Re Polixronis Super Pty Ltd
[2017] VSC 551
•11 September 2017
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S CI 2016 3698
| POLIXRONIS SUPER PTY LTD (ACN 167 051 210) | Plaintiff |
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JUDGE: | Lansdowne AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 11 September 2017 |
DATE OF JUDGMENT: | 11 September 2017 |
DATE OF REVISED REASONS: | 21 September 2017 |
CASE MAY BE CITED AS: | Re Polixronis Super Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2017] VSC 551 |
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RESTRICTIVE COVENANT – Restriction to shop and one dwelling – Small local shopping strip - Modification sought to shop and three dwellings – Whether restriction to one dwelling obsolete – Whether any substantial injury would be occasioned to benefited land by the modification – No objection from any benefited person – Restriction to one dwelling in conjunction with a shop held to be obsolete within second limb of s 84(1)(a) given change in retail behaviour – No significant precedential effect – Likely increased height a planning matter - Section 84(1)(c) also satisfied - Property Law Act 1958 s 84(1)(a) and (c).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D Laidlaw | Mark M Morgan Barristers and Solicitors |
HER HONOUR:
Introduction
The plaintiff is the owner of land at 12 Carson St, Reservoir (‘the subject land’). The subject land is burdened by a restrictive covenant, which currently permits a shop but prohibits more than one dwelling on the subject land. The plaintiff seeks that the covenant be modified to permit up to three dwellings and a shop. The plaintiff principally asserts that, in accordance with s 84(1)(a) of the Property Law Act 1958, the restriction, in so far as it limits a dwelling to one only, is obsolete. It is difficult to discharge the burden of establishing that a restriction is obsolete. Nevertheless, for the reasons which I gave ex tempore and now elaborate, I consider that the plaintiff in this unusual case has discharged that burden. If I am wrong in that conclusion, I consider that in any event the plaintiff has shown pursuant to s 84(1)(c) of that Act that there will be no substantial injury to any benefited land by the proposed modification.
Facts
The covenant was created in 1945 on transfer of the subject land as part of Lot 959 of Plan of Subdivision 8481. At that time, the covenant prevented the erection of any shop and certain other named commercial and industrial activities, and permitted only a single dwelling on the Lot. The covenant was modified by order of this Court in 1958 to permit a shop but no more than one dwelling to be erected on the land. The subject land is Lot 2 on Plan of Subdivision 53439, which it appears subdivided Lot 959 into four lots. Each of those lots is burdened by the same covenant.
The subject land is currently vacant. It is located in a small pocket of land zoned Commercial, within a broader area of residential land. The other lots within this small commercial pocket contain shops or shops and dwellings, and include the other lots on Plan of Subdivision 53439, which are burdened by the same covenant.
Initially, the registered proprietors of 8 and 10 Carson St, Lots 3 and 4 on Plan of Subdivision 53439, objected to the plaintiff’s application. 8 and 10 Carson Street are located immediately to the south of the subject land. On being informed that their land was burdened by the same covenant, and so it could not also be benefited land,[1] those proprietors withdrew their objections. It is plain from the presence of the representative of the owners of 10 Carson St in court, however, that he and his co-owners retain an interest in the outcome of the application. For the assistance of the former objectors, I note that the decision that I have made in this case is distinct from the planning process that will no doubt take place if the subject land is to be developed, and that as adjacent land owners they will in all probability have rights of notification and objection in relation to the planning process, including as to issues of height, density, overshadowing, overlooking, parkingand other concerns,.
[1]Terrier and ors v Frostmeadow Pty Ltd and ors [2013] VSC 43.
A detailed search of the land that benefits from the restrictions in the covenant was undertaken by Feigl & Newell Pty Ltd, title searchers. I made orders for direct notification of the application to the registered proprietors and registered mortgagees of benefited land in the two blocks closest to the subject land, together with notification of the application on the subject land itself. No objection was received from any person with an interest in benefited land.
Legal principles
Section 84(1) of the Property Law Act 1958 provides that a covenant may be modified in the following circumstances:
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)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…
The plaintiff relies on s 84(1)(a) and (c).
The test for satisfaction of the first limb of s 84(1)(a) is whether the restriction on user created by the covenant, here the restriction to one dwelling in addition to a shop, can no longer achieve or fulfil any of its original objects or purposes, or has become futile or useless.[2]
[2]Prowse v Johnstone [2012] VSC 4, [99].
In relation to the second limb of s 84(1)(a), the plaintiff must show that the restriction ‘hinders, to a real, sensible degree, the land being reasonably used, having due regard to the situation it occupies, to the surrounding property, and to the purpose of the (restriction)’.[3] The term ‘practical benefits’ means any real benefits to a person entitled to the benefit of the covenant. It must be established that the covenant ‘is not necessary for any reasonable purpose of the person who is enjoying the benefit of it’.[4]
[3]Vrakas v Registrar of Titles [2008] VSC 281 (‘Vrakas’), [28], citing earlier authorities.
[4]Vrakas, [31].
In relation to s 84(1)(c), the mere fact that there are no objectors does not discharge the onus on the plaintiff to establish that the proposed modification will not substantially injure the persons entitled to its benefit. . It remains a matter for the Court to be satisfied that the modification is appropriate.[5] It may be relevant to both the second limb of s 84(1)(a) and to s 84(1)(c) to consider whether the proposed modification will have a precedential effect.[6]
[5]Re Morihovitis [2016] VSC 684 per Mukhtar AsJ, [16].
[6]Vrakas, [32] and [39].
An application to modify or discharge a restrictive covenant affects property rights. Whether or not a plaintiff has established a ground for modification or discharge under s 84(1) does not turn on the desirability of the proposed changed use from a town planning perspective. Town planning considerations may, however, be a reason to refuse an application even if a ground is established.[7]
[7]Vrakas, [41] and [46].
Application of the principles to this case
Obsolete
This is an unusual application. It does not concern a single dwelling covenant in a residential zone. It concerns a shop and dwelling covenant, in what the plaintiff’s expert Mr Clarke describes as ‘a small local strip shopping centre’.[8]
[8]Expert report of Matrix Planning Australia Pty Ltd (‘Expert report’), 23.
Mr Clarke does not directly identify the purpose of the restriction to shop and one dwelling, but I infer from his evidence that the purpose when the covenant was modified in 1958 and the land was subdivided into the smaller lots was to create a small local shopping centre, in the expectation that the shop owners would live above or behind their respective shops. On Mr Clarke’s evidence this purpose can no longer be met, because of changes in retail behaviour. He also gives expert evidence on the question of any change to the practical benefits enjoyed by benefited land. His evidence on these issues is as follows:
Small suburban strip centres such as this comprising a handful of shops are generally in decline. This is because of changes in retail behaviour for convenience goods favouring larger format shops such as supermarkets within major shopping centres and precincts, usually with high accessibility on a main road. Being located centrally within a suburban residential area with low visibility away from main roads, and with the general population enjoying greater personal mobility than previously existed decades ago has meant that centres such as this have high levels of vacancies and offer low rent and turnover in retail sales.
The existing strip centre is dated, has a high vacancy rate (2 of the 8 lots are vacant land, 1 is under construction and 2 of the existing shops are vacant) and has a depressed appearance. The modification of the covenant by allowing an increase in activity could only improve the centre’s character by providing greater incentive to upgrade and develop the subject land which is currently vacant.
The character of this commercial strip is unlikely to adversely change as a result of the modification of the covenant sought. In my opinion a 2 or 3 storey development of the subject land would be a reasonable outcome for a small strip centre in a Commercial 1 Zone with no planning scheme built form or heritage overlay controls. A shop and three dwellings could fit within 2 or 3 storey development on the site. The shop would be likely confined to ground floor with the dwellings also at ground floor and/or at upper floors. The covenant does not restrict dwelling size or building height and a large single dwelling and a shop could also fill such a building envelope up to three storeys. Therefore, the covenant does not directly impact the built form character of the subject land, the strip centre or the wider neighbourhood.
The fact that the subject land is well removed from other sites that benefit from the covenant means that if it was redeveloped for medium density housing purposes, there would be little change to the character that those beneficiaries currently enjoy. This is particularly so because of their separate street location and physical separation from the subject land.[9]
[9]Ibid.
The plaintiff does not seek to remove the permission within the covenant for a shop on the subject land, and indeed his concept plans retain a shop or studio together with dwellings. This is consistent with the zoning of the land, which is commercial. Mr Clarke’s evidence is that this zoning permits the intensification of residential use that the plaintiff envisages, and indeed encourages it.[10]
[10]Expert report, 24-25.
In my view, the plaintiff has established a ground for the proposed modification under the second limb of s 84(1)(a). Mr Clarke’s evidence of the current decline of the commercial strip including the subject land establishes that the restriction now impedes its reasonable use. His evidence in the portion quoted above also establishes that the restriction does not currently confer practical benefits on any benefited land, and, indeed that the envisaged modification will not change any amenity that those beneficiaries currently enjoy.
No substantial injury
If I am wrong in my conclusion that the restriction to one dwelling is obsolete, I accept the plaintiff’s alternative submission that there will be no substantial injury to benefited land by reason of the modification.
Benefited land not proximate and of different character
I reach this conclusion largely on the basis of Mr Clarke’s evidence that the benefited land is not proximate and is of a different character. His view, which I accept, is that that character will remain notwithstanding the proposed modification. His evidence is as follows:
The subject land is not proximate to the location of any lots which benefit from the covenant. The nearest is at 24 Morris Street, separated from the subject land by four lots. The subject land is not visible from this property or any of the other benefiting properties, views to it being blocked by intervening buildings and vegetation. In addition no beneficiaries adjoin the subject land and all are in different streets to the subject land.
The character that exists where the closest beneficiaries are located is very different to that which exists in the immediate environs of the subject land. The closest beneficiaries generally enjoy an exclusively homogenous residential character, whereas the character of the subject land is one of a small local strip shopping centre.[11]
[11]Expert report at 23.
Further, I note that there is no objection from any owner or mortgagee of benefited land who takes a different view.
Height and any precedential effect
In the course of giving consideration to this application, I expressed concerns in exchanges with counsel about the height of the proposed development (four storeys in the concept plans) given that most proximate development is one or two storeys in height. This means that the proposed development, if developed in accordance with those plans, would be the first of its kind in the commercial strip, let alone in the benefited area, and quite a departure from existing proximate development.
I accept the submission of counsel that the covenant does not restrict the height of any building on the subject land, and so does not directly protect benefited persons against increased height. Protection of adjacent landowners against intrusion on their amenity by increased height is a concern of planning. The subject land is very narrow, however, and so it follows as a matter of practicality that the proposed relaxation of the restriction from one to three dwellings in addition to a shop will in all probability increase the height, and probably substantially increase the height, of any building on the land. It follows in my view that the restriction to one dwelling and a shop indirectly protects against increased height. On that basis, it is a legitimate matter in my view for the Court to take into account because it does relate to the interests protected by the covenant.
It was as a result of those exchanges with counsel that I looked more closely at the concept plans. What they show is that those plans, which propose a four-storey building, actually envisage four dwellings, not three.
I stood the matter down to give counsel for the plaintiff the opportunity to get some further instructions. It seemed to me appropriate that the plaintiff fully understood that there was a disparity between the application and the concept plans. Those instructions have now been obtained and the plaintiff confirms that the application is for three dwellings, notwithstanding the concept plans. I am informed that the concept plans may have been drawn for purposes other than the application.
Mr Clarke, in his expert opinion, says that three dwellings could be encompassed within two or three storeys, which would not be such a departure from the current surrounding development. To the extent that height may be an issue of concern, I consider that it is now a planning issue.
The other matter that I have given particular consideration to is the possibility that this modification, if granted, would create a precedent. Mr Clarke has identified some changes in the use of land formerly within the parent title, but those changes appear confined to lots along more significant roads. Mr Clarke does not identify any changes to single dwelling covenants in the area of benefited land most proximate to the subject land, and notes that that land is residential in character and zoning.[12] It follows that it is appropriate to consider if the proposed modification could have a precedential effect, particularly as it is quite a substantial departure from the existing restriction and, according to counsel’s researches, it is the first of its kind to come to this Court in this immediate area.
[12]Expert report, 22-23.
I have concluded that the modification, if granted, will not have any precedential effect other than, potentially, for the other adjacent similarly burdened lots and possibly the other lots within the small area of commercial zoning if they too are burdened by a similar covenant. I do not consider that the proposed modification would have any precedential effect for a pure single dwelling covenant in those areas of the original parent title that remain residential.
I reach this conclusion because the apparent purpose of the covenant on the subject land is directed to a commercial use, reflected in its current zoning. A pure single dwelling covenant on any former land in the parent title that has not been subdivided and remains residential is likely to exclude commercial uses, and have as its purpose the retention of an airy residential character. The commercial zone is a small pocket within the broader area. It is also of note that one of the lots that is also subject to this covenant, which is 8 Carson Street, already, it appears, has a permit for a two-lot subdivision which ordinarily would have required a variation of the covenant. The evidence before me does not show how, or indeed if, that occurred.
For these reasons, I do not think there is a concern about a precedential effect other than the immediately adjacent land which is also within the same zoning, and one of those lots is already seeking development.
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