Re RJ and RG Bakey Pty Ltd

[2017] VSC 669

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST

S CI 2017 01854

IN THE MATTER of an application pursuant to s 84 of the Property Law Act 1958 for the modification of a restrictive covenant by:

R.J. AND R.G. BAKEY PTY LTD ACN 057 624 405 Plaintiff

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JUDGE:	Ierodiaconou AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	4 October 2017
DATE OF JUDGMENT:	1 November 2017
CASE MAY BE CITED AS:	Re RJ and RG Bakey Pty Ltd
MEDIUM NEUTRAL CITATION:	[2017] VSC 669

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PROPERTY – Restrictive covenant – Covenant restricting, among other things, the erection of more than one dwelling on the land – Application to modify restrictions in covenant pursuant to the Property Law Act 1958 (Vic) – Proposed development involving subdivision and construction of four new dwellings on the land – Whether precedent already set by previous developments – Whether modification will not substantially injure the persons entitled to the benefit – Relevance of original purpose of covenant in argument for modification – Whether restriction on the value of a house erected on the land should be discharged – Application partially refused.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr W Rimmer	Aughtersons Lawyers Pty Ltd

HER HONOUR:

1. The plaintiff, R.J. & R.G. Bakey Pty Ltd, seeks modification of a restrictive covenant over land situated at 24 Ryland Avenue, Croydon, Victoria.  The effect of the restrictive covenant is that only one house may be built on the land.  There is currently a single storey weatherboard dwelling on the land.  The plaintiff wishes to develop the land by building up to four units on it.  The primary issue for determination is whether the restrictive covenant should be modified so as to allow that. 

1. The other issues for determination are whether the restrictions in the covenant; (a) preventing excavation save for building foundations and, (b) limiting the value or cost of the house erected on the land to not less than one thousand pounds, should be removed. 

Summary

1. Orders will be made allowing the application in part.  The application to modify the covenant to enable up to four houses to be built is dismissed.  The application to modify the covenant to remove the excavation restriction is dismissed.  The application to modify the covenant to remove the one thousand pound restriction is allowed. 

Background

1. The land situated at 24 Ryland Avenue, Croydon, is more particularly described in Certificate of Title 08885, Folio 352.  The plaintiff is the registered proprietor of the land.[1]The land is Lot 69 on Plan of Subdivision No. 11393.[2]   

   [1]Exhibit ‘GAE-1’ to the affidavit of Glen Andrew Egerton sworn 16 May 2017 (‘the first Egerton affidavit’).  This exhibit is a title search of the land.

   [2]Exhibit ‘GAE-2’ to the first Egerton affidavit.  This exhibit is a copy of the plan of subdivision.

1. The restrictive covenant is contained in transfer No. 2079191, dated 21 May 1947.[3]  By way of its originating motion filed on 18 May 2017, the plaintiff seeks the restrictive covenant be modified by deletion of the words struck through and insertion of the words double underlined so that it reads: (emphasis added)

...COVENANT with the said ROBERT DICKINSON TIMMS his heirs executors administrators and transferees registered proprietor or proprietors for the time being of the land now comprised in the said Certificate of Title other than the land hereby transferred that he and his heirs executors administrators and transferees shall not at any time hereafter excavate carry away or remove or permit to be excavated carried away or removed from the land hereby transferred any earth soil clay stone gravel or sand except for the purpose of excavating for the foundations of any buildings to be erected thereon nor cause to be erected on either of the said Lots any buildings save and except one dwelling house with outbuildings and that such dwelling house shall be of the value or cost of not less than One thousand pounds exclusive of outbuildings erect more than four dwelling houses on Lot 69 on plan of subdivision no. LP11393 and that the above restrictive covenants shall appear as encumbrances on the Certificate of Title to issue in respect of the land hereby transferred that Lot and shall run with the said land in that Lot.

[3]Exhibit ‘GAE-4’ to the first Egerton affidavit. 

1. The plaintiff intends to construct four double-storey units on the land if it succeeds in this application.[4]

   [4]The first Egerton affidavit [8]; pages A23 and A24 of the planning report (‘the Easton report’) being Exhibit ‘RWE-1’ to the affidavit of Robert Walter Easton, town planning consultant, sworn on 26 April 2017 (‘the Easton affidavit’).

1. After notification was given of this application, a number of residents in the area wrote to the plaintiff’s solicitors objecting to the proposal.  One resident, Ms Julie Gilbert, initially objected to the application.  However, she later indicated that due to the potential financial burden that would be caused by possible costs of the proceeding she would not continue with her objection. 

1. Although there were no official objectors, the letters from potential objectors are exhibited to an affidavit of the plaintiff’s solicitor and have been considered.[5]  The concerns outlined were chiefly on the impact of flora and fauna to the area if the development were to proceed.  Ms Gilbert provided a letter from the Croydon Conservation Society which submitted there would be serious environmental consequences if the vegetation on the subject land was to be removed.[6]  In addition, Ms Gilbert outlined her concerns about street amenity should the development proceed.

   [5]Exhibits ‘GAE-9’, ‘GAE-12’ and ‘GAE-14’ to the affidavit of Glen Andrew Egerton sworn 15 August 2017 (‘the second Egerton affidavit’).

   [6]Exhibit ‘GAE-13’ to the second Egerton affidavit.

Evidence

1. The plaintiff relies upon:

(a)        the affidavit of Robert Walter Easton, town planning consultant, sworn on 26 April 2017 (‘the Easton affidavit’) including exhibit ‘RWE-1’, being his planning report (‘the Easton report’); and

(b)        two affidavits deposed by its solicitor, Mr Egerton sworn on 16 May 2017 and 15 August 2017.[7]

[7]The first and second Egerton affidavits.

1. There was no evidence filed by the potential objectors. 

1. Turning now to the first issue.

Should the restrictive covenant be modified to allow four houses on the land?

1. I am assisted by the plaintiff counsel’s written and oral submissions given on 4 October 2017. 

1. The plaintiff’s application is made pursuant to s 84(1)(c) of the Property Law Act 1958 (‘the PLA’). 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: 

1. The relevant principles are well-established.  I accept the plaintiff’s submission that they are summarised by Riordan J in Oostemeyer v Powell.[8]  These principles, among others, were recently enunciated by Derham AsJ in Jiang v Monaygon Pty Ltd:[9]

   [8][2016] VSC 491 [47]-[51] (‘Oostemeyer’).

   [9][2017] VSC 591 [31]-[36] (citations omitted) (‘Jiang’).

The plaintiff relies on s 84(1)(c) of the PLA, and therefore has the burden of proving as a matter of fact that the proposed discharge or modification will not substantially injure those with the benefit of the covenant. As the person carrying the burden, the plaintiff must prove the negative and the failure by the plaintiff to establish its plans with specificity may result in the Court not being satisfied that the conditions of the section have been fulfilled.

The following guiding principles apply to determine whether those entitled to the benefit of the covenant will not be substantially injured:

(a)a substantial injury must be a detriment that is real and not fanciful.   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’;

(b)the substantial injury relates to practical benefits, being any real benefits to the person entitled to the benefit of the covenant.   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; 

(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’;  and

(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) of the PLA.

In 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.’   His Honour was prepared to ‘assume, without deciding’ that in assessing the benefits which would remain, if the covenant is removed or modified, the Court could consider the protections afforded to neighbouring properties by statutory planning provisions.  It is relevant to consider evidence of statutory planning provisions to the extent it shows what realistically will be the result of the removal or modification of the covenant because ‘it would be artificial and wrong to pay no heed at all to the reality of the situation’.

In considering whether the plaintiff has satisfied the Court that there will not be substantial injury:

(a)       town planning principles and considerations are not relevant;  

(b)the absence of objectors to the discharge or modification of a covenant will not 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. 

If the plaintiff satisfies the Court that there will be no substantial injury to the relevant persons, the Court has a residual discretion to refuse the application.  The Court in exercising its discretion, may consider town planning principles and the precedent value.  

1. I adopt the summary above.  In respect of the plaintiff’s reference to the decision of Adam J in Re Robinson,[10] I refer to and adopt the following analysis of Derham AsJ:[11]

There has been a tendency in applications under s 84(1)(c) of the PLA to refer to the observations of Adam J in Re Robinson, where his Honour referred to the purpose of s 84(1)(c) of the PLA identified in Ridley v Taylor, which was to preclude vexatious opposition to cases where there is no genuineness or sincerity or bona fide opposition on any reasonable grounds.  It is worth emphasising what was said in MacLurkin v Searle, about this notion that s 84(1)(c) of the PLA is restricted to dealing with vexatious or frivolous objections. That is not, in my opinion, the proper interpretation. As Eames J observed in Greenwood & Anor v Burrows & Ors, although the restriction of s 84(1)(c) of the PLA to ‘substantial’ injury would enable the weeding out of vexatious objections to the modification or removal of a covenant, the dichotomy in the section is not between vexatious and non-vexatious claims but is between cases involving some genuinely felt but insubstantial injury, on the one hand, and cases where the injury may truly be described as substantial, on the other.

[10][1972] VR 278 at 284-85.

[11]Jiang [37] (citations omitted).

1. As to the purpose of the single dwelling in this restrictive covenant, I accept the submissions of the plaintiff’s counsel that relevant propositions are set out by Riordan J in Oostemeyer,[12] namely: 

Similar sentiments were expressed by Myers J in Re Parimax (SA) Pty Ltd, in which his Honour said:

I consider that the benefit which a person gets from a restriction cannot necessarily be measured only by material consideration. There are many of us who derive enjoyment from our surroundings, even though they do not add anything to the value of our houses. Indeed, there are many people who object, because it would be unpleasant to them, to the alterations in their neighbourhood, even though it might actually increase the value of their properties.

[12]Oostemeyer [58] (citations omitted).

1. The plaintiff’s submission, in essence, is that the horse has already bolted.  The plaintiff refers to substantial changes in the vicinity of the subject land and relies on the Easton report in that respect.  It is submitted by the plaintiff that anyone living near the subject land must be greatly affected by a large swathe of properties that have been developed with multiple units. 

1. I have personally undertaken a view of the subject land and surrounds at their location. 

1. Ryland Avenue runs from the Maroondah Highway south-east, inclining as it does so, until it ends at a large park, Grandfill Reserve.  There is another park, Gladys Grove Reserve, immediately behind the subject land.

1. I do not agree with the Plaintiff’s proposition that the horse has bolted.  I do not agree that the neighbourhood has lost many of the practical benefits intended to be secured by the covenant by reason of the multi-unit developments already built or permitted.  Further, I reject the plaintiff’s submission that the property of Ms Gilbert, which is adjacent to the subject land, and has the benefit of the covenant, will only be minimally impacted because it is adjacent to the proposed driveway and there will be no overshadowing. 

1. My reasons are as follows. 

1. Firstly, the modification sought is a substantial one: to build up to four units.  This will have a substantial impact on the low density neighbourhood, and particularly upon Ms Gilbert’s land.  It will affect the peaceful and tranquil ambience of the area.

1. Mr Easton opines that the design and location of the proposed four units will not have any significant impact on the neighbourhood because it is such they are ‘easily absorbed into the subject site with no major change at the street frontage.’[13]  This begs the question.  The neighbourhood is a low density one.  I note also that although there may be no major change at the street frontage, there will be on the side bordering Ms Gilbert.  There will also be a major change at the rear of the property, which borders a park.  That park includes a small hill.

   [13]Easton Report [6.7].

1. Secondly, considering the neighbourhood as a whole, whilst there have been some multi-unit developments, they are very much the exception rather than the norm.  The neighbourhood is a low density one, characterised by majority single houses on large blocks of land. 

1. Thirdly, although Ryland Avenue extends to the Maroondah Highway, it retains a quiet attractive residential atmosphere.  The multi-unit developments in Ryland Avenue that exist are closer to the Highway end of the Avenue than the subject land, and do not affect the quiet residential atmosphere in the part of Ryland Avenue where the subject land is. 

1. Fourthly, the neighbourhood is characterised by a sense of spacious homes and gardens. 

1. Fifthly, I do not accept Mr Easton’s opinion that Ryland Avenue is a significant distributor road connecting others in the area with the Maroondah Highway, and for that reason the modification should be permitted.[14]  There are multiple distributor roads to the Maroondah Highway, including Kent Avenue.  Ryland Avenue is not a particularly significant one.  More importantly, its intersection with the Maroondah Highway does not detract from the ambience described above of a low density neighbourhood. 

   [14]Easton Report [6.6].

1. Sixthly, reference is made by the plaintiff to properties adjacent to the Maroondah Highway as evidence of the character of the neighbourhood.[15]  The properties adjacent to the Maroondah Highway are not of the same character as those along Ryland Avenue, Gladys Grove, Woodland Avenue and Penhyrn Avenue, where the majority of land with the benefit of the restrictive covenant is located.  The properties along Maroondah Highway, in contradistinction to the neighbourhood away from the Highway, tends to be of a higher density.  I do not accept that the properties along the Maroondah Highway evidence the character of the neighbourhood.

   [15]Easton Report [8.3].

1. For completeness, I make reference to further submissions advanced by the plaintiff, which I reject.  I do not accept that there will be no substantial injury to other beneficiaries because they are remote to the subject land.  They are not.[16]  As discussed, Ms Gilbert’s land is adjacent to the subject land.  There are other beneficiaries in Ryland Avenue, and many in the street behind the property, Gladys Grove.  There are other beneficiaries in Woodland Avenue, which crosses Ryland Avenue not far from the subject land, and Penhyrn Avenue.  Penhyrn Avenue is parallel with Woodland Avenue and on a higher incline.  It intersects with the south-east end of Ryland Avenue at Grandfill Reserve.

   [16]Easton Report, Figure 5, Base plan showing lots on the parent title having the benefit of the restrictive covenant..

1. I do not accept the plaintiff’s submission that there will be no substantial injury because the covenant does not restrict the number of storeys or size of the dwelling. Nor that it would encourage more substantial dwellings to be constructed.[17]  Whilst it may be the case that a more substantial dwelling will be erected on this specific land, that will be subject to planning controls.  More significantly however, the burden of proof is on the plaintiff to prove that there will be no substantial injury to beneficiaries.  It does not discharge that burden by pointing to hypothetical injuries if the status quo is retained.

   [17]Easton Report [6.5].

1. In conclusion, it is for the plaintiff to prove that there will be no substantial injury to beneficiaries, and it has failed to discharge that burden.

Should the restrictive covenant be modified to remove the excavation restriction?

1. Section 84(1)(a) of the PLA permits modification or discharge of a covenant if it is deemed obsolete by the Court. The plaintiff does not however rely upon this ground. It relies upon s 84(1)(c) that it will cause no substantial injury.

1. Mr Easton’s evidence is that the original purpose of the excavation restriction in the covenant was to operate as a planning control to prevent the establishment of quarries and sand pits in the area.  I accept that these matters are now controlled under planning and other relevant legislation.  Mr Easton does not provide an opinion about the impact of this legislation on the subject land, or the definition of ‘excavation’ in this context. 

1. The plaintiff’s counsel submits that the purpose of removing the excavation restriction is to enable basements to be built.  The restrictive covenant currently only permits excavation for building foundations, not the building itself.  There are however no basement plans in evidence.  Further, even if there were, given that the proposed modification to is not being allowed, those plans would be of no utility because they relate to the construction of four houses. 

1. Without any specificity as to the effect of the removal of the excavation restriction, the plaintiff has not discharged its burden to prove that there will be no substantial injury to the beneficiaries if it is removed.

Should the restrictive covenant be modified to remove the one thousand pound  restriction?

1. The restrictive covenant currently provides that the house erected on the land ‘shall be of the value or cost of not less than one thousand pounds exclusive of outbuildings’.

1. I take judicial notice that a house in Melbourne is unlikely to be erected for less than one thousand pounds.

1. I accept the plaintiff’s submission that removal of this restriction will not result in any substantial injury to beneficiaries.

Conclusion

1. I will hear from the plaintiff as to the appropriate form of orders.