Re Jonson
[2016] VSC 721
•30 November 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S CI 2016 01642
IN THE MATTER of an application pursuant to s 84 of the Property Law Act 1958 for the modification of a restrictive covenant by:
| PETER ANDREW JONSON | Plaintiff |
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JUDGE: | Ierodiaconou AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 28 September 2016 |
DATE OF JUDGMENT: | 30 November 2016 |
CASE MAY BE CITED AS: | Re Jonson |
MEDIUM NEUTRAL CITATION: | [2016] VSC 721 |
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REAL PROPERTY – Restrictive covenant – Application for modification – Covenant restricting the erection of more than one dwelling on the land – Proposed development involving subdivision and construction of 6 dwellings on the land – Whether precedent already set by previous developments - Whether modification will not substantially injure the persons entitled to the benefit – Application granted – Applicable legal principles – Property Law Act1958 (Vic), s 84(1)(c).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D P Lloyd | Forrest Legal |
| For the Objectors (Mrs Lynne Cheers and Mr Michael Cheers) | In person |
HER HONOUR:
Introduction
This proceeding concerns an application to modify a restrictive covenant affecting land situated at 40-42 Zealandia Road East, Croydon North, Victoria. The plaintiff is the registered proprietor of that land, which is more particularly described in Certificate of Title Volume 10374 Folio 514, being Lot 16 on the Plan of Subdivision 007683 (‘the subject land’).
The restrictive covenant is contained in Instrument of Transfer No. 0928080 dated 5 March 1920. It permits only one house to be erected on the subject land. By originating motion filed 4 May 2016, the plaintiff applies to have the restrictive covenant modified so that up to six town houses to a maximum of two storeys may be erected.[1] Specifically, the plaintiff seeks orders pursuant to section 84 of the Property Law Act 1958 (Vic) (‘the Act’) to modify the restrictive covenant to read as follows:
(a)will not erect or cause to be erected on the said land hereby transferred
more than one dwelling housemore than 6 dwelling houses and it is hereby requested that this covenant be noted on and appear on every future Certificate of Title.
[1]Affidavit of Peter Andrew Jonson sworn 21 November 2016, the plaintiff proposes to construct six townhouses to a maximum of two storeys. Mr and Mrs Cheers, the objectors to the proposal, were aware of the proposed two storey height as stated in paragraph 3 of their letter of objection dated 12 September 2016.
The application is opposed by Mrs Lynne Cheers and Mr Michael Cheers (‘the objectors’). They did not seek to be joined as defendants. There were no other contradictors to the application. The plaintiff did not oppose the objectors being heard, and the Court allowed them to make submissions.
The objectors are the residents and registered proprietors of the property at 44 Zealandia Road East, Croydon North, Victoria (‘the objectors’ land’). The objectors’ land is situated next door to the subject land, sharing a west fence line with the subject land. The objectors’ land has the benefit of the restricted covenant that is currently in place.
Summary
For the reasons below, the Court will make the orders sought by the plaintiff for the modification of the restrictive covenant.
Background
The subject land was originally part of a parent title Volume 4257 Folio 257 belonging to a Mr Edward Vernon Jones. Mr Jones registered the Plan of Subdivision 007683 which caused the Land to be subdivided into 52 allotments.
Various lots were transferred from the parent title. It appears that of the 52 original lots, 21 did not contain a restrictive covenant.[2] There are now 140 lots which have the benefit of the restrictive covenant.
[2] Affidavit of Mr Robert Walter Easton, town planning consultant, sworn 19 April 2016
including exhibit ‘RWE-1’, being his planning report Easton report, 26 [9.2].
On 5 March 1920, Mr Jones, by instrument of transfer, transferred the subject land to Ms Jane Sophia Jacks who became the registered proprietor of the property. The Instrument of Transfer No. 0928080 by which Lot 16 was transferred by Mr Jones to Ms Jacks contained the restrictive covenant.
Evidence
The plaintiff relies upon the following evidence:
(a) affidavit of Mr Robert Walter Easton, town planning consultant, sworn 19 April 2016 (‘the Easton affidavit’), including exhibit ‘RWE-1’, being his planning report (‘the Easton report’);
(b) affidavit of Mr Robert John Forrest, solicitor, sworn on 22 April 2016 (‘the first Forrest affidavit’);
(c) affidavit of Mr Robert John Forrest, solicitor, sworn on 3 August 2016 (‘the second Forrest affidavit’); and
(d) his own affidavit sworn 21 November 2016.
The objectors did not file any evidence in support of their objection.
Submissions
The plaintiff made written submissions dated 10 August 2016. The objectors wrote a letter of objection dated 12 September 2016 (‘the letter of objection’). Both parties also made oral submissions.[3]
[3]The Court also received an email to chambers from the objectors on 28 November 2016. It has been disregarded. There was no application before the Court to re-open the case.
The authorities referred to in both parties’ submissions have been considered and, where applicable and necessary, referred to in the discussion of applicable principles. The key submissions of each party are otherwise summarised below.
Plaintiff’s submissions
The plaintiff relies on the Easton report. Referring to the period in which the restrictive covenant was created, the Easton report states:
The neighbourhood originally consisted of 52 rural residential size lots. All of these lots were large with frontages well above the normal average in metropolitan areas today. There were no made roads or reticulated services and it is likely that the area had a semi rural atmosphere.[4]
[4]Easton report, 26 [9.1].
The plaintiff says that there were no statutory planning controls of any kind operating in the area when the restrictive covenant was created.[5] Consequently, the restrictive covenant operated, in effect, as a type of rudimentary planning control for the benefit of purchasers of the affected land. The current planning controls are more stringent than the restrictive covenant. The restrictive covenant was imposed for the purpose of ensuring that one residence only was to be erected on each block, so that there would be reasonable density of population giving a ‘reasonably quiet residential atmosphere, attractive in that it would provide a tranquil, quiet existence.’[6]
[5]Easton report, 28 [10.2].
[6]The plaintiff cites Re Stani (unreported, Full Court of Supreme Court of Victoria, 7 December 1976) 8.
The plaintiff relies upon s 84(1)(c) of the Act, and submits:
there is no real or significant harm caused by [the plaintiff’s] proposal, because the planning controls that apply in this area now provide for the kind of regulation of building bulk, open space, off-street parking, privacy and other such amenities that are secured by controlling the size, location and style of building much more effectively than could have been secured by the blunt instrument of a single dwelling covenant when the covenant was first created.[7]
[7]Plaintiff’s written submissions, 5 [13] and the Easton report, 28-30 [10.3-10.9]; 33 [10.17].
Further, under the existing restrictive covenant, a single dwelling could be constructed that had a bulk and design with a greater impact than the plaintiff’s proposed multiple dwellings. A large dwelling could be constructed that is an equivalent size to the composite size of the largest unit development that could be constructed on the subject land.[8]
[8]Ibid.
The plaintiff relies on the substantial changes to the character of the neighbourhood (as shown in the Easton report) to submit that his proposal to modify the covenant to allow six dwellings on the property would be in line with the current character of the neighbourhood as a low-density residential one.
The plaintiff outlines the following substantial changes to the neighbourhood in his submissions:
(a) 21 of the original 52 lots did not have covenants preventing their further development; [9]
[9]Easton report, 26 [9.2].
(b) currently, the neighbourhood is fully urban with made roads and a full range of reticulated services;
(c) there are now at least 163 dwellings in the original 52 lots. A further 32 dwellings are in the process of being approved on other lots;[10]
(d) one of the lots currently under development is being developed in a similar manner to the plaintiff’s proposal and is the land adjoining the subject land to the South, at 307 Maroondah Highway East; and
(e) the number of dwellings in the parent title has tripled since the covenant was created.
[10]Easton report, 27 [9.3].
The plaintiff submits that the effect of these substantial changes to the neighbourhood is that the beneficiaries have already been substantially deprived of the benefits initially secured by the restrictive covenant. The horse has bolted. It is no longer a neighbourhood of semi-rural dwellings, but is now one with urban developments.[11]
[11]The plaintiff relies on the summary in the Easton report, A21-A22.
Given the substantial changes to the character of the neighbourhood, and the modifications to covenants affecting other land in the neighbourhood, the plaintiff says his proposal will not create any substantial precedential effect.
The proposed modification will not result in any substantial detriment to the beneficiaries’ enjoyment of their property, as compared with the protection conferred by the restrictive covenant.
The plaintiff makes the following submissions on the impact to immediate neighbours of his proposal to construct six dwellings on the subject land, relying on the Easton report:[12]
[12]Easton report, 32-33[10.14[-[10.16].
(a) Lot 12 (property to the South) is under development with a similar proposal to that of the plaintiff. Neither property will be adversely affected by the other’s development;
(b) the objectors’ land, which is adjacent to the subject property, will be subject to minimal impact due to the setback requirements in the applicable planning scheme;
(c) the other adjacent property, 36 Zealandia Road East, does not have the benefit of the restrictive covenant; and
(d) the properties directly opposite the subject land, namely 25 and 29 Zealandia Road East will have a view of two new townhouses, however, they will have a minimum 9 metre setback so there is unlikely to be any direct impact.
Traffic impacts from the plaintiff’s new development will not be substantial.[13]
[13]Easton report,33 [10.18].
The plaintiff also submits that the Court should have regard to the lack of any objectors other than the objectors.
Objectors’ submissions
The objectors submit that the restrictive covenant does not include all properties in the original sub-division. It has however benefited all residents by allowing the subdivision to remain a mix of development. The discharge and modification of the covenant since the original subdivision is undermining the value of the original covenant.
The objectors say the plaintiff has enjoyed the fruits of the restrictive covenant for more than 30 years. Also, they have done a lot of neighbourly things for the plaintiff over the years they have been neighbours.
The objectors contend the aim of the restrictive covenant is to have a mixture of development in the neighbourhood. The objectors say they did not object to the 100 plus resident aged care facility to the Western side, on the Maroondah Highway. However, another potential six double storey units on the Eastern fence will have a negative effect on them. They submit that the covenant was to protect landowners and residents from the ‘sameness’ of development. They note that on Maroondah Highway, behind the subject property, there are six two-storey units. Adjacent to these are another six two-storey units under construction. Behind the objectors’ property are 12 two-storey units and a single storey unit.
The objectors submit that:
(a) the accumulative effect of repetitive construction of unit development is the reason for their objection to the proposed modification of the existing covenant;[14] and
(b) the proposed development appears to be a direct copy of the two developments to the south and therefore does not offer a varied character for the neighbourhood.
[14]The letter of objection, dated 12 September 2016, 2.
The objectors refer to case law concerning the relevance of the covenant, and the purpose of it being to provide a spacious living environment. They argue that despite changes to the character of the neighbourhood, this can still be achieved by a housing development of a mixed and varied character.
The objectors submit that:
(a) there have been no changes to the character of the subject land in the 29 years since they purchased their property. The restrictive covenant does not impede in any way the current use of the property;
(b) there have been no additional residences built on the eight blocks in their section of the street that alter the character of the immediate vicinity;
(c) the modification of the restrictive covenant would alter the spacious living conditions of their property, impact the bird life and increase congestion. They also lost trees due to a development at the rear of their property as a result of excess run off of water from the development. The trees were more than 15 metres high, and 50 years old;
(d) the approximate average ownership and residency of the section of Zealandia Road East on which the objectors reside, and in respect of which the modification is sought, is 20 years;
(e) the building of units would entice a higher turnover rate of residents which would negatively impact on the good sense of community afforded by long-time residents;
(f) since units have been built in the street, there is less opportunity to interact. The other residences on the street are single homes, not units. The units have a higher turnover of residents. The biggest injury is the loss of community; and
(g) they cannot predict what other injury there will be until the development occurs.
The objectors also raised concerns with the manner in which notice was given of the proposed modification. They say the subject land is in a dead end street and they are unsure if all relevant people were identified, including individual notification of those living in units.
Applicable principles
The plaintiff relies solely on s 84(1)(c) of the Act. It provides:
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—
…
(c) that the proposed discharge or modification will not substantially injure the persons entitled to the benefit of the restriction:
Rule 52.09 of the Supreme Court (General Civil Procedure) Rules 2015 (‘the Rules’) provides:
(1)This Rule applies where on an application under section 84 of the Property Law Act 1958 an order is made under subsection (3) of that section directing the plaintiff to make inquiries or give notices.
(2)Whether the plaintiff has made inquiries and given notices in accordance with the order and what the results of the inquiries are shall be determined by an Associate Judge after inquiry.
(3)The Associate Judge shall by order declare what the Associate Judge has determined under paragraph (2) and the application shall not proceed until the order is made.
The applicable principles were recently summarised by Riordan J in Oostemeyer v Powell (citations omitted):[15]
[15][2016] VSC 491, [46] – [51].
46 Section 84(1) of the Act provides:
(1)The Court shall have power from time to time on the application of any person interested in any land affected by any restriction arising under covenant or otherwise as to the user thereof or the building thereon by order wholly or partially to discharge or modify any such restriction (subject or not to the payment by the applicant of compensation to any person suffering loss in consequence of the order) upon being satisfied—
(a)that by reason of changes in the character of the property or the neighbourhood or other circumstances of the case which the Court deems material the restriction ought to be deemed obsolete or that the continued existence thereof would impede the reasonable user of the land without securing practical benefits to other persons or (as the case may be) would unless modified so impede such user; or
(b)that the persons of full age and capacity for the time being or from time to time entitled to the benefit of the restriction whether in respect of estates in fee-simple or any lesser estates or interests in the property to which the benefit of the restriction is annexed have agreed either expressly or by implication by their acts or omissions to the same being discharged or modified; 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.
47The plaintiff only relies on s 84(1)(c) and therefore has the burden of proving, as a matter of fact, that the proposed discharge or modification will not substantially injure the relevant persons. This means that the plaintiff must prove the negative. As the person carrying the burden, the failure by a plaintiff to establish its plans with specificity may result in the Court not being satisfied that the conditions of the section have been fulfilled.
48To determine whether persons, who are entitled to the benefit of the covenant, will not be substantially injured, the courts have established the following guiding principles:
(a)A substantial injury must be real and not a fanciful detriment.[16] 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’.
[16]Ibid [36].
(b)The substantial injury relates to practical benefits, being any real benefits to the person entitled to the benefit of the covenant.[17] 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.
[17]Vrakas v Registrar of Titles [2008] VSC 281 [30], [34] (Kyrou J) and the cases cited.
(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’. This consideration is referred to as the ‘precedent value’.
(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.
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).
49In Prowse v Johnstone, 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.’[18] His Honour was also 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. In my opinion, 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’.
[18]Ibid [104].
50In considering whether the plaintiff has satisfied the Court that there will not be substantial injury:
(a) town planning principles are not to be taken into account;
(b)the absence of objectors to the discharge or modification of a covenant will not, in itself, necessarily satisfy the onus of proof; and
(c)each case must be decided on its own facts; and each covenant should be construed on its own terms and having regard to the particular context in which it was created.
51If the plaintiff satisfies the Court that there will not be a substantial injury to the relevant persons, the Court has a residual discretion to refuse the application. In the exercise of its discretion, the court may take into account town planning principles and the precedent value.
As Mukhtar AsJ has recently observed, applications to modify or discharge restrictive covenants should be approached by a Court ‘with caution because a covenant is a significant property right.’[19]
[19]Re Morihovitis [2016] VSC 684, [6].
Consideration
The neighbourhood to which the subject land belongs is no longer one with a semi-rural atmosphere. It has already undergone numerous subdivisions, modifications of covenants and residential changes so as to significantly change its original character.[20] It is now an urban neighbourhood. The Court accepts that the ‘horse has bolted’; the spacious and tranquil semi-rural environment that the restrictive covenant intended to protect has already been lost. For this reason, the modification of the covenant is unlikely to have any precedential effect.
[20]Easton report, 12-27 [8]-[9].
The objectors rely on the judgment of J McDonald J in Re Pivotel Pty Ltd.[21] That decision concerns the same subdivision of land as this proceeding, and a covenant restricting the erection of more than one dwelling house. The restrictive covenant is contained in a different instrument of transfer to this one, and is dated the following year. J McDonald J refused the application for modification to enable up to ten dwelling houses to be constructed. However, each case must be decided on its own facts. The evidence referred to above indicates that the semi-rural atmosphere of the neighbourhood has now been lost.
[21][2000] VSC 264, [48].
The community in this neighbourhood, and indeed in many outer suburban neighbourhoods across Melbourne, is changing to reflect an increasing population density. The Court understands the objectors’ concerns about maintaining a good community. There are many factors important to maintaining a good community, and the density of houses may be one of them. There are also good communities throughout the world where there is high density living. The proposed modification to the covenant will not substantially injure the sense of community. Indeed, as observed above, and by the objectors, the community is already changing.
In response to the submissions by the objectors that there will be an alteration of the spacious conditions of the objectors’ property, the Court has considered whether they will be substantially injured. It does not consider that they will be. The proposed modification will not, of itself, alter the spacious conditions of the objectors’ property. Rather, it will affect the spacious conditions of the subject property.
The Court understands the objectors’ submissions that they have been neighbourly towards the plaintiff over many years. Further, that the plaintiff has enjoyed the fruits of the restrictive covenant. These are however moral issues for the plaintiff to reflect upon, rather than issues relevant to the determination under s 84 of the Act.
Both parties refer to the issue of traffic congestion. There was no evidence to suggest that there would be traffic congestion due to the building of the six units. Further, although it is not a determinative factor, it is observed that the proposed development of the subject land provides for a garage for each of the six units, and a proposed visitor parking space.[22] Traffic issues may be the subject of town planning considerations.
[22]Easton report, A192.
The objectors raised concerns regarding notice of this application. The Court made orders on 8 June 2016 regarding how notices were to be given in this proceeding. The second Forrest affidavit proves compliance with those orders. Pursuant to r 52.09(3) of the Rules, the Court will declare that the plaintiff has given the notices required by the 8 June 2016 orders.
The Court observes that it was useful to the Court to receive submissions from the objectors, particularly in circumstances where there was no other contradictors to the application.
Conclusion
In conclusion, the Court is satisfied that the proposed modification of the restrictive covenant will not substantially injure the persons entitled to the benefit of it. Orders will be made allowing the proposed modification sought by the plaintiff.
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