Re EAPE (Holdings) Pty Ltd
[2019] VSC 242
•15 April 2019
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S ECI 2018 01831
| IN THE MATTER of an application pursuant to section 84 of the Property Law Act 1958 for the modification of a restrictive covenant | |
| - and - | |
| IN THE MATTER of an application for the modification of the restriction arising under the covenant in transfer of land registered no. P878974A dated 26 June 1990 affecting the land at 1 Bridle Place, Pakenham, being lot 266 on Plan of Subdivision no. 212290W and being the land in Certificate of Title Volume 11512 Folio 959 by: | |
| EAPE (HOLDINGS) PTY LTD (ACN 081 259 789) | Plaintiff |
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JUDGE: | Lansdowne As J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 7 March 2019 |
DATE OF JUDGMENT: | 15 April 2019 |
CASE MAY BE CITED AS: | Re EAPE (Holdings) Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2019] VSC 242 |
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REAL PROPERTY – Restriction to ‘one private dwelling house’ in covenant – Whether modification to allow up to three dwellings would cause substantial injury to beneficiaries – Precedential effect – Impact on adjoining benefited land – Alternative development as a rooming house – Whether alternative development a genuine proposal – Whether a rooming house is permitted by the covenant – Held: yes – Consequent comparison of the benefits conferred by the restriction with those that would remain after modification – Modification granted – Property Law Act 1958 (Vic) s 84 (1)(c)
WORDS AND PHRASES – ‘one private dwelling house’ – Downie v Lockwood [1965] VR 258; Longo Investments Pty Ltd [2003] VSC 37; Prowse v Johnstone & Ors [2012] VSC 4 considered.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr W Rimmer | G E Law Services |
TABLE OF CONTENTS
Introduction......................................................................................................................................... 1
Background......................................................................................................................................... 2
The covenant.................................................................................................................................. 2
The Land......................................................................................................................................... 4
Previous applications................................................................................................................... 6
Objection to this application....................................................................................................... 8
Legal principles.................................................................................................................................. 9
Discussion.......................................................................................................................................... 14
Proposal for three dwellings..................................................................................................... 15
Objection to the three extra dwellings proposal.................................................................... 15
Consideration of these objections............................................................................................. 16
Materials restriction.......................................................................................................... 16
Amenity objections............................................................................................................ 17
Precedent............................................................................................................................ 20
Summary............................................................................................................................. 21
Rooming house proposal.......................................................................................................... 21
A genuine alternative proposal?..................................................................................... 23
Is a rooming house permitted under the existing covenant?..................................... 26
Comparison of injury........................................................................................................ 31
Conclusion on substantial injury.............................................................................................. 33
Discretion..................................................................................................................................... 34
Conclusion......................................................................................................................................... 34
HER HONOUR:
Introduction
The plaintiff is the registered proprietor of 1 Bridle Place, Pakenham. It seeks to modify a restrictive covenant so as to increase the number of permitted dwellings from one to three, and to reduce the proportion of each dwelling that is required to be constructed of brick or stone, or similar material. The application is made pursuant to s 84(1)(c) of the Property Law Act 1958 (Vic) (‘PLA’). I will come to the requirements of that paragraph in detail shortly, but in essence it allows the Court to modify a restriction in a covenant if the Court considers that to do so will not substantially injure the beneficiaries of the restriction. The law that the Court must apply to determine such an application, and the range of persons whose views may be considered, are both different from the law and categories of objectors that apply to applications to local councils (or the Victorian Civil and Administrative Tribunal (‘VCAT’) on review) for planning permits, or for the variation of a covenant.
The application is not formally opposed, in the sense of an objector being joined as a defendant. However, for several reasons I considered it appropriate to hear it at formal trial, albeit undefended, and to publish reasons. I also undertook an inspection of the subject land, accompanied by counsel for the plaintiff.
The first reason for taking this approach is that the plaintiff’s prior attempts to construct three dwellings on the land have had a tortuous history and at various stages have been met with objection from a number of nearby landowners. Thus there may be some continuing broader interest in the outcome of the application. The second is that at one point the landowners of one of the benefited properties, the adjoining property at 3 Bridle Place, Pakenham, were objectors to this application, but withdrew that objection after the director of the plaintiff deposed to an alternative proposal, which it seems they considered even more undesirable. The alternative proposal is the extension of the existing dwelling and its conversion to a rooming house. The plaintiff contends that this alternative proposal could be implemented without modification of the covenant and without the necessity for a planning permit, and so without the opportunity for further objection given by that planning process. Given the impact that that alternative proposal had on the objection to the application, it seemed to me important to obtain further evidence from the plaintiff as to whether this was a real alternative, and whether the plaintiff’s contentions that it would be permitted by the covenant and does not require planning approval are correct.
Finally, the proposed modification is the first modification of a covenant within the subdivision, which is the area within which the benefit of this covenant, and the others like it, is conferred. Potential precedential effect of a modification is a relevant matter to consider, and ordinarily the fact that the proposed modification would be the first in the area of benefit would be accepted as establishing a precedent. As I will discuss, the plaintiff contends that in this case the fact that the proposed modification would be the first modification does not mean it sets a substantially injurious precedent.
For the reasons that I now give, I will allow the modification as sought.
Background
The covenant
The subject land, 1 Bridle Place, Pakenham (‘Land’) is Lot 266 on Plan of Subdivision 212290W (‘Subdivision’). The covenant was created when Lot 266 was first transferred from Analed Pty Ltd (‘Analed’), the developer of the subdivision, to Haliden Pty Ltd (‘Haliden’) by transfer dated 26 June 1990 (‘Transfer’). Haliden is identified as the Transferee in the covenant. The covenant is in these terms:
AND the said Transferee for itself its respective heirs executors administrators and transferees and registered proprietor or proprietors for the time being of the land hereby transferred and of each and every part thereof DOES HEREBY COVENANT with the said ANALED PTY LIMITED and other the registered proprietor or proprietors for the time being of each of the lots on Plan of Subdivision NO. LP 212290W and every part thereof (other than the Lot hereby transferred) as follows:
That it will not at any time hereafter erect or build or cause or suffer to be erected or built on any lot hereby transferred or on any part or parts thereof more than one private dwelling house.
That not less than 70 per centum of the external walls of such dwelling (excluding windows) shall consist of brick, brick veneer, stone or like materials.
The benefit of the covenant was expressed in the Transfer to run with each of the lots in the Subdivision other than the land transferred, and the burden to run with the land transferred. At the time of the Transfer, Analed had already transferred some of its land in the Subdivision to other purchasers. It follows then that the covenant purported to confer the benefit of the restrictions not just on the transferor Analed and its successors in title from later transfers of the land it still held out of the Subdivision, but also on the registered proprietors of land that Analed had already so transferred.
It might be thought then, at first blush, that every other lot within the Subdivision has the benefit of the covenant. It was because of this possibility, and the past history of objection to which I will shortly turn, that I directed on 7 November 2018 on the first return of the application that the registered proprietors of every other lot within the Subdivision be given direct notice of the application.
At that time, there was no judicial authority in Victoria as to the meaning of the phrase used in this covenant to confer benefit. The registered proprietors of land already transferred by Analed were not, of course, parties to the contract constituted by the transfer. The plaintiff’s counsel contended that as a matter of law it follows that benefit could only be conferred by the transferor Analed pursuant to the Transfer on lots that it still owned at the time of the Transfer. A submission to this effect has subsequently been accepted as corrected in Xu v Natarelli,[1] a judgment of Associate Justice Ierodiaconou. In the absence of any argument to the contrary, I accept that to be correct.
[1][2018] VSC 759, [69]-[105].
The effect in this case is that although the Subdivision contains 18 lots other than Lot 266, only three are benefited lots. The uncontested evidence of the expert retained by the plaintiff is that the Land was the 16th lot to be transferred, and so at the time of the transfer the transferor continued to own only three other lots within the Subdivision – Lots 279, 278 and 267. These Lots are now known respectively as 14 Bridle Place, 16 Bridle Place, and 3 Bridle Place.
The Land
Bridle Place is a small cul-de-sac, with most of its lots placed in a half circle around a relatively narrow road, with areas for turning. It has two legs – an entrance ‘leg’ from Bluegrass Crescent, running from south to north, and a leg running east to west where the entrance leg turns at 14 and 16 Bridle Place to run west to the most westerly parcels, at 11 and 28 Bridle Place. The two parcels of land on the corners of the entrance ‘leg’ from Bluegrass Crescent are not part of the Subdivision. Notwithstanding this, the street address of the entrance parcel on the east is 2 Bridle Place, and the dwelling currently on that land fronts onto Bridle Place, rather than onto Bluegrass Crescent. The first dwelling on the land to the west of the entrance from Bluegrass Crescent fronts onto Bluegrass Crescent. The Land abuts it and its neighbour on their northern boundaries. It is the first parcel on the western entrance ‘leg’ that is within the Subdivision. The dwelling constructed on it fronts onto that entrance leg.
The Land is rectangular in shape, with its longer edge running west to east, forming its northern and southern boundaries. On the north, this longer edge adjoins the southern boundary of 3 Bridle Place, which is a benefited lot. This is the land owned by Mr and Mrs Brown. On the south, the longer edge of the Land is on the boundary of the Subdivision. As noted above, the two lots running south from this southern boundary front onto Bluegrass Crescent. They are not within the Subdivision. The shorter edge of the Land runs south to north and forms its eastern and western boundaries. On the west, the Land adjoins 5 Bridle Place, which is not a benefited lot.
As noted earlier, I visited the Land for a view on 7 March 2019. I was accompanied by my associate, and for part of the view by counsel for the plaintiff. We inspected the Land, and its interface with 3 Bridle Place, from the open grassed area at the rear of the Land, walked through Bridle Place, and my associate and I drove through the wider area identified by the plaintiff’s expert, Mr Easton, in his expert report.
The Land is currently developed with a small single storey brick or brick veneer dwelling with a tile roof, fronting east onto the entrance ‘leg’ of Bridle Place. This dwelling has a driveway to the south, with a carport, and a small surrounding fenced area at the rear, sealed off from the rear of the Land by a paling fence. The rear of the Land behind this paling fence is approximately two thirds of the total land area and is currently vacant grass, with the exception of what appears to be a concrete foundation pad, perhaps of an earlier outbuilding. Thus the impression on inspection is of land capable of infill development.
The dwelling on the Land appears both from the street view and from the aerial view permitted by Google Earth and shown in photographs reproduced by Mr Easton to be the smallest in the Subdivision, and so the open area of the Land is the largest in any lot in the Subdivision. The other lots in Bridle Place are developed with larger, although still single storey, homes, many with substantial outbuildings or garages as well, and many lots having pleasant established gardens. There are also established large street trees in Bridle Place. The general impression within the interior of Bridle Place is of well-established and well-tended, pleasant low rise suburban spaciousness in a secluded cul-de-sac.
As noted, my associate and I drove through the area identified by Mr Easton, bounded by Kingston Avenue on the west, Barrington Drive on the north and east, and Cameron Way on the south. I observed that that broader area is also almost uniformly developed with single storey brick and tile dwellings, but as noted by Mr Easton there are a few lots where a second (single storey) dwelling has been built behind the dwelling on the street frontage. This wider area also has some street trees, and many lots have gardens, but the overall impression is less well cared for, as well as less secluded, than that of Bridle Place, and indeed some of the other cul-de-sacs running of the main roads.
The house owned by Mr and Mrs Brown, the former objectors, is built along the long frontage of their land onto the west-east leg of Bridle Place. A triple garage is built next to it, and it and the house take up most of the northern frontage of their lot. The aerial photographs and Google Earth show, in addition to these buildings, a large roofed extension at the back of the house, which extends almost to the adjoining fence to the Land. As a consequence, it appears that the only open space areas on the Browns’ property are at the rear of the house, to the east and west of this extension. These areas directly abut the boundary with the Land. In particular, the open space at the rear of their house and to the west of the extension directly abuts that part of the Land on which the two new proposed dwellings are proposed to be built. This proximity gives rise to much of their objection.
The boundary between the land owned by Mr and Mrs Brown, and the Land is fenced. The palings close to the existing dwelling on the Land are a standard 150 cm high, but are topped by a lattice in the area adjacent to the extension from the Browns’ house. Further along the fence to the west, a large bush is also adjacent to the fence on the Brown side, which adds to the height of the barrier. At the extreme western end, there is a solid higher fence.
Previous applications
Mr Rees’ evidence is that the plaintiff acquired the land in 2014 ‘expressly for its investment and development potential’.[2] Even before it was registered on title on 27 November 2014, the plaintiff engaged surveyors and design consultants with a view to development of the land.[3] Promptly after settlement of the purchase of the land, the plaintiff lodged an application to Cardinia Shire Council (‘Council’) for a planning permit to allow the construction of two additional dwellings on the Land. Regrettably, this application incorrectly asserted that the proposal did not infringe any covenant burdening the Land.[4] This was a critical error because s 61(4) of the Planning and Environment Act 1987 (Vic) (‘PEA’) requires that a Council must refuse a permit application that would result in breach of a covenant. On 30 June 2015, the Council issued a planning permit for the construction of the two extra dwellings over the objection of four objectors.[5] It was only when the plaintiff lodged a subsequent application for a three lot subdivision to proceed with the development that the plaintiff was made aware by its surveyors that the covenant would prevent the issue of that permit. The plaintiff duly informed the Council of the existence of the covenant. The Council then informed the plaintiff that it must refuse the application for subdivision, and applied to the VCAT to cancel the planning permit it had issued.
[2]Second supplementary affidavit of Steven Rees, affirmed 1 February 2019, [3].
[3]Affidavit of Steven Rees, affirmed 29 October 2018.
[4]Ibid, Exhibit SR-3.
[5]Exhibit SR-2 to the additional affidavit of Steven Rees, affirmed 29 January 2019.
The plaintiff then took a two pronged approach to obtaining modification of the covenant to allow the development to proceed. It issued a proceeding in this Court seeking an order pursuant to s 84(1)(c) of the PLA for the modification of the covenant, i.e. an earlier application to the same effect as this application, and also made application to the Council under the PEA for modification of the covenant. The tests that the Court must apply under the PLA and that the Council must apply under the PEA are different. The application to Council met with objection from the landowners of five other lots within Bridle Place, including Mr Brown (3 Bridle Place), and the owners of 14 Bridle Place. As noted earlier, 3 and 14 Bridle Place are two of the three benefited lots. Council refused the application for variation under the PEA. The plaintiff contested that refusal in VCAT, and that application for review attracted a further two objections, from the owners of 5 and 20 Bridle Place. None of the objections, save those from the owners of 3 and 14 Bridle Place, were from beneficiaries of the covenant, but the right to object under the PEA is not confined to beneficiaries.[6]
[6]Section 57 of the PEA. See also s 52 as to who must be given notice of an application for a planning permit.
The proceeding that the plaintiff had commenced in this Court at this same time came before me in August 2016. I expressed concern at the possible confusion that two concurrent proceedings in different jurisdictions, turning on different tests, might occasion objectors. The plaintiff subsequently discontinued its application in this Court.
VCAT heard both the Council’s application to cancel the grant of a planning permit and the plaintiff’s application to review Council’s refusal to modify the covenant together. On 20 February 2017, VCAT granted the Council’s application and cancelled the earlier planning permit, and affirmed the Council’s refusal to modify the covenant. The plaintiff commenced this proceeding for modification pursuant to s 84(1)(c) of the PLA on 16 October 2018.
Objection to this application
The only objection received to the notification for this application was from the owners of 3 Bridle Place, which adjoins the subject land along its northern boundary. They objected to the application within the required time frame by letter dated 22 January 2019 to the solicitors for the plaintiff. The sole director of the plaintiff, Mr Steven Rees, swore two further affidavits in response to their objection, one on 29 January 2019 and the next on 30 January 2019, for consideration at the next Court date, 31 January 2019.
Mr Rees exhibited to his affidavit of 29 January 2019 the earlier objections made by Mr and Mrs Brown to his initial application to the Council for a planning permit in 2015 and their objections to his subsequent application to Council for variation of the covenant in 2016, which Council refused. The Browns made the same objections when the plaintiff sought review of that refusal at VCAT. Mr Rees sought to address Mr and Mrs Brown’s concerns about invasion of their privacy in his affidavit of 29 January 2019, and confirmed that if this application for modification is granted his intention is to develop the Land in accordance with the plans previously approved by the Council in 2015.
In his affidavit sworn 30 January 2019, Mr Rees raised for the first time the possibility of an alternative development of the Land, being a rooming house which he deposed could provide accommodation for workers in market gardens in the nearby Koo Wee Rup area. The Browns then withdrew their objection, by email sent to the solicitors for the plaintiff shortly after being served with the affidavit. They said that they did so after reviewing this alternative proposal, and also noted that they are ‘senior citizens/ pensioners and do not have the time nor the financial resources to fight this application’.[7]
[7]Email from Mr Brown to the solicitors for the plaintiff, dated 30 January 2019.
As flagged in their email, the Browns did not attend the hearing the next day, 31 January 2019. They did, however, arrange for a friend to attend on their behalf who provided the Court, without objection from the plaintiff, a medical certificate to the effect that Mr Brown is the medical carer for his wife and could not attend for that reason.[8] I take the fact that Mr and Mrs Brown withdrew their objection after service of Mr Rees’ affidavit of 30 January 2019, yet still arranged for a presence on their behalf at the hearing on 31 January 2019, to be an indication that they remain concerned about the proposal for an additional two two-storey dwellings on the Land, but regard the alternative proposal as even less attractive.
[8]Medical certificate dated 25 January 2019 and covering email from Mr Brown, dated 31 January 2019, together marked Exhibit 1.
I was concerned at the late introduction into the plaintiff’s case of the alternative rooming house proposal and the effect it had had on objection, and so required the plaintiff to file further evidence before trial. In his final affidavit sworn 1 February 2019 Mr Rees provided further details of the development of the rooming house proposal and deposed:
12.I confirm that if the proposed development of two additional units is not able to proceed, my intention is to proceed with an extension of the existing house based on the plans for a two (2) story [sic], six (6) bedroom rooming house (in the initial instance).
13.I further confirm that, should the initial extension prove successful as a viable rooming house, I am contemplating a further extension to the rear at ground level to add an additional three (3) bedrooms bringing a permitted total of nine (9) bedrooms that do not require a planning permit.
Legal principles
This application is made pursuant to s 84(1)(c) of the PLA. Section 84 provides as follows:
84 Power for Court to modify etc. restrictive covenants affecting land
(1)The Court shall have power from time to time on the application of any person interested in any land affected by any restriction arising under covenant or otherwise as to the user thereof or the building thereon by order wholly or partially to discharge or modify any such restriction (subject or not to the payment by the applicant of compensation to any person suffering loss in consequence of the order) upon being satisfied—
(a) (not here relied upon); or
(b) (not here relied upon); or
(c)that the proposed discharge or modification will not substantially injure the persons entitled to the benefit of the restriction:
Provided that no compensation shall be payable in respect of the discharge or modification of a restriction by reason of any advantage thereby accruing to the owner of the land affected by the restriction unless the person entitled to the benefit of the restriction also suffers loss in consequence of the discharge or modification nor shall any compensation be payable in excess of such loss; but this provision shall not affect any right to compensation where the person claiming the compensation proves that by reason of the imposition of the restriction the amount of consideration paid for the acquisition of the land was reduced.
(2)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.
(3)The Court may before making any order under this section direct such inquiries (if any) to be made of any local authority or such notices (if any) whether by way of advertisement or otherwise to be given to such of the persons who appear to be entitled to the benefit of the restriction intended to be discharged, modified or dealt with as, having regard to any inquiries, notices or other proceedings previously made given or taken the Court thinks fit.
(4)Any order made under this section shall be binding on all persons whether ascertained or of full age or capacity or not then entitled or thereafter capable of becoming entitled to the benefit of any restriction which is thereby discharged, modified or dealt with and whether such persons are parties to the proceedings or have been served with notice or not.
(5)An order may be made under this section notwithstanding that any instrument which is alleged to impose the restriction intended to be discharged, modified or dealt with has not been produced to the Court, and the Court may act on any evidence of such instrument as it thinks fit.
(6)This section shall apply to restrictions whether subsisting on the thirty-first day of December One thousand nine hundred and eighteen, or imposed thereafter and whether the land affected thereby is registered or not, and in the case of registered land the registrar shall if the restriction has been noted on the register give effect on the register to the order when made[i].
By s 84(1)(c) the Court must be satisfied of a negative – that the proposed modification (here to reduce the materials restriction, and increase the number of permitted dwellings from one to three) will not substantially injure the persons entitled to the benefit of the restriction. Those beneficiaries are, broadly speaking, the owners or those with a legal interest in such lots. The burden of proving this negative is on the plaintiff, and the absence of objectors is not determinative in favour of the application.[9]
[9]Oostemeyer v Powell & Others [2016] VSC 491, [50] (Riordan J) (‘Oostemeyer v Powell’).
The test imposed on an applicant by s 84(1)(c) is stringent, but less stringent than that imposed where an application for a planning permit to the local council pursuant to the PEA would cause a restriction in a covenant to be breached. The provision pursuant to which applications for planning permits are made, s 60, relevantly provides as follows:
60 What matters must a responsible authority consider?
…
(2)The responsible authority must not grant a permit which allows the removal or variation of a restriction (within the meaning of the Subdivision Act 1988) unless it is satisfied that the owner of any land benefited by the restriction (other than an owner who, before or after the making of the application for the permit but not more than three months before its making, has consented in writing to the grant of the permit) will be unlikely to suffer—
(a) financial loss; or
(b) loss of amenity; or
(c)loss arising from change to the character of the neighbourhood;
or
(d) any other material detriment—
as a consequence of the removal or variation of the restriction.
…
(4) Subsection (2) does not apply to any restriction which was—
(a) registered under the Subdivision Act 1988; or
(b)lodged for registration or recording under the Transfer of Land Act 1958; or
(c) created—
before 25 June 1991.
(5)The responsible authority must not grant a permit which allows the removal or variation of a restriction referred to in subsection (4) unless it is satisfied that—
(a)the owner of any land benefited by the restriction (other than an owner who, before or after the making of the application for the permit but not more than three months before its making, has consented in writing to the grant of the permit) will be unlikely to suffer any detriment of any kind (including any perceived detriment) as a consequence of the removal or variation of the restriction; and
(b)if that owner has objected to the grant of the permit, the objection is vexatious or not made in good faith.
(6)If an application for a permit to remove or vary a restriction referred to in subsection (4) was made on or after 25 June 1991 and the responsible authority had made a decision in respect of the application before the commencement of section 15 of the Planning and Environment (Amendment) Act 1993, the Tribunal must determine in accordance with subsection (5) any appeal under this Act in respect of that decision.
(7)Nothing in subsection (4), (5) or (6) affects the validity of a permit to remove or vary a restriction issued under this Act before the commencement of section 15 of the Planning and Environment (Amendment) Act 1993.
The covenant burdening the plaintiff’s land was created before 25 June 1991, and so the Council, and VCAT on review, were required to determine the plaintiff’s application for a planning permit to vary the covenant to allow three dwellings with consideration given to s 60(5). An application that requires consideration under that sub-section may only be granted if the council (and VCAT on review) is satisfied that no benefited landowner will be likely to suffer detriment of any kind, including perceived i.e. subjective detriment.
By contrast, under s 84(1)(c) of the PLA, the Court must be satisfied that no benefited landowner will suffer substantial injury. An injury sufficient to prevent modification must be ‘something more than unsubstantial, must be real and not a fanciful detriment’.[10] Further, the test imposed by s 84(1)(c) is to be considered objectively, although the subjective views of beneficiaries will be taken into account.[11]
[10]Re Stani, Full Court of Supreme Court of Victoria 7 December 1976, 10, discussed in Freilich v Wharton [2013] VSC 533, [27] (Bell J).
[11]Freilich v Wharton (n 10), [29].
The principles governing an application based on s 84(1)(c) have been stated in many cases.[12] I do not purport to set them out exhaustively. For the purpose of this application, principles of particular relevance are the following:
[12]For example, Vrakas v Registrar of Titles and anor [2008] VSC 281, [34]-[46] (Kyrou J, as he then was) contains a detailed summary, adopted in Prowse v Johnstone& ors [2012] VSC 4 (Cavanough J) (‘Prowse v Johnstone’); Freilich v Wharton (n 10), [17]-[29]; Oostemeyer v Powell (n 9), [47]-[51].
(i) As a restriction in a covenant confers a proprietary right, the injury sufficient to prevent its modification or discharge must occur in relation to the enjoyment by a beneficiary of his or her property.[13]
[13]Re Cook [1964] VR 808, 810 (Gillard J), cited in Freilich v Wharton (n 10), [25].
(ii) Whether there will be substantial injury is to be assessed by comparing the benefits initially intended to be conferred, and actually conferred, by the restriction, and the benefits, if any, which would remain after the proposed modification or discharge. If the evidence establishes that the difference between the two i.e. the injury, if any, will not be substantial, the ground in s 84(1)(c) is made out.
(iii) Substantial injury may consist of the precedential effect of the modification, because it may be used to support further applications for modification and the long term erosion of the benefits of a single dwelling covenant.
(iv) In assessing the benefits actually conferred, the Court may take into account the most potentially injurious development that would be permitted by the restriction, but should have regard to the realistic probability of this occurring. In assessing the benefits that would remain after the proposed modification or discharge, the Court may take into account the protections afforded benefited properties by statutory planning provisions.[14]
[14]Prowse v Johnstone (n 12), [104]-[105]; Oostemeyer v Powell (n 9), [49].
(v) However, the Court is not permitted to consider whether or not the proposed development would, or would not be, desirable or acceptable under town planning principles in assessing whether or not there will be no substantial injury.[15] That question is to be determined having regard to the proprietary rights conferred by the covenant.[16]
(vi) Even if the plaintiff satisfies the Court that there will not be substantial injury to benefited persons, the Court has a residual discretion to refuse the application. In the exercise of this discretion, the Court may take precedential effect and town planning principles into account.
[15]Prowse v Johnstone & Ors (n 12), [105].
[16] Freilich v Wharton (n 10), [18]-[19].
Discussion
The benefits intended to be conferred by a single dwelling covenant are well known. They were well expressed by Associate Justice Mukhtar in Re Morihovitis as follows:
…the manifest purpose or benefit of a single dwelling covenant is to maintain the building density in an area, variously put by saying that single dwellings keep the peace and tranquillity or ambience of an area, as the presence of multiple dwellings on land brings with it added use, more people (maybe tenants), more cars, more movement, reduction in land values and space, more noise or general hustle and bustle, more rubbish and waste collection, so on and so forth.[17]
[17][2016] VSC 684, [20].
Proposal for three dwellings
The plaintiff’s preferred proposal is to construct an additional two dwellings behind the existing dwelling in accordance with plans approved by the Council at the time the initial planning permit was issued in error in 2015.[18] These plans are in evidence. They show that each of the additional dwellings would be two storey, and identical in layout and size. All the dwellings would be accessed via the existing driveway, which would be extended and upgraded to service the rear dwellings. The additional two dwellings would each have an attached single garage. They would each contain two bedrooms, a retreat and bathroom upstairs, and kitchen, laundry, living areas and garage downstairs. The kitchen and meals area downstairs, and the smaller bedroom and retreat upstairs would face the norther boundary. There is 4 metres of open space area outside the kitchen and meals on each from the northern boundary. I observed on the view that this is a greater setback than currently exists from the northern boundary to the existing dwelling. The open space at the front of each of the additional dwellings would be largely taken up by driveway.
[18]Additional affidavit of Steven Rees (n 5), [23].
Objection to the three extra dwellings proposal
Mr and Mrs Brown expressed their objection to this proposal by letter dated 22 January 2019 to the solicitors for the plaintiff. They first correctly observed that they are benefited landowners. They then stated that as their southern boundary is the northern boundary of the Land, it is their amenity that will be most affected by the proposed addition of two further dwellings. I accept that to be correct. Mr and Mrs Brown flagged in the letter that they did not wish to be become defendants, in view of their age and limited financial resources, but asked the Court to take their objections into account. They also flagged that they may not be able to attend the hearing on 31 January 2019 in person, in view of Mrs Brown’s health issues.
Their objections were as follows (numbered 2-8 in their letter):
(vii) The modification would result in triple the number of dwellings along the common boundary. This will result in a significant increase in noise levels as there will be three households instead of one. Further, despite the 4 metre setback, the additional dwellings will have their living areas and private open spaces directly abutting the fence which faces their living areas and master bedroom. They stated that their peace and quiet would be adversely affected by this increase in population density in their direct immediate vicinity (no. 2 in the letter).
(viii) The construction of two additional two-storey dwellings at the rear of the existing dwelling would result in a significant increase in bulk when viewed from their kitchen, family and dining rooms (no. 3 in the letter).
(ix) Destruction of the current feeling of spaciousness that they enjoy as the additional dwellings would be clearly visible from their land, notwithstanding the current screening provided by the fence and hedge (no. 4 in the letter).
(x) The adverse precedential effect of the proposed modification, being the first modification of a ‘watertight network of covenants in the parent subdivision’. The Subdivision is the relevant area within which this precedential effect should be determined, not the broader area identified by Mr Easton (nos. 5-7 in the letter).
(xi) An increase in street parking given that the proposed new dwellings include only one garage each, and it is likely that each additional household will have two cars. Street parking will also be required for visitors (objection numbered 8 in the letter).
Consideration of these objections
Materials restriction
I observe first that Mr and Mrs Brown do not express any objection to the proposed reduction of the extent to which external walls must be built of brick, brick veneer, stone or like materials from 70% to 55%. According to Mr Easton, the plans show that the upper walls of the proposed additional dwellings would be rendered in a stone like render over lightweight foam board, and the ground floor walls would be brick.[19]
[19]Exhibit RWE-1 to the affidavit of Robert Easton, sworn 22 October 2018, [7.3], [10.12] (‘Easton Report’).
It is generally accepted that the historical purpose of a materials covenant requiring the use of brick, brick veneer or stone was to ensure high quality materials were used, or a uniformity of appearance.[20] It is also generally accepted that there are now high quality building materials that are not brick, brick veneer or stone, and that such materials are commonly used in upper storeys.[21] This covenant is relatively recent, and so I will proceed on the basis that its purpose was primarily to ensure uniformity of appearance. As noted earlier, the dwellings in the Subdivision and in the surrounding broader area identified by Mr Easton are indeed uniformly constructed of brick. Such a uniformity of appearance will continue if the materials restriction is modified as sought and a stone like render is used on the upper floors. If for any reason that is not in fact done (that being a matter for a planning permit), uniformity of appearance at ground level will still be substantially apparent from the construction of the external walls to the lower storey in brick. What is proposed is a reduction of the percentage of brick that is required, not a removal of any requirement. For these reasons, and given the absence of any objection, I would modify the materials restriction as sought.
[20]Re Sanders & anor [2019] VSC 217, [40].
[21]Ibid.
Amenity objections
Under this heading, I consider the objections I have numbered (i), (ii), (iii) and (v). I consider all these objections to be sound. Some do not relate to matters directly protected by a single dwelling covenant, but they all relate to common indirect effects of low density. Given that the projected increase in density is from one to three dwellings, and that those additional dwellings will be immediately adjacent to the open space and living areas on the Browns’ land, I accept that the three dwelling proposal would likely occasion impacts to the amenity the Browns currently enjoy. These impacts would go directly to their enjoyment of their land, and in combination would be substantial. Had the matter gone no further, I would have refused the application. Of course, there were further developments, which I will discuss shortly.
My particular findings arising from the comparison between the benefits intended to be afforded by the single dwelling covenant, and the proposal to build two extra dwellings, are these. First, a reduction in the feeling of spaciousness. The siting of the existing dwelling on the Land and the siting of the Brown dwelling on their land have the combined effect that there is currently a large area of open space on the Land adjacent to the open space on the Brown land. Such a high degree of open space is not guaranteed by a single dwelling covenant, but a feeling of spaciousness generally is an intended benefit of such a covenant. It is an intangible, but no less real, benefit of low density.
A feeling of spaciousness from Bridle Place itself is currently provided by the fact that most of the dwellings on the other lots in the Subdivision are set well back from the street, and many lots have attractive front gardens. The covenant does not require any particular setback from the street frontage, however, and the current dwelling on the Land is less set back than some others (as is the dwelling on the Brown land). On the basis of my observations on the view, I agree with the opinion of Mr Easton that from a street perspective, the addition of the two extra dwellings would not make the Land appear any less spacious. I also note that the aerial photographs show that some of the other lots within the Subdivision are built over to the side or at the rear of the main house to a large degree.
From the perspective of the Browns, however, I agree that the proposal would result in a loss of a feeling of spaciousness. The proposed new dwellings would be set further back from the boundary than the existing dwelling, but will take up most of what is now open space, directly opposite the open space and living areas of the Brown land.
An increase in noise with consequent loss of peace and quiet is also very likely, particularly given that the usable open space for the new dwellings is likely to be the space to the north of their meals area and kitchens. There is open space on the other side of the new dwellings as well, but it is largely taken up by the proposed driveways. I could not tell with precision from the plans in evidence, but it may be that French doors are proposed for the meals area, opening it up to the open space adjoining the boundary. The proposed new dwellings are each only two bedrooms, and so might be thought to limit occupation to four at most. That is, however, a potential increase of eight people within a relatively small area.
The concerns expressed about increased bulk and increased street parking relate to matters that are not directly protected by a single dwelling covenant. A single dwelling covenant does not ensure that the permitted dwelling be of any particular size - height, or bulk, and nor does it control the required amount of open space. These are matters that are regulated by planning controls. The single dwellings that I observed in the Subdivision are all single storey, and not of the large McMansion style now often seen in newer developments, but this is a matter of style and possibly cost, to the extent it is not regulated by planning controls, not a requirement of the single dwelling restriction.
Matters of parking and traffic congestion are also not directly regulated by a single dwelling covenant. A single dwelling restriction does not of itself limit the number of occupants, or how many cars they may have. For example, a large family home with multiple young adult children still in residence may mean there are multiple vehicles to house and park. The proposal in fact accepts that the number of cars will increase, because it includes a garage for each dwelling. It is entirely possible that this will not be enough to prevent street parking. The regulation of street parking is directly a matter for local government control through planning or other restrictions.
I do accept, however, that fewer cars and so less demand for on street parking, can flow from the limitation to a single dwelling, although they do not necessarily do so. As will be seen, this is one respect in which the alternative rooming house proposal would in my view occasion greater adverse impact than an additional two dwellings.
Precedent
The proposed modification is the first within the Subdivision. As the Browns observe, all the lots on the Subdivision have similar single dwelling covenants, and none have been modified or discharged. Due to the inability of a transferor to confer the benefit of a covenant on land it has already sold, the covenants have a reducing field of benefit within the Subdivision, depending on when the land burdened by a particular covenant was transferred. However, it is correct to say, as do the Browns, that there is a network of covenants within the Subdivision.
I also agree with their observation that it is not appropriate to take into account the broader area described by Mr Easton in his report, within which there has been further subdivision or infill development. That development has occurred on lots opening onto broader streets, with greater traffic flow and so already with less amenity than the secluded cul-de-sacs in the area such as Bridle Place. The relevant area for consideration of the precedential effect of the proposed modification is only the Subdivision.
Counsel for the plaintiff submits that although this would be the first modification in that area, its precedential effect is limited because it is an infill proposal, and there is no other lot within the Subdivision where similar infill development would be possible.[22] I do not agree. First, the aerial view shows that infill development may be possible on the lot directly opposite the Brown land, 18 Bridle Place, as there appears to be a large area of open space at the rear of the dwelling. I do not, of course, know if this is proposed. At a more fundamental level, the submission ignores the possibility that an owner or purchaser of a lot within the Subdivision may, if this modification is allowed, rely on it to seek a similar modification even if demolition of the existing dwelling would be required. It cannot be assumed that all owners even in the near future, let alone in time, will be content to retain their existing dwellings.
[22]Plaintiff, ‘Supplementary Submissions’, dated 7 March 2019, [6(a)].
Summary
Having regard to the precedential effect of the modification, in combination with the loss of amenity that would be suffered by the benefited owners directly adjacent to the Land, I would have refused the application to increase the number of permitted dwellings had the matter ended there. I could not have been satisfied that there would be no substantial injury to beneficiaries by reason of the modification.
I acknowledge that the plaintiff has had an unduly difficult, prolonged, and no doubt disappointing time, in its endeavour to develop the Land. This is, however, of no relevance to the statutory test. That test is directed to the impact on beneficiaries, not any disappointment to the putative developer. The covenant inhibiting additional dwellings was plain on the title, and the plaintiff, and its sole director, Mr Rees, must be taken to have known that the Land was burdened with a restrictive covenant that restricted its development. If he was not properly advised in this regard, that is a matter to take up with those advisors.
However, the plaintiff’s clear determination to develop the Land is relevant to the consideration of what happened next in this application. That was, of course, that Mr Rees gave evidence that he would pursue an alternative development, being a rooming house, if the application were to be refused.
Rooming house proposal
The relevance of what can already be constructed in conformity with a single dwelling covenant was considered at length in Prowse v Johnstone & Ors.[23]In that case, the plaintiff owned two adjoining lots, each of which was burdened with a covenant restricting construction to one house on each lot. The plaintiff wished to demolish the existing house built over both lots and construct a three storey apartment building comprising 18 apartments. The proposal met with substantial objection from benefited landowners, and was refused. The application in that case dealt with two matters of particular relevance to this application.
[23]Prowse v Johnstone (n 12).
First, the plaintiff sought a declaration that the three storey apartment building she proposed did not in fact infringe the prohibition in the covenants against the erection of ‘more than one house’ on each of the lots. Her submission was, in part, that a building constructed to appear as if it was one dwelling, although it in fact contained discrete apartments, was ‘one house’. Cavanough J rejected that submission both on the facts, and on the law. He held on the facts that the proposed building would not present as one dwelling.[24] More significantly for current purposes, Cavanough J held that, on the basis of dictionary definitions of ‘house’ and the way the phrase was used in the covenants before him, ‘house’ in those covenants referred to ‘a residence designed for occupation by one household or family’,[25] and so did not include an apartment building. After an extensive review of authorities, including the two cases to which the plaintiff took me in the current application, Cavanough J concluded that he was not compelled by previous authority to reach any different conclusion. In reaching this conclusion, his Honour equated the word ‘house’ with ‘dwelling’.[26] The restriction in this case is to ‘one private dwelling house’, and thus contains the words ‘one’, ‘dwelling’ and ‘house’ all of which were considered by Cavanough J to be significant in reaching his conclusion, after examination of the authorities. The additional word ‘private’ in my view would fortify that conclusion.
[24]Ibid [47]-[49].
[25]Ibid [64].
[26]Ibid [60]-[61].
The second aspect of relevance from Prowse v Johnstone & Ors is that the plaintiff in that case submitted that the proposed apartment building would be no worse in terms of injury to beneficiaries by reason of bulk, height, or proximity to boundaries than a large single dwelling for one household that she was permitted to build under the covenants. As noted earlier in my summary of the relevant legal principles, Cavanough J held that the relevant comparator for assessing whether the proposed modification would occasion substantial injury can include a hypothetical construction, but regard must be had to whether or not in fact that would be likely to occur.[27] In that case, his Honour concluded that there was no serious likelihood that the land would be the subject of a development of comparable height, bulk and footprint if the restrictions were to remain.[28] He also concluded that even if this was a realistic alternative proposal, it would occasion less injury than the proposed apartment building.[29]
[27]Ibid [103]-[104].
[28]Ibid [120].
[29]Ibid [121].
I draw from this aspect of the case the following principles. First, for the plaintiff’s proposed rooming house to be considered as a potential comparator to the preferred construction of two additional dwellings, it must be a genuine proposal. Secondly, it must be permitted within the existing covenant. If both of these pre-conditions are met, then the injury that would be occasioned to beneficiaries by the alternative proposal may be compared to the injury that would be occasioned by the preferred proposal. If the difference is not substantial, then the covenant may be modified to allow the preferred proposal. In this regard, the withdrawal of the sole objection in light of the alternative proposal should also be taken into account.
A genuine alternative proposal?
The fact that this alternative proposal only emerged in evidence in this proceeding at a late stage and after objection arouses suspicion that it may be an afterthought, and not a genuine alternative proposal. However, I am satisfied on the basis of the evidence given by Mr Rees in his affidavits of 30 January 2019 and 1 February 2019 that it is, in fact, a genuine alternative that the plaintiff would likely pursue if the application for modification of the covenant was refused.
I reach this conclusion on the basis of the following evidence. First, Mr Rees deposes that ‘(in)vestigations of alternative use strategies commenced from the moment the Plaintiff become (sic) aware of the Covenant and its effect on any development permit required for uses proposed by the Plaintiff’.[30] Next, this assertion is consistent with Mr Rees’ evidence that the plaintiff acquired the Land ‘expressly for its investment and development potential’.[31] I infer that the plaintiff would likely not be content to retain the Land as is if this application is refused.
[30]Second supplementary affidavit of Steven Rees (n 2), [4].
[31]Ibid [3]
Thirdly, and most significantly, this evidence of general intent is supported by detailed evidence as to Mr Rees’ inquiries and instructions to his designers, and exhibits SR-1 and SR-2 to his affidavit sworn 30 January 2019.
SR-1 is a comparative use proposal prepared by those designers, dated 3 January 2017 and relied on by the plaintiff before VCAT. It appears to assert that a permitted use under the covenant could be built over almost all of the land surface, and could be two stories in height with additional roof space. There are no detailed plans or detailed evidence to support this assertion, and so I reach no conclusion about it. It is not the alternative proposal the plaintiff now relies upon. That is shown in Exhibit SR-2, which contains detailed plans and computations for an extension to the existing dwelling to convert it to a two storey six bedroom rooming house.
While Mr Rees’ evidence is not structured entirely chronologically, it emerges from his affidavits of 30 January and 1 February 2019, read together, that prior to the development of this alternative proposal for a six bedroom rooming house by an extension to the existing dwelling, he considered removing the existing dwelling to construct a nine bedroom rooming house.[32] He made enquiry of the Council in early March 2017 and was told that no planning permit would be required for a nine bedroom rooming house.[33] For commercial reasons Mr Rees did not immediately proceed with plans for demolition and construction of a nine bedroom rooming house. Instead, in March 2017 he instructed his designers to draw plans for an extension to the existing house for a smaller six bedroom rooming house.[34] The extension plans are exhibited and are dated 31 May 2017. As noted, they are detailed, containing working drawings, engineering and structural computations and an evacuation plan. Mr Rees also exhibits correspondence between him and his designers, which further corroborate the genuineness of the intention to proceed with a rooming house if modification of the covenant is not allowed.
[32]Ibid [5].
[33]Ibid [6].
[34]Ibid [7]; First supplementary affidavit of Steven Rees, affirmed 30 January 2019, [4].
Mr Rees confirms in his affidavit of 1 February 2019 that if the proposed development of two additional dwellings is not ‘able to proceed’ (which could be for reasons unrelated to modification of the covenant) it is his intention to proceed with an extension of the existing house to construct a two storey six bedroom rooming house ‘in the first instance’.[35] If this proves successful as a rooming house, the plaintiff may add a further extension at the ground floor to add a further three bedrooms, to bring the total to nine, being the maximum permitted without a planning permit.
[35]Second supplementary affidavit of Steven Rees (n 2), [12].
Fourthly, I am satisfied that a rooming house of six bedrooms would be permitted under the relevant planning code without the need for a planning permit, and would be otherwise consistent with the Cardinia Planning Scheme (‘Scheme’). This shows that the alternative strategy for use of the site would be able to proceed. In this regard I accept the evidence of Mr Robert Easton in his further affidavit sworn 15 February 2019. Mr Easton does not specifically address all aspects of the potential expansion of the rooming house to include nine bedrooms. However, from the extracts of the Scheme that he quotes, and which are also exhibited to one of Mr Rees’ affidavits, nine bedrooms would not of itself trigger the need for a planning permit provided no more than 12 persons were accommodated within them and the total area of the building thus extended did not exceed 300 sq metres. An enlarged rooming house would also need to comply, as do the plans for the six bedroom rooming house, with the requirements that bedrooms can only be accessed from within the building; a minimum garden area be provided; and there is a shared entry and common area, including living area and kitchen.[36]
[36]Ibid, Exhibit SR-1; Easton Report (n 19).
Finally, there is some, although limited evidence, that a rooming house on the Land could find occupants, and so be commercially successful. Mr Rees envisages that the proposal ‘would provide accommodation needs for workers in market gardens an (sic) other farms in the nearby Koo-wee-rup area’.[37] He also deposes that the Public Register of Rooming Houses presently shows four properties registered as rooming houses in Cardinia Shire (in this context, meaning a rooming house with more than four rooms) and ‘significantly more’ in the neighbouring City of Casey.[38] These assertions are not supported by any more detailed evidence, such as to the proximity of the market gardens and farms of which Mr Rees speaks, the location of the current rooming houses, and whether there is an identifiable need for further rooming house accommodation for farm workers. However, the evidence is not contradicted in any way. Further, the plaintiff has shown a determination to develop the land for commercial gain, and so I consider it unlikely that it would have engaged its designers in such a detailed exercise as developing the plans shown as Exhibit SR-2 unless it had good reason to believe a rooming house would be profitable.
[37]First supplementary affidavit of Steven Rees (n 34), [6].
[38]Second supplementary affidavit of Steven Rees (n 2), [9].
For all these reasons, I consider the alternative proposal of a six bedroom rooming house, with the possibility of a subsequent addition of a further three bedrooms, is a genuine and likely alternative to the preferred addition of two dwellings at the rear of the Land. This is of course if such a development would be permitted by the covenant, a question to which I now turn.
Is a rooming house permitted under the existing covenant?
The covenant restricts construction to ‘one private dwelling house’. Would the alternative proposal for a six bedroom rooming house, in accordance with the proposed plans, comply with this?
Counsel for the plaintiff has taken me to two authorities in support of his contention that it would. The first is Downie v Lockwood,[39] a single judge decision of this Court concerning the meaning in a lease of permitted use as ‘a dwelling house’. The second is a more recent single judge decision of this Court, Longo Investments Pty Ltd (‘Longo’)[40] concerning a restrictive covenant limiting building to ‘one main dwelling house’ only to be used for ‘residential purposes’. I have also considered the more extensive review of previous authority conducted by Cavanough J in Prowse v Johnstone, and his conclusion in that case.
[39][1965] VR 257.
[40][2003] VSC 37 (Osborn J, as he then was).
Dealing first with Prowse v Johnstone, that case concerned a covenant that limited development to ‘one house’. As noted earlier, Cavanough J held that an apartment building containing 18 apartments did not comply with this restriction. So much might seem obvious. In the course of his discussion, however, he held that ‘one house’ equated to occupancy by one household or family. This suggests that a rooming house, occupied by unrelated individuals, might not comply with the restriction in this case, particularly as the restriction is amplified by the words ‘dwelling’ and ‘private’.
In Downie v Lockwood, Smith J considered English authority. One line of authority he considered is to the effect that ‘dwelling house’ may include residential habitation that is of a public character (such as workhouses and public accommodation for the poor). This would suggest that the addition of the word ‘private’ in the covenant before me was intended to exclude publicly funded residences. Another line of English authority considered by Smith J held, somewhat more surprisingly, that a building holding a number of separate self-contained dwellings may nevertheless be one ‘dwelling house’. This line of authority was considered in detail by Cavanough J in Prowse v Johnstone, because it was of particular relevance there.[41] Cavanough J was critical of the analysis in that line of authority, and did not consider it binding on him. It does not apply to the rooming house here proposed, which does not contain self-contained flats, and so I do not consider it further.
[41]Prowse v Johnstone (n 12), [65]-[71].
Cavanough J also conducted an extensive review of Australian authority, including, but not limited to, Downie v Lockwood and Longo. The matters considered in those cases to illuminate the meaning of the various restrictions considered (variously a ‘house’, ‘residence or dwelling house’, ‘one main dwelling house’, ‘one house or dwelling’) as they applied to the buildings in question included the following:
·Whether there is a common entry;
·Whether the building externally presents as one dwelling;
·The internal structure; in particular
·Whether there is internal communication between the internal habitations; and
·Whether the internal habitations are self-contained and lockable one from the other.
Broadly speaking, although different results were achieved in the various Australian cases considered by Cavanough J depending on the precise wording of the restrictions there in question, there are three consistent themes.
The first is that it is significant if the restriction includes, as it does here, a descriptor such as ‘one’, ‘single’ or ‘private’. That is an indicator that the building must be capable of habitation by only one household or family.[42]
[42]Natraine Nominees Pty Ltd v Patton [2000] VSC 303 (Smith J), discussed in Prowse v Johnstone (n 12), [74]; Tonks v Tonks [2003] VSC 195 (Bongiorno J), discussed in Prowse v Johnstone (n 12), [84]-[85].
A second theme is the significance of a common entry and internal communication between habitations as indicators that the building may not offend a single dwelling restriction.[43] The proposed rooming house in this case would have a common entry, and the bedrooms are only accessible internally.
[43]Ex parte High Standard Constructions Pty Ltd (1929) 29 SR (NSW) 274, discussed in Prowse v Johnstone (n 12), [72]-[73].
A third consistent theme of these authorities is that habitations within a building are likely to be considered separate dwellings if structurally separate from one another, and each capable of occupation by a separate family or household, causing the building as a whole to infringe a single dwelling restriction.[44] The bedrooms in the proposed rooming house are not structurally separate from the rest of the building, and the residents all would share the common facilities of bathrooms and toilets, kitchen, laundry and living areas.
[44]Cobbold v Abraham [1933] VLR 385, discussed in Prowse v Johnstone (n 12), [78]; Re Marshall and Scott’s Contract [1938] VLR 98, discussed in Prowse v Johnstone (n 12), [80].
The significance of these matters is indicated in the two particular cases to which counsel for the plaintiff took me. The building in question in Downie v Lockwood was used as a boarding house. The issue before the Court was whether that use infringed a restriction in the lease to use it ‘only as a dwelling house’. The boarders did not have exclusive possession of any part of the premises, and lived there with the family of the tenant, who provided them with meals, accommodation and domestic services. Smith J equated the term ‘dwelling house’ in the lease with the phrase ‘private dwelling house’ (as appears in the covenant in this case) and held that it required a place of abode structurally separate from other buildings and adapted for occupation by persons living in one household only. He held, however, that those persons did not need to be related, or members of the one family, provided they could be said to constitute one household. He held that the living situation in consideration before him was that of one household only, but noted that that would not necessarily be so in the case of ‘an unlicensed hotel or a large scale boarding house run by a staff and catering for all comers’. He observed that in that situation, ‘the public element becomes so prominent that the boarders can no longer be regarded as members of a household, still less of a private household’.[45]
[45]Downie v Lockwood (n 39), 262-263.
There is no indication in the rooming house proposal before me in this application as to whether the inhabitants would be provided with meals and domestic services by persons residing on site, or whether they would cater for themselves. If the intention is that they self-cater, then it presents as an even stronger case than Downie v Lockwood for the residents to properly be considered members of the one household, particularly given the necessity to share all facilities other than the bedrooms.
Osborn J adopted and applied Downie v Lockwood, after considering other authority, in the more recent decision of Longo. The building in question in that case operated as a hostel providing residential accommodation for the aged. The plaintiff, the owner of the building, wished to extend it and sought a declaration that the extension would not infringe the covenant, or, in the alternative a modification to permit it. The proposed new accommodation would comprise separate bedrooms with ensuite bathrooms, together with communal activity areas. Osborn J held that, in view of its combination of individual bedrooms and communal facilities, the proposed building was designed and intended to operate as one ‘household’ in the terms of Smith J in Downie v Lockwood.[46] It followed that the proposed development would not infringe the covenant. However, Osborn J nevertheless thought it desirable to modify the covenant, to put the matter beyond doubt.[47] The number of the proposed new bedrooms is not apparent from the reported decision, but the context suggests that it may well have exceeded the six in consideration, with a possibility of nine, before me.
[46]Longo (n 40), [12].
[47]Ibid [16]-[19].
There was no objector to the application in Longo, and so the outcome is not the result of a fully argued case, but in my view it does show that one household may be constituted by potentially quite a large number of unrelated residents occupying their own bedrooms, in that case with ensuite bathrooms, provided other facilities are communal.
The restriction in this case contains the additional express requirement that the one dwelling house be a private dwelling house. That word was not express in the restrictions in either Downie v Lockwood or Longo. I do not think, however, that this detracts from the applicability of either.
Although that word was not expressly stated in the restriction in Downie v Lockwood, Smith J imported it into the requirement that the building be only used as a dwelling house by stating that ‘(i)n popular speech, the term (‘dwelling house’) is commonly used in a narrower sense, derived, perhaps, from an abbreviating of the expression ‘private dwelling-house’.[48] It was this ‘popular’ meaning that he then applied. He held that the requirement that the use be ‘private’ did not exclude the carrying on of the business of taking in boarders, provided they could be said to thereby become members of the household.
[48]Downie v Lockwood (n 39), 262.
Similarly, it appears that it was this expanded ‘popular’ meaning that Osborn J applied in Longo.[49] The effect of that decision is that even though the provision of accommodation in that case would appear to have been more overtly commercial and of larger scale than in Downie v Lockwood, it still did not offend the restriction, because the residents would still constitute only one household. The rooming house proposal is of a scale more similar to that in Downie v Lockwood, and so in my view would not offend the requirement that the dwelling house be ‘private’.
[49]Longo (n 40), [9].
I conclude that the rooming house proposal would be permitted by the restriction in the covenant, without the necessity for modification.
Comparison of injury
The objectors on the adjoining land withdrew their objection when confronted with Mr Rees’ evidence that the plaintiff would build a rooming house if the application is not allowed. They did not explain their reasons, but I infer that while they may retain their concern that they will be injured by two additional dwellings, they believe that they would suffer even greater injury to their current amenity if a rooming house were to be constructed instead.
I agree that this is objectively likely to be the case. I do so for the following reasons. First, a rooming house with six bedrooms, if fully occupied, will contain at least six persons, and up to 12 (the maximum number if a planning permit is not required, and the maximum if each bedroom contains two persons). This may exceed the number of additional persons accommodated within an additional two dwellings, each of two bedrooms. The likely maximum number for each of those additional dwellings is four, making a total of eight. The greater the number of people, the greater the reduction to the benefits of reduced population density conferred by a single dwelling covenant, in particular in relation to noise and activity.
Secondly, it is possible that worse issues of noise and disturbance may arise from adult and probably unrelated rooming house residents than from the residents of the proposed additional two dwellings. The latter residents are likely to be members of a family or connected by friendship, and so potentially subject to greater internal regulation over behaviour. Adult unrelated residents in a rooming house may have less need or desire to accommodate a desire for peace and quiet by neighbours.
Further, one aspect of the injury perceived by the Browns relates to increased car parking requirements. This would potentially be far worse under the rooming house proposal. The preferred proposal of two additional dwellings contains a single garage for each. If, as the Browns fear, each of those households will have two cars, there would be two additional cars that would need to be parked on the street, or in the limited space available on the driveway.
The current plan for a six bedroom rooming house retains the current carport, but contains no designated on-site parking for additional cars, although it retains a large area at the rear where potentially cars could be parked. According to Mr Easton, only one car space would be required under the Scheme.[50] This presumably would be met by the existing carport. If each of the bedrooms was occupied by a farm worker, or other person, with his or her own car, then potentially there could be an additional five cars needing parking at the rear of the building, or on the street, and causing noise and disturbance when driven. If the rooming house was extended to nine bedrooms, this would trigger a requirement for an extra on site car park, but could add a further two cars needing off-site parking, with less room on site.
[50]Easton Report (n 19), [15].
My concern that the proposed modification could set an adverse precedent remains, but if this occurs, it is likely to occur over time, and on balance I consider the adverse impacts of a rooming house in the short term on all beneficiaries, but particularly the Browns, to outweigh this.
Finally, it is relevant in my view that the rooming house proposal, provided it complies with the requirements of the Scheme, does not need a planning permit. It follows that the opportunity for neighbours such as the Browns to object or have input that arises when a permit is required would not apply. By contrast, the proposal for two additional dwellings does require a planning permit (the earlier permit having been cancelled) and so there would be a further opportunity for objection or input by the Browns and other neighbours, including the proprietors of the other two benefited lots.
Conclusion on substantial injury
Viewed alone, I am not satisfied that the proposed modification to allow two additional dwellings would not occasion substantial injury to beneficiaries. It is a substantial modification (not just two dwellings, but three in total on the lot); it is the first of its kind in the relevant area, and so would set a precedent; and it would substantially reduce the current amenity of the immediately adjacent benefited landowners.
However, when compared to what can be permitted under the covenant, and is a likely alternative development, specifically a six bedroom rooming house not requiring planning permission, the difference in injury is exposed as not substantial. Indeed, I think it likely that there would be greater injury to beneficiaries if the current permitted alternate development were to be undertaken. It is particularly relevant that the immediately adjacent benefited landowners, the Browns, have also, I infer, come to the same conclusion. It is for the Court to reach a conclusion on the removal or limitation of the property rights conferred by a restrictive covenant, and just as the absence of objection is not determinative in favour of the grant of the application, nor is the withdrawal of an objection previously made. It is a relevant factor, however, and reinforces my own conclusion that the proposed modification would not occasion substantial injury to beneficiaries, given what can already be done on the Land without modification.
Discretion
The Court retains a residual discretion to refuse an application for modification even if no substantial injury would be occasioned. This could be exercised, for example, if the proposed development is in fact unlikely to obtain planning permission. That is not the case here. The earlier permit was cancelled, but there is nothing to suggest that a permit would not be granted once the modification is allowed.
I remain concerned that the alternative strategy that has been key to arriving at this result only emerged late in the proceeding, and so it was not advertised to all the beneficiaries at the notification stage. Further, the plaintiff has in substance obtained a finding that the rooming house would be a permitted use under the covenant, without the formal requirements of seeking a declaration to that effect. There has also been no contradictor in that exercise and so limited opportunity to test the plaintiff’s proposition that it is a permitted use. It would have been far preferable, and fairer to beneficiaries, to expose this alternative proposal at the outset.
On balance, however, I do not consider that these factors make it appropriate in the interests of the beneficiaries to refuse the application. Refusal is only likely to encourage an alternative use that I am satisfied would be potentially more injurious to them than the additional two dwellings.
Conclusion
I will grant the modification sought.
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