on 31 High, none of which appears to be relevant to the questions I have to address.
[69]Exhibit C.
Mr Lambropoulos, the director of Monaygon, has given evidence of the effect of the plaintiff’s proposed development on Monaygon’s commercial interests. He says a three storey apartment building threatens leases he has granted to mobile telephone companies for telecommunications towers on the roof of the building on 453 Warrigal. The plaintiff submitted that this kind of commercial benefit – the liberty for Monaygon or its tenants or other occupiers of the property to place and operate telecommunications towers unhindered at heights between 10.8 and 14 metres above ground level – is not a benefit intended to be secured and actually secured by a single dwelling covenant two doors away with no express height restriction and no equivalent restriction on the intervening property.
The plaintiff submitted in response to this evidence:
(a) while radio transmission and reception was a possible use of the rooftops of the shops on Warrigal Road in 1936, the protection of that use was not one of the benefits intended or actually conferred by the single dwelling restriction over 33 High. For that construction of the covenant to be open, the covenant would have needed an express height restriction limiting the construction of any building on 33 High to a specified certain height. Furthermore, for such an express height limitation over 33 High to have been intended, a similar height restriction would have been created over 31 High. A height restriction protecting line-of-sight radio communication across the land at 33 High would have been futile if a building of unlimited height were permitted at 31 High;
(b) that a single-dwelling covenant does not imply any height restriction in the absence of an express one. It is impossible to discern in the words of this single dwelling covenant any particular height above which the permitted dwelling may not be constructed. As Mukhtar AsJ stated in Re Morihovitis,[70] a registered proprietor in fee simple may, within the confines of relevant planning schemes, erect an imposing multistorey dwelling and remain within the bounds of a single dwelling covenant;
[70][2016] VSC 684 [33].
(c) a restrictive covenant may secure an auxiliary benefit which is not expressly enumerated within the covenant’s wording. However, such an auxiliary benefit must fall within the ambit of the original covenant to be considered a benefit under that covenant. However, in R v Paddington and St Marylebone Rent Tribunal, Ex parte Bedrock Investments Ltd, Lord Goddard CJ summarised the standard at which the court must be satisfied to imply a covenant:[71]
[71][1947] KB 984, 990.
No covenant ought ever to be implied unless there is such a necessary implication that the court can have no doubt what covenant or undertaking they ought to write into the agreement.
(d) this observation is consistent with the Australian authorities on the requirements that must be satisfied before a term will be implied into any kind of contract.[72] The suggested limitation on the height of buildings on the subject land sought to be implied into the covenants burdening the subject land is neither reasonable, obvious, capable of clear expression or necessary to give the covenants commercial efficacy;
(e) these matters create an insurmountable problem for any argument that the single dwelling covenant at 33 High implies a height restriction, because it is impossible to state with precision at the date the covenant was granted in 1936 exactly what height above natural ground level any single dwelling on the land must not exceed; and
(f) for these reasons, the single dwelling covenant is discrete and separable from any implied height restriction (as are the two quarrying restrictions, explored in more detail below). It operates to secure its own benefits, namely that the original low-density residential character of the neighbourhood is preserved. There is no evidence in all the circumstances to suggest that the covenantors intended to impose any particular height restriction on the subject land.
[72]BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, 283; Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337, 347 (Mason J).
Further, the plaintiff submitted that to construe either of the covenants in this application as having that effect would be to empower a neighbour to impose an additional restriction on the subject land that it did not have as at the date the covenant was granted in 1936. This, in essence, turns the ‘no substantial injury’ test as interpreted in the decided cases on its head. It would be wrong to construe covenants as intending to confer and in fact conferring at the outset benefits which only arise because of later changes to the use of a neighbouring property with the benefit of the covenant.
In my opinion, a comparison of the benefits initially intended to be conferred by the covenant and actually conferred, with the benefits, if any, which would remain after the covenant has been discharged or modified, leads to the conclusion that no height restriction was intended to be conferred, and none is actually conferred, by the single dwelling restriction, and the modification or removal of the covenant will not change that position. It was not seriously contended by Monaygon that any height restriction could be implied into the covenant.
The other beneficiaries
The plaintiff then submitted that only 7 Kennett Street adjoins 33 High. There is a garage on 7 Kennett Street on the common boundary with 33 High.[73] The rest of the dwelling at 7 Kennett Street is set back 1.2 metres from the boundary.[74] The plaintiff’s proposed development will be built so that the basement and ground floor of the apartment building will be set back at least 2.5 metres from the boundary with 7 Kennett Street, and would at that point be limited in height to the same building profile applying to a standard replacement dwelling.[75]
[73]First Easton Report [7.5].
[74]This is evident in the aerial photograph in Figure 7 on p 7 of the First Easton Report.
[75]First Easton Report [7.5].
The plaintiff submits that this evidence establishes that the impact of the plaintiff’s proposal on 7 Kennett Street is no greater than that which would occur if the plaintiff were to replace the existing dwelling and outbuildings at 33 High with a compliant dwelling of similar magnitude. I agree. Mr Easton’s evidence is confirmed by my own observations in the course of the view.
The plaintiff also submits that the Court can give some weight to the fact that the owners of 7 Kennett Street have not objected to the plaintiff’s proposal, despite having been served directly with notice of the application and extracts from the First Easton Report describing the proposal.[76]
[76]Pursuant to orders made on 26 August 2016.
The plaintiff referred to my decision in MacLurkin v Searle,[77] where I considered that the absence of objection from immediate neighbours in that case, when combined with the separate and discrete part of the neighbourhood in which the land was located, had some persuasive force. The subject land in this case is not separate from the other parts of the Subdivision in the way that Mrs MacLurkin’s land was. Nevertheless, having regard to the location of the subject land on a busy main road, and that it is opposite a major retail development, the absence of objection is some support for the inference that, at least from their own subjective viewpoint, there is no substantial injury. Again, I agree.
[77][2015] VSC 750 [80].
Most of the shop lots on Warrigal Road immediately to the west of the subject land have the benefit of the single dwelling restriction burdening 33 High (including 453 Warrigal). The plaintiff submits that these lots were not intended to be used for residential purposes and are not so used. My inspection of these shops confirmed they do not appear to be so used. Accordingly, it was submitted that the covenant does not protect any residential amenity of those lots. It was submitted that the benefits initially intended and in fact conferred on the shop lots were commercial benefits of retail shops located within a low density residential neighbourhood, constituted by single households on individual suburban blocks such as those laid out in this neighbourhood. The First Easton Report identifies that one benefit was the usability of the lane which services the rear of those shops.[78] Another benefit would be the protection of custom for retail businesses of a kind likely to service such residential neighbourhoods in 1936, such as mixed businesses, grocers, butchers, newsagents and the like.
[78]First Easton Report [7.6].
The First Easton Report notes that these lots have now been developed with a range of different styles of shops or offices.[79] It was submitted that, given Mr Easton’s opinion that the usability of the laneway for the shops will not be affected by the plaintiff’s proposal and given that an increase in residential density on the subject land is unlikely to adversely affect custom to retail businesses on Warrigal Road, there will be no substantial injury to any amenity originally secured by the single dwelling restriction on 33 High for the benefit of these lots. Once again, I agree.
[79]Ibid [13.2].
The quarrying restriction
The covenant prohibiting the excavation and removal of soil, sand, stone, gravel and other similar materials is to prohibit quarrying or the extraction of minerals on the subject land. In the present case, it was not part of the purpose of the covenant to prevent building works for the foundation of any building on the subject land.
On the basis of Mr Easton’s evidence in the Supplementary Easton Report, such covenants were commonly applied ad hoc in Melbourne to prevent commercial pottery, quarrying and brick manufacturing in residential areas. The plaintiff’s proposal is to preserve the covenant against commercial quarrying, but to broaden the exception to allow for any residential works. The specific aspect of the proposal intended to be permitted by this modification is the construction of a basement. The modification will, however, also permit other residential improvements strictly falling outside the scope of permitted excavation works, such as swimming pools, tennis courts, basements or the significant excavation required to lay the sewers and drains required by any associated residential development.
The plaintiff submitted that the purpose of the covenant initially was to preserve the amenity of the benefitted lots as a residential neighbourhood service by local shops and that this purpose is not substantially affected by extending the scope of permitted excavation works to include works in connection with any residential use. The construction of a basement in an apartment building is otherwise permitted under applicable planning controls.
If the covenant is not modified, the plaintiff’s proposal would potentially be thwarted by the strict application of the covenant, notwithstanding the fact that the covenant was not intended to apply to non-commercial construction.[80]
[80]See Freedom90 Pty Ltd v Bass Coast SC [2010] VCAT 1034 (23 June 2010).
The quarrying restriction cannot be construed so as to confer on the benefitted lands protection of the free and unhindered operation of telecommunications towers at heights between 10.8 and 14 metres above ground level. To confer such a benefit, the quarrying restriction would have had to include an express height restriction. Further, there can be no implied height restriction in the quarrying restriction as it is limited in its scope to matters affecting disturbance of the benefitted lands by the subject land being used for an extractive industry – by digging below the surface and extracting soil, sand, stone, gravel and other similar materials from the subject land and in so doing removing it and taking it away by using heavy and noisy dust creating machinery and equipment.
Mr Easton notes in his Supplementary Report that the plaintiff’s proposed three storey building could be built under the current planning controls affecting the subject land either with or without a basement.[81] Mr Easton draws attention to a number of buildings of which he is aware where planning approval was obtained for multi-level apartment buildings without that parking being in the basement (at [19]). Parking can, if necessary, be accommodated in higher levels of the building. The point of this evidence, it was submitted, is that the current restriction prohibiting the excavation of the subject land to construct basements does not limit the plaintiff’s ability to obtain planning permission for a building of as many levels as could be accommodated within the current height restriction under the planning scheme of 11 metres.
[81]Supplementary Easton Report [17].
The plaintiff also submitted that, on the basis of Mr Easton’s evidence, there is no other comparable site within the neighbourhood suited for a development similar to the plaintiff’s proposal, and its location on High Street Road which is a busy and developed main road, means that the proposed modification - if ordered - will create no substantial precedential effect adversely affecting lots with the benefit of the covenant. The site is unique as it is adjacent and opposite to commercial zones and fronts onto a major road.
For these reasons, the plaintiff submitted that amending the restrictive covenant as sought will not substantially injure any land in the neighbourhood with the benefit of the covenant. I agree.
Residual Discretion
Monaygon submitted that in the exercise of the Court’s residual discretion I could, and should, refuse to modify the single dwelling covenant and the quarrying restriction. Counsel for Monaygon found no authorities that deal with the way in which the residual discretion should be exercised. He submitted that the matters relevant were not limited to the benefits intended and actually conferred by the covenant. He put the following matters as relevant to the exercise of the discretion:
(a) by authorising the erection of the telecommunication antennas Monaygon has exercised a permitted use of the site;
(b) Monaygon has received income from the use of the site for this purpose for many years before the plaintiff purchased the subject land;
(c) the use of the site for this purpose is a valuable property right of Monaygon;
(d) this use of the site benefits the community and is an essential service.
The authorities to which I have referred indicate that both town planning considerations and the precedential value of the modifications may be taken into account in exercising the discretion to refuse the modifications sought. That of course does not limit the matters that may be taken into account. Like all discretions, it must be exercised by reference to facts and matters relevant to the subject matter at hand.
In this case, the residual discretion falls to be exercised once the plaintiff has discharged the burden of satisfying the court that the modifications sought will not substantially injure those having the benefit of the covenants. In my view, to exercise the residual discretion to refuse the modification there would need to be something identified within the protection afforded by the covenants that moves the Court to exercise the discretion. The matters relied on by Counsel for Monaygon as relevant to the residual discretion are those referred to above as relevant to whether the plaintiff has satisfied the ‘no substantial injury’ test and the matters referred to in paragraph 76 above.
In my view, it would be unwarranted to conclude that the matters I have rejected as relevant to the determination of the ‘no substantial injury’ test should be taken into account in exercising the Court’s residual discretion to refuse the modifications sought. Further, the matters identified in paragraph 76 above are themselves matters connected with the protection of a benefit not within the intended or actual benefits conferred by the covenants applicable in this case.
I consider the benefits intended to be conferred and actually conferred by the covenants do not include the benefit of unimpeded telecommunications signals from 453 Warrigal nor the protection of leases entered into by the proprietor of that land for the erection of telecommunication antennas. Neither covenant has anything to do with protecting such things. Thus the proprietary right to enter into leases of the roof space of 453 Warrigal, to receive the rentals and to provide a ‘public service’, are not, in my view, considerations I should take into account in the exercise of the residual discretion.
Conclusion
In my view, the plaintiff has established that the modifications of the covenants sought will not substantially injure the landholders having the benefit of the covenants and that it is appropriate to modify them as proposed.
I will hear the parties as to the appropriate orders and as to the costs of the proceeding.
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