Re Tang
[2019] VSC 467
•16 July 2019
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S ECI 2019 00343
IN THE MATTER of an application pursuant to s 84 of the Property Law Act 1958 for the modification of a restrictive covenant by:
- and -
IN THE MATTER of an application for the modification of the restriction arising under a covenant in a transfer of land registered no. 2061902 dated 27 February 1947 affecting the land at 41-43 Montana Parade, Croydon being lot 3 on plan of subdivision no. LP 16996 and being the land in folio of the Register volume 7210 folio 948 by:
| JIQIANG TANG | Plaintiff |
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JUDGE: | Ierodiaconou AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 5 June 2019 |
DATE OF JUDGMENT: | 16 July 2019 |
CASE MAY BE CITED AS: | Re Tang |
MEDIUM NEUTRAL CITATION: | [2019] VSC 467 |
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PROPERTY — Restrictive covenant — Covenant restricting, among other things, the erection of more than one building per acre on the land — Application to modify restrictions in covenant pursuant to the Property Law Act 1958 s 84 — Proposed subdivision into two lots and construction of one dwelling on the new lot — Whether precedent already set by previous developments — Whether modification will not substantially injure the persons entitled to the benefit.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D P Lloyd | Aughtersons Solicitors |
HER HONOUR:
The plaintiff, Jiqiang Tang, seeks modification of a restrictive covenant over land situated at 41-43 Montana Parade in Croydon, Victoria (‘the subject land’). The covenant restricts building density to one building per acre. This effectively restricts the subject land to one dwelling, given it is just over one acre. There is currently a single storey dwelling on the subject land.
The plaintiff plans to subdivide the subject land into two separate lots and modify the covenant to allow one dwelling on each. The plaintiff seeks to remove the restrictions on the construction of any building at a cost of less than 1,200 pounds and the requirement that construction be supervised by a registered architect with plans submitted to the original transferor or her architect.
The issues for determination are whether the covenant should be modified to:
(a) permit a second dwelling be erected on the subject land;
(b) remove the cost restriction; and
(c) remove the supervisory restriction related to the original transferor.
These issues are to be determined pursuant to s 84(1)(c) of the Property Law Act 1958 (‘PLA’). The test is whether the Court is satisfied that the proposed modifications ‘will not substantially injure the persons entitled to the benefit of the restrictions’.
Summary of decision
The plaintiff’s application to modify the covenant to enable a second dwelling house is disallowed. The plaintiff has not established that the modification will not substantially injure the beneficiaries of the covenant. The plaintiff’s application to modify the covenant to remove two other restrictions, namely a costs limit on the value of the house and the supervisory restriction related to the original transferor is allowed.
Background
The land situated at 41–43 Montana Parade, Croydon, is more particularly described in Certificate of Title volume 7210, folio 948. The plaintiff is the registered proprietor of the land.[1]The land is lot 3 on plan of subdivision no. 16996.[2]
[1]Exhibit ‘GAE-1’ to the affidavit of Glen Andrew Egerton, sworn 23 January 2019 (‘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.
The restrictive covenant is contained in transfer number 2061902, dated 27 February 1947 and registered on 14 March 1947.[3] By way of his originating motion filed on 29 January 2019, the plaintiff seeks the restrictive covenant be modified by deletion of the words struck through in the part of the covenant extracted below and insertion of the words in bold text and double-underlined, so that the covenant as modified reads:
... shall not
at any time hereafter in subdividing the land transferred erect permit or cause to be erected more than one building except outbuildings appertaining thereto on any part of the said land having an area of less than one acre AND FURTHER that he and they shall not at any time erect on the said land hereby transferred any building at a cost lower than one thousand two hundred pounds exclusive of outbuildings and that no such building shall be erected except by or under the substantial supervision of a registered architect and of which plans and specifications shall have been submitted before commencement of the said building to the said Doris Mary York Syme or her architect appointed in writingbuild more than two dwellings on the land transferred ...
[3]Exhibit ‘GAE-4’ to the first Egerton affidavit.
The plaintiff plans to subdivide the land into two lots and to construct one further dwelling, such that there would be a dwelling on each lot.[4]
[4]First Egerton affidavit (n 1) [8]; see also A30 of Easton Consulting, Planning Report: Covenant Modification 41–43 Montana Parade Croydon (December 2018) (‘the Easton report’) being exhibit ‘RWE-1’ to the affidavit of Robert Walter Easton, town planning consultant, sworn on 5 February 2019 (‘the Easton affidavit’).
After notification was given of this application, two residents in the area wrote to the plaintiff’s solicitors objecting to the proposal. Ms Lesley Wilson’s email to the plaintiff’s solicitors dated 15 April 2019 expressed several concerns.[5] These have been considered, and include: the area’s role as ‘a green belt’; the loss of trees and indigenous plants; the effect of noise and disruption on wild life; increased road traffic; and pedestrian safety issues given there are no footpaths along Montana Parade. However, Ms Wilson declined to become a defendant in the proceeding because of the salary she would necessarily forego by attending court.
[5]Exhibit ‘GAE-9’ to the affidavit of Glen Andrew Egerton, sworn on 28 May 2019, [8] (‘the second Egerton affidavit’).
Ms Judy Pullen wrote to the plaintiff’s solicitors by way of a letter dated 26 April 2019.[6] Ms Pullen’s objections were that the subdivision would not be in keeping with the character of the area and would further strain the existing road system. Subsequent to the further hearing of this application on 5 June 2019, Ms Pullen emailed the Court on 24 June 2019 explaining that she would not be joined as a defendant because of the potential cost involved.
[6]Exhibit ‘GAE-14’ to the second Egerton affidavit, [13]: Mr Egerton deposes to receiving the letter on 8 May 2019.
Although there were no appearances by any objectors, nor were any joined as defendants, the correspondence with potential objectors is exhibited to an affidavit of the plaintiff’s solicitor and has been considered.[7] The main concerns expressed were over the impacts of increased road traffic on Montana Parade, on the rural character of the area and on local flora and fauna, should the covenant be modified to facilitate the proposed development.
[7]Exhibits ‘GAE-9’, ‘GAE-10’, ‘GAE-11’, ‘GAE-12’, ‘GAE-13’ and ‘GAE-14’ to the second Egerton affidavit.
Evidence
The plaintiff relies upon:
(a) the affidavits of Robert Walter Easton, town planning consultant, sworn on 5 February 2019 (‘the Easton affidavit’) and 1 May 2019 (‘the supplementary Easton affidavit’) including exhibit ‘RWE-1’ to the first Easton affidavit, being his planning report (‘the Easton report’);
(b) two affidavits deposed by his solicitor, Mr Egerton, sworn on 23 January 2019 (‘the first Egerton affidavit’) and 28 May 2019 (‘the second Egerton affidavit’); and
(c) the affidavit of the plaintiff sworn on 25 March 2019.
There was no evidence filed by the potential objectors.
I undertook a view of the neighbourhood of the subject land.
Turning now to the first issue.
Should the restrictive covenant be modified to allow two houses on the subject land?
I am assisted by counsel for the plaintiff’s written and oral submissions of 5 June 2019.
The plaintiff’s application is made pursuant to s 84(1)(c) of 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:
Principles
The relevant principles are well-established. I accept the plaintiff’s submission that they are summarised by Riordan J in Oostemeyer v Powell[8] (‘Oostemeyer’). These principles, among others, were 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.
Plaintiff’s submissions
The plaintiff submits that the substantial injury test requires comparing the benefits of the covenant (both those initially intended to be conferred and those actually conferred), with any benefits remaining after its modification. If the difference is not substantial, the test is satisfied in favour of the plaintiff. This requires comparing what the covenant permits prior to modification with what would be permitted afterwards.[10]
[10]Here the plaintiff cites Re Morihovitis [2016] VSC 684, [31].
The plaintiff discusses the benefits of single dwelling covenants in general terms. He cites the ‘largely intangible’ benefits of lower-density living as a ‘certain ambience or quality of life and a degree of peace and quiet’.[11] He also cites the benefits identified in Oostemeyer: a) a tranquil and quiet existence; b) spacious homes and gardens; and c) lower population numbers.
[11]Outline of Submissions on Behalf of the Plaintiff, 5 June 2019, [10].
As to the remaining benefits, the plaintiff submits that the land in the parent title has changed in character since the covenant was made in 1947. Many original lots on plan of subdivision no. 16996 have been further subdivided, although these tend to be larger lots than the subject land.
In respect of the plaintiff’s proposed modification, he submits it would effectively limit the number of dwellings on the subject land to two, rather than being ‘open-ended’. He points out that the Easton report does not indicate any adverse impact on adjoining or nearby properties with the benefit of the covenant.[12]
[12]Easton report (n 4) [6.2], [6.6], [9.5].
On precedential effect, the plaintiff observes that the restrictive covenants over several original lots in the subdivision close to the subject land have already been modified:[13]
[13]Ibid [8.3].
(a) the covenant over original lot 9 was modified in 2010 to allow a minimum lot size of 2,000 square meters;
(b) the covenant over original lot 11 was similarly modified in 2015;
(c) the covenant over original lot 12 was modified in 2013 to provide for four new lots;
(d) the covenant over original lot 18 was modified in 2004 to allow a minimum lot size of 2,000 square meters.
For the above reasons, the plaintiff submits that the difference is not substantial between the benefits intended to be conferred and actually conferred, as against the benefits which would remain were the modification allowed. Further, there are no appearances by or on behalf of any beneficiaries to the covenant. While he concedes that an absence of objectors does not satisfy the relevant test, it is a relevant factor to the Court’s decision.
Finally, the plaintiff points out two matters. Firstly, the existence of rights under the Planning and Environment Act 1987 in favour of the beneficiaries of the covenant. Secondly, the proposed modification refers to number of dwellings rather than minimum lot size because the latter is already regulated by the applicable planning scheme.
Analysis
The upper side (front boundary) of the subject land is situated along the southern (lower) side of Montana Parade. There is direct access from Montana Parade onto the subject land. The subject land contains one dwelling. The remainder of the land, which is downhill from the dwelling, is a backyard and a fenced field. It appears to have suffered from erosion by the small landslip found towards the rear. There is a row of trees along the rear boundary and a swing gate on the eastern side of the field. It opens to Moralla Avenue, a bitumen road, and provides vehicular access.
The lower side (rear boundary) abuts an unpaved walking path. This walking path is adjacent and parallel with the railway line. Moralla Avenue terminates at the north-eastern corner of the subject land, that is, at a corner with the rear boundary.
Montana Parade is an undulating gravel lane that crowns the south-east side of a hill in Croydon. There are no footpaths. There is an open country style guttering along the laneway. From Montana Parade, there are views down to the land below and out to neighbouring hills. While housing and infrastructural development have surely altered the character of the area since 1947, it retains a semi-rural character with a quaint and charming ambience.
Along parts of the southern (downhill) side of Montana Parade, the density of the vegetation is such that some dwellings are barely visible from either the road or the path below that runs alongside the railway line. Their inconspicuousness is also in part an effect of the incline upon which the lots are situated. It is difficult to see many of the dwellings built downhill on lots abutting Montana Parade’s southern edge.
The lots nestled between Montana Parade and Moralla Avenue are generally much smaller (and were not part of the parent title) than the lots south of Montana Parade beyond Moralla Avenue which back down onto the railway. However, even among the latter, some subdivision and development has occurred.
For example, original lot 7 was twice subdivided into three long narrow lots, however it appears it was not subject to a covenant. Original lot 9 was subject to a covenant in different terms to the covenant over the subject land, and was modified by this Court on 12 July 2010 to allow a minimum lot size of 2,000 square meters (the statutory minimum).
The plaintiff proposes to subdivide the subject land.[14] The lot with the existing dwelling, proposed lot 1, would be 2393 square metres. Proposed lot 2 would be 2392 square metres. Although the Easton report indicates that access to lot 2 will be provided from Moralla Avenue, and access to lot 1 will remain from Montana Parade, that is not evidenced in the concept plan contained in the report, or the plaintiff’s affidavit.
[14]Affidavit of plaintiff, sworn on 25 March 2019. See Easton Report (n 4) [6.2]–[6.5] and the concept plan is contained in Easton Report, A30.
The concept plan is of the proposed subdivision. It contains the proposed building envelope. As noted on the plan, it is subject to Council approval. The building envelope is set back 7 metres from the rear boundary, and five metres from other boundaries. Nevertheless the proposed building envelope is extremely large because of the size of the proposed lot.
There is no evidence as to the plan for the second proposed dwelling. There is evidence as to planning requirements in the Easton report. However, without a particular proposal to assess, there is a question as to how the applicable planning laws prove there is no substantial injury if the restrictive covenant is modified. Yes, there are restrictions as to height, setback and other matters, but one is left guessing as to whether, notwithstanding those restrictions, there may still be substantial injury. It is relevant to take into account applicable planning laws, but they do not answer the whole question.
I will not allow the plaintiff’s application for the following reasons.
Firstly, the following part of my analysis in Re Katherine Scerri (as Legal Personal Representatives of Giovanna Scicluna, Deceased)[15] is applicable here.
The plaintiffs have not provided any plans with specificity… as Riordan J stated in Oostemeyer, they have the burden of proving, as a matter of fact, that the proposed discharge will not substantially injure the relevant persons. That is, those with the benefit of the restrictive covenant . They must prove the negative.
In my view, they have failed to do so. The absence of objectors does not vitiate this conclusion. Nor does the fact that the land size is large with considerable depth, that the [expert] report identifies the land as suitable for development, or that the plaintiffs are seeking to build up to three [here, two] dwelling houses.
Without any plans with specificity, I do not accept the conclusion in the [expert] report that there can be no substantial injury if the modification is made.
[15][2017] VSC 368, [11]–[13].
Secondly, there is a semi-rural ambience to the area. Having undertaken a view, I cannot agree with Mr Easton’s opinion that the area can no longer be described that way. As discussed above, Montana Parade has the characteristics of a country laneway.
As the Easton report acknowledges, the existence of any future dwelling would be visible from 45 Montana Parade (whose owner has the benefit of the covenant). The plaintiff has not established that the proposed modification will not be a substantial injury to the beneficiary, particularly in circumstances where Montana Parade retains a semi-rural ambience. Further, the Easton report states that the second dwelling would not otherwise be evident from Montana Parade. I cannot accept that assertion in circumstances where there is no concept plan for the housing development. Further, there is no evidence that the future dwelling would not be visible from 45 Montana Parade and if so, whether it would alter the semi-rural ambience.
Thirdly, the proposed second dwelling will be visible to beneficiaries strolling along the rear walking path adjacent to the railway. This walking path is accessible by another narrow walkway that descends from Montana Parade into Moralla Avenue. On the day that I walked along it, there were pedestrians and people walking their dogs. There are no second residences evident at the rear of original lots 4-6 from the walking track. Those lots, like the adjacent subject-land, have a front on Montana Parade and rear boundary at the walking track. The plaintiff has not established that there will be no substantial injury to those having the benefit of the covenant in respect of their enjoyment of the walking path.
Fourthly, there is the risk of a precedent. The subject land was originally lot 3. Original lots 4-6 are neighbouring lots with the benefit of the covenant that are situated along the south side of Montana Parade, that is downhill, and to the west of the subject land. There is no evidence before me to provide they have not modified or discharged the restrictive covenant. Together with the subject land, they form part of a unique tract of land abutting the walking track, and add to the semi-rural ambience of the area. I reject the plaintiff’s submission that the area has already changed because of discharge or modification of covenants on the northern side of Montana Parade, or in other streets. The southern side of Montana Parade where properties west of the subject land abut the walkway discussed above is unique, as is Montana Parade itself. Surrounding streets are bitumen and do not have the same semi-rural ambience.
For completeness, I add the following. I have considered concerns over the impact on native flora and fauna. The part of the subject land upon which the second dwelling is proposed to be built features a line of conifers along the rear boundary. Beyond the row of conifers, the rear half of the subject land is a small field. Without expert evidence, I make no findings as to whether there is any native flora or fauna on the subject land. The restrictive covenant presently does not prevent these trees being removed. Further, the concept plan in the Easton report indicates the trees would remain.
Should the covenant be modified to remove the supervisory restriction related to the original transferor?
The covenant restricts any building exclusive of outbuildings to those erected:
…by or under the substantial supervision of a registered architect and of which plans and specifications shall have been submitted before commencement of the said building to the said Doris Mary York Syme or her architect appointed in writing…
The Easton report describes this as perhaps ‘a more sophisticated attempt at quality control’ than the cost restriction.[16] The report claims that in 1947 no statutory planning controls operated in the area.[17] It observes the subsequent rise of additional qualification requirements for persons supervising construction, including the registration of builders.[18] The plaintiff submits that the Planning and Environment Act 1987 extensively regulates any development of the subject land.[19] Further, it is unknown whether the original transferor is even available to approve any plans.
[16]Easton report (n 4) 8 [4.5].
[17]Easton report (n 4) 14 [6.8].
[18]Easton report (n 4) 8 [4.5].
[19]Outline of Submissions on Behalf of the Plaintiff, 5 June 2019, [18].
Given the now extensive statutory regime regulating development on the subject land post-dates the restrictive covenant, modification of the covenant to remove reference to the supervisory restriction will not substantially injure the persons entitled to the benefit of it.
Should the restrictive covenant be modified to remove the restriction that a building on the subject land must not cost less than 1,200 pounds?
The restrictive covenant currently provides that any building on the land shall not be erected ‘at a cost lower than one thousand two hundred pounds exclusive of outbuildings’.
I take judicial notice that a house in Croydon could not be erected for less than one thousand two hundred pounds. I also refer to the above analysis on the post-1947 regulatory developments.
I accept the plaintiff’s submission that modification of the covenant to remove reference to the cost restriction will not substantially injure the beneficiaries.
Conclusion
The plaintiff’s application to modify the covenant to remove the restriction of one building per acre is disallowed. Other minor modifications are allowed.
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