Roj Property Group Pty Ltd v Eventpower Property Pty Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST

S ECI 2022 00007

IN THE MATTER of an application pursuant to section 84 of the Property Law Act 1958
(Vic) for the modification of a restrictive covenant imposed by Instrument of Transfer
AK036535Y registered in the Register Book at the Office of Titles and on Certificate of
Title Volume 11384 Folio 290

BETWEEN:

ROJ PROPERTY GROUP PTY LTD & ANOR (according to the attached Schedule)	Plaintiffs
v
EVENTPOWER PROPERTY PTY LTD	Defendant

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JUDGE:	Derham AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	19 April 2023
DATE OF JUDGMENT:	5 May 2023
CASE MAY BE CITED AS:	ROJ Property Group Pty Ltd & Anor v Eventpower Property Pty Ltd
MEDIUM NEUTRAL CITATION:	[2023] VSC 239

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PROPERTY – Restrictive covenant – Application to modify restrictions in covenant pursuant to the Property Law Act1958 (Vic), s 84(1)(c) – Covenant prohibits signage which does not directly relate to the business activities being carried out by the transferee on the Land – Plaintiffs seek modification to prohibit signage which does not directly relate to the business activities being carried out by the transferee on the Land or by a tenant or occupier of the Land – 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 Plaintiffs	Mr Matthew Townsend of Counsel	S & K Planning Lawyers
For the Defendant	Mr William Rimmer of Counsel	Planning & Property Partners Pty Ltd

TABLE OF CONTENTS

Introduction....................................................................................................... 1

The Covenant.................................................................................................... 1

The Proposed Modification............................................................................ 3

Nature and Location of the Land................................................................... 3

Proposed Signage............................................................................................. 4

Some Relevant Background Facts................................................................. 4

Other covenants in the Subdivision............................................................. 6

Applicable Law................................................................................................. 8

Interpretation of the Covenant.................................................................... 11

Submissions..................................................................................................... 15

Plaintiffs’ first submissions...................................................................... 15
Defendant’s first submissions.................................................................. 17
Plaintiffs’ reply submissions.................................................................... 24
Defendant’s reply submissions................................................................ 26

Consideration.................................................................................................. 27

Construction of the Covenant.................................................................. 27
The modification sought........................................................................... 29

Conclusion....................................................................................................... 35

HIS HONOUR:

Introduction

The plaintiffs apply to the Court pursuant to s 84(1)(c) of the Property Law Act 1958 (Vic) (‘Act’) to modify a covenant burdening their land at 26 Cook Street, Port Melbourne, Victoria (‘Subject Land’ or ‘Land’), being Lot 6 on Plan of Subdivision 641054A (‘Subdivision’).[1] The covenant in question is not the usual kind limiting the number of dwellings permitted to be erected. It relates to ‘signage’ that is not to be erected or displayed on the Subject Land.
[1]The land more particularly described in Certificate of Title Volume 11384 Folio 290.

The restriction prohibits signage which does not directly relate to the business activities being carried out by the transferee on the Subject Land and the plaintiffs wish to modify it to prohibit signage which does not directly relate to the business activities being carried out by the transferee on the Land or by a tenant or occupier of the Land.

The defendant is the registered proprietor of Lots 4 and 5 on the Subdivision, and is a beneficiary of the covenant. The defendant’s land at 28–30 Cook Street, Port Melbourne, Victoria adjoins the Subject Land.[2] It opposes the modification sought.[3]
[2]The land more particularly described in Certificate of Title Volume 11516 Folio 059.
[3]There were two defendants joined to the proceeding after the giving of notices to beneficiaries of the Covenant. The second defendant, Cook Street Pty Ltd, withdrew its objection before trial, and was removed subsequently.

The Covenant

The covenant is contained in the first transfer of land after the Subdivision was registered.[4] Because the defendant seeks to make something of the context of the covenant as a whole, I will set it out in its entirety (‘Covenant’):
[4]Transfer of Land from Cook Street Property Development Pty Ltd to Caneva Management Pty Ltd signed on 8 November 2012 and registered on 21 November 2012. The Covenant number is the number of the Transfer: AK036535Y.

The transferee hereby for himself, herself or themselves his, her or their heirs executors administrators and transferees the registered proprietor or proprietors for the time being of the land hereby transferred (“Land”) covenants with the transferor and the registered proprietors from time to time of the land in Crown Allotment 2018 City of Port Melbourne Parish of Melbourne South (other than the Land) and separately covenants with the registered proprietor or proprietors for the time being of the land in Crown Allotment 2018 City of Port Melbourne Parish of Melbourne South whether transferred thereout before or after the Land that the transferee will not and will not suffer, cause or permit:
(a)the use of the land wholly or partly for the retail sale of food and/or beverages;
(b)the use of the Land for any of the following purposes: [there are then set out seriatim an extensive list of prohibited uses which I list in one sentence, as follows: brothel; concrete batching plant; concrete panel plant; recycling plant; vehicle wreckers; junk yard; panel beaters; place of worship; place of assembly; adult bookshop; agriculture; caretakers residence; circus; carnival; crop raising; animal husbandry; and mining];
(c)the Land or any building on the Land to become unsightly or in a state of disrepair;
(d)any signage to be erected or displayed on the land which does not directly relate to the business activities being carried out by the transferee on the Land or allow any third party signage (such as commercial advertising signage) to by [sic] erected or displayed on the Land;

and it is intended that this covenant shall appear as an encumbrance affecting the same and every part thereof on the Certificate of Title to be issued in respect of the lot hereby transferred and further that this covenant shall forever run at law.

The reference in the Covenant to Crown Allotment 2018 is to the grandparent title from which the Land is derived via two subdivisions. The Covenant purports to benefit all land in Crown Allotment 2018, whether transferred out of Crown Allotment 2018 before or after the Land. The plaintiffs and the defendant agree, however, that it is only the proprietors of the parcels of land transferred out of the Subdivision, all of which were transferred out of the parent title after the Land was transferred out,[5] who have the benefit of the Covenant. No issue arises out of the contractual principle of privity which excludes the registered proprietors of the lots transferred out of the parent title before the Covenant was made.[6]
[5]There is one parcel transferred on the same day as the Land – Lot 10, being the land in Certificate of Title Volume 11384 Folio 294, 12–18 Cook Street, Port Melbourne, Victoria.
[6]Re Mack and the Conveyancing Act [1975] 2 NSWLR 623 (Wooten J); Xu v Natarelli [2018] VSC 759, 105.

The parties agree, and there is no dispute, that the burden of the Covenant is borne not only by the initial transferee of the Land (Caneva Management Pty Ltd), but also subsequent transferees who derive title from that original transferee. In this case I think that is correct, as the Covenant is expressed and intended to run with the Land and to bind ‘the registered proprietor or proprietors for the time being of the land hereby transferred.’[7] To conclude that the Covenant applied only to the transferee named in the Transfer of Land by which the Covenant was created would run counter to the evident intention to restrict certain kinds of advertising on the Land by the current transferee, or registered proprietor for the time being. In any event, there is no dispute that the restriction binds the current registered proprietor and at least one object of the modification is to remove any doubt about that.
[7]See also s 78(1) of the Property Law Act 1958 (Vic).

The Proposed Modification

The plaintiffs propose a modification of only para (d) of the Covenant (‘Signage Restriction’) so that it reads (new words underlined and previous typographical error struck through):

(d)any signage to be erected or displayed on the Land which does not directly relate to the business activities being carried out by the transferee on the Land or by a tenant or occupier of the Land or allow any third party signage (such as commercial advertising signage) to by be erected or displayed on the Land;

Nature and Location of the Land

The Subject Land has an area of approximately 1,036m²and contains a four-storey commercial building (three storeys plus ground floor car parking/communal area). The commercial building on the Land currently contains the offices of Symmetric Homes Pty Ltd (Symmetric), Ground Property Group and AMK Owners Corporation.

Cook Street runs approximately parallel with the West Gate Freeway on its northerly side and to the east of the West Gate Bridge. The Land and its immediate neighbours, including the land of the defendant, is accessed via Cook Street, but on the other side faces the West Gate Freeway. Signs on the buildings on land in the Subdivision that face towards the freeway are and will be visible to passing traffic, and particularly if the signs are elevated.

This graphic is oriented to the north. It shows the relevant subdivisions in pink and the Subject Land outlined in blue dashes. The land immediately to the right of the Subject Land is the land owned by the defendant. The inbound carriageway of the West Gate Freeway (heading north-easterly) is immediately below the subdivisions.
Proposed Signage

The plaintiffs intend to construct and display a floodlit, high-wall, business identification sign on the four-storey commercial building located on the Land. The proposed sign is 8.5 metres wide and 4.5 metres long with a total display area of 38.25 square metres, and will advertise Symmetric. The plaintiffs propose to erect the sign on the top corner of the northern elevation of the building so that it will face traffic moving in a south-westerly direction on the West Gate Freeway; that is proceeding to cross the Bridge to the western suburbs of Melbourne.

Some Relevant Background Facts

The plaintiffs purchased the land in April 2018 and they became registered as proprietors in May 2018. In August 2019, the second plaintiff applied to the Melbourne City Council (MCC), as the Responsible Authority under the Planning and Environment Act 1987 (Vic) (P&E Act), for a permit to display the name and logo of Symmetric together, with a slogan, on the Subject Land, in particular on the building erected on the Land and facing the West Gate Freeway (on the easterly face of the building facing traffic proceeding in a westerly direction).

The defendant, as owner of the adjacent land, objected to the application for a signage permit on grounds that included that the sign would breach the Signage Restriction. Nevertheless, in November 2020 the MCC decided to grant the permit, subject to conditions. The defendant applied to review that decision under s 82 of the P&E Act. That application was heard by the Victorian Civil and Administrative Tribunal (VCAT) in August 2021 and a decision was given in September 2021 setting aside the decision of the MCC to issue the planning permit, and refusing to issue a permit, on the basis that it would result in a breach of the Covenant and contravene s 61(4) of the P&E Act.

In her reasons for decision, Member Susan Whitney stated:

Having considered the wording of the Restrictive Covenant and the submissions of the parties, I agree with the Applicant that the proposed sign is prohibited due to the Restrictive Covenant. This is because the proposed sign that is sought to be erected and displayed is not a sign that directly relates to the business activities being carried out by the transferee on the Land, because Symmetric is not the transferee of the Land. Rather, the transferees are ROJ Property Group Pty Ltd and K & M Property Investments Group Pty Ltd. Although it could be argued that there is a relationship, of sorts, between K & M Property Investments Group Pty Ltd and Symmetric, in that Mr Yorenc is involved with both companies, these are two different legal entities.

Rather, I regard Symmetric to be a third party who is seeking to erect signage on the Land. The Restrictive Covenant prevents any third party signage being erected on the Land. The example given – ‘such as commercial advertising signage’ - I take to mean advertising signage unrelated to the Land. However, conceivably, the restriction in covenant (d) would also prevent a third party such as Symmetric erecting and displaying its signage on the Land.

I acknowledge that this interpretation may seem strict and austere but it is not nonsensical. It is what the words of the Restrictive Covenant say. Covenant (d) has been drafted to specifically include reference to the ‘business activities being carried out by the transferee on the Land’, which has to mean something. If what was intended was simply that the business activities be those carried out on the Land, there would be no reason to include reference to these business activities being carried out ‘by the transferee’ on the Land. If I was to read the term transferee as broadly as is suggested by the Respondent, it would negate the inclusion of that word in covenant (d).

Further, reading the words of covenant (d) in this manner does not derogate from the purpose of the Restrictive Covenant, which appears to be to limit signage erected and displayed on the Land to only signage related to the business activities of the transferee carried out on the Land. In practice, this might impact on the leasing of the Land but this does not make the wording of the Restrictive Covenant unworkable or a nonsense. Rather, such strict wording might be consistent with a desire to prevent the potential exploitation of what is arguably a prized advertising position, in light of the location of the Land adjoining one of the busiest freeways in Melbourne.[8]

[8]Eventpower Property Pty Ltd v Melbourne CC [2021] VCAT 1002, [36]–[39] (‘Eventpower’).

This decision is the reason that application is made to modify the Covenant.

On 19 October 2021, the second plaintiff lodged a new planning permit application with the City of Melbourne for a sign on the Subject Land (on the easterly face of the building facing traffic proceeding in a westerly direction) displaying the names of the plaintiffs. It was proposed that the sign would be 8.5 metres wide and 4.5 metres long (38.25 square metres) and display the names of the registered proprietors of the Land. VCAT made an order on 29 March 2023 granting a permit for the proposed sign to be displayed.[9]
[9]K & M Property Investments Group Pty Ltd v Melbourne CC [2023] VCAT 317.

Other covenants in the Subdivision

There are other covenants that are either identical to the Covenant burdening the Subject Land, or similar to it. In summary, they are as follows:[10]
[10]Affidavit of Jessica Kaczmarek made 27 January 2023, CB 873, 878.

(a) The transferee (registered proprietor) of Unit 1, 40–44 Cook Street is Red Island Property Pty Ltd. The covenant burdening the land includes the same Signage Restriction as the Covenant in this case. The signage on the outside of the building is either the current or former tenant or occupant, ‘Texco’.[11]
[11]Affidavit of Jessica Kaczmarek made 27 January 2023, CB 873, 879–881.

(b) The transferee (registered proprietor) of Unit 2, 40–44 Cook Street is Red Island Property Pty Ltd. The covenant burdening the land includes the same Signage Restriction as the Covenant in this case. The signage on the outside of the building is either the occupant or tenant, ‘Redbook Inspect’.[12]
[12]Affidavit of Jessica Kaczmarek made 27 January 2023, CB 873, 881.

(c) The transferee (registered proprietor) of Unit 3, 40–44 Cook Street is Red Island Property Pty Ltd. The covenant burdening the land includes the same Signage Restriction as the Covenant in this case. The signage on the outside of the building is ‘YOUR BUSINESS NAME HERE’.[13]
[13]Affidavit of Jessica Kaczmarek made 27 January 2023, CB 873, 878–882.

(d) The transferee (registered proprietor) of Unit 4, 40–44 Cook Street is Red Island Property Pty Ltd. The covenant burdening the land includes the same Signage Restriction as the Covenant in this case. The signage on the outside of the building is either the occupant or tenant, ‘Programmed’.[14]
[14]Affidavit of Jessica Kaczmarek made 27 January 2023, CB 873, 878–883.

(e) The transferee (registered proprietor) of 28–30 Cook Street is the defendant. The covenant burdening the land includes the same Signage Restriction as the Covenant in this case, save that it expires 15 years after registration of the Subdivision. The signage on the outside of the building is either the occupant or tenant, ‘Eventpower Solutions’ (ACN 130 494 549).[15]

(f) The transferee (registered proprietor) of 24 Cook Street is Reav Investments Pty Ltd. The covenant burdening the land includes the same Signage Restriction as the Covenant in this case. The signage on the outside of the building is either the occupants or tenants, ‘Archer Insurance’ and ‘RDM Electrical’.[16]

(g) The transferee (registered proprietor) of 20–22 Cook Street is Cook St Pty Ltd. The covenant burdening the land includes the same Signage Restriction as the Covenant in this case. The signage on the outside of the building is either the occupant or tenant, ‘Corplex’. [17]

[15]Affidavit of Jessica Kaczmarek made 27 January 2023, CB 873, 878, 888–889.

[16]Affidavit of Jessica Kaczmarek made 27 January 2023, CB 873, 893–894.

[17]Affidavit of Jessica Kaczmarek made 27 January 2023, CB 873, 895–896.

The land at 36–38 Cook Street has the Signage Restriction struck through, that is deleted.[18] That land remains vacant.
[18]Affidavit of Jessica Kaczmarek made 27 January 2023, CB 873, 884.

The transferee (registered proprietor) of the land at 12–18 Cook Street is Westgate Industries Pty Ltd. The land is burdened by a different signage restriction, the substance of which prohibits any ‘static billboards and digital super screens (major promotional signage) which are operated by outdoor advertising companies’. The covenant then names a number of specific outdoor advertising companies. The covenant ceases if the land is re-zoned. The signage on the land is ‘ashi hire’.[19]
[19]Affidavit of Jessica Kaczmarek made 27 January 2023, CB 873, 878, 897–898.

Applicable Law

The application is made under s 84(1)(c) of the Act which provides:

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—
…
(c)that the proposed discharge or modification will not substantially injure the persons entitled to the benefit of the restriction: …

By relying on s 84(1)(c) of the Act, the plaintiffs have 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.[20] The plaintiffs must prove the negative,[21] and the failure by the plaintiffs to establish its plans with specificity may result in the Court not being satisfied that the conditions of the section have been fulfilled.[22]
[20] Vrakas v Registrar of Titles [2008] VSC 281, [40] (Kyrou J) and the cases cited (‘Vrakas’).
[21]Ibid [42].
[22]Ibid.

The following guiding principles apply to determine whether those entitled to the benefit of the covenant will not be substantially injured:[23]
[23]Taken from my judgment in Randell & Ors v Uhl & Ors [2019] VSC 688, [85].

(a) A substantial injury must be a detriment to the benefitted land that is real and not fanciful.[24] The requirement that the injury must be substantial is intended ‘to preclude vexatious opposition cases where there is no genuineness or sincerity or bona fide opposition on any reasonable grounds’.[25] That does not mean, however, that s 84(1)(c) of the Act is restricted to dealing with vexatious or frivolous objections. Although the restriction of s 84(1)(c) of the Act 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.[26]
[24]Ibid [36].
[25]Ridley v Taylor (1965) 1 WLR 611, 622 (Russell LJ); referred to with approval in Re Stani (Supreme Court of Victoria, Young CJ, Barber and Nelson JJ, 7 December 1976) 10.
[26]Greenwood v Burrows (1992) V ConvR 54-444, 65, 199 (Eames J) (‘Greenwood’); MacLurkin v Searle [2015] VSC 750, [54]–[56] (‘MacLurkin’); Jiang v Monaygon Pty Ltd [2017] VSC 591, [37].

(b) The substantial injury relates to practical benefits, being any real benefits to the person entitled to the benefit of the covenant.[27] 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.[28]
[27]Vrakas [2008] VSC 281, [30], [34] and the cases cited.
[28]Re Parimax (SA) Pty Ltd (1956) SR (NSW) 130, 133 (Myers J).

(c) Substantial injury may arise from 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’.[29] This consideration is referred to as the ‘precedent value’.[30]
[29]Re Stani (Supreme Court of Victoria, Young CJ, Barber and Nelson JJ, 7 December 1976) 11.
[30]Vrakas [2008] VSC 281, [39] and the cases cited.

(d) Whether there will be substantial injury is to be assessed by comparing the benefits initially intended to be conferred and actually conferred by the covenant and the benefits, if any, which would remain after the covenant has been discharged or modified.[31]
[31]Prowse v Johnstone [2012] VSC 4, [104] (‘Prowse’).

(e) 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 Act.[32]
[32]Re Cook [1964] VR 808, 810–11 (Gillard J) (‘Cook’), approved in Freilich v Wharton [2013] VSC 533, [25] (Bell J).

(f) It is relevant to consider evidence of statutory planning provisions to the extent they show 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’.[33]
[33] Prowse [2012] VSC 4, [104].

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

(i) town planning principles and considerations are not relevant;[34]
[34]Vrakas [2008] VSC 281, [41] and the cases cited.

(ii) the absence of objectors to the discharge or modification of a covenant will not necessarily satisfy the onus of proof;[35] and
[35]Ibid [43].

(iii) each case must be decided on its own facts,[36] and each covenant should be construed on its own terms and having regard to the particular context in which it was created;[37] and

(h) 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.[38] The Court, in exercising its discretion, may consider town planning principles and the precedent value.[39]

[36]Ibid [44].

[37]Prowse [2012] VSC 4, [52].

[38]Cook [1964] VR 808, 810; Re Robinson [1972] VR 278, 285-6; Re Stani (Supreme Court of Victoria, Young CJ, Barber and Nelson JJ, 7 December 1976) 7; Greenwood (1992) V ConvR 54-444, 65, 192, 65, 200; Stanhill Pty Ltd v Jackson (2005) 12 VR 224, 239 (‘Stanhill’).

[39]Vrakas [2008] VSC 281, [45]–[46].

Interpretation of the Covenant

In Clare v Bedelis,[40] I reviewed the authorities applicable to the interpretation of restrictive covenants as follows:
[40][2016] VSC 381, [31].

(a) Subject to the qualifications mentioned below, the ordinary principles of interpretation of written documents apply.[41] The object of interpretation is to discover the intention of the parties as revealed by the language of the document in question;[42]
[41]AJ Bradbrook and SV MacCallum, Easements and Restrictive Covenants (LexisNexis Butterworths, 3^rd ed, 2011), [15.3] (‘Bradbrook & Neave’).
[42]Bradbrook & Neave; but see Prowse [2012] VSC 4, [55]–[58].

(b) The words of a restrictive covenant:

(iv) should generally be given their ordinary and everyday meaning and not be interpreted using a technical or legal approach.[43] Evidence may be admitted, however, as to the meaning of technical engineering, building or surveying terms and abbreviations;[44] and
[43]Re Marshall and Scott’s Contract [1938] VLR 98, 99; Ferella v Otvosi (2005) 64 NSWLR 101, 107 (‘Ferella’); Ex parte High Standard Constructions Limited (1928) 29 SR (NSW) 274, 278 (‘High Standard’); Prowse [2012] VSC 4, [52].
[44]Phoenix Commercial Enterprises Pty Ltd v City of Canada Bay Council [2010] NSWCA 64, [157]–[158] (‘Phoenix’); Westfield Management Limited v Perpetual Trustee Company Limited (2007) 233 CLR 528, [44] (‘Westfield’); Prowse [2012] VSC 4, [58].

(v) must always be construed in their context, upon a reading of the whole of the instrument,[45] and having regard to the purpose or object of the restriction;[46]
[45]Ferella (2005) 64 NSWLR 101, 107; High Standard (1928) 29 SR (NSW) 274, 278; Prowse [2012] VSC 4, [52].
[46]Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451, [22], 462 (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ); Phoenix [2010] NSWCA 64, [148]–[149].

(c) Importantly, the words of a restrictive covenant should be given the meaning that a reasonable reader would attribute to them.[47] The reasonable reader may have knowledge of such of the surrounding circumstances as are available.[48] These circumstances may be limited to the most obvious circumstances having regard to the operation of the Torrens system and the fact that the covenant is recorded in the register kept by the Registrar of Titles.[49] As the High Court held in Westfield Management Limited v Perpetual Trustee Company Limited:
[47]Phoenix [2010] NSWCA 64, [157]–[158].
[48]These are limited by the decision in Westfield and subsequent decisions: see Sertari Pty Ltd v Nirimba Developments Pty Ltd [2007] NSWCA 324 (‘Sertari’); Berryman v Sonnenschein [2008] NSWSC 213; Shelbina Pty Ltd v Richards [2009] NSWSC 1449; Neighbourhood Association DP No 285220 v Moffat [2008] NSWSC 54; Fermora Pty Ltd v Kelvedon Pty Ltd [2011] WASC 281, [33]–[34]; Prowse [2012] VSC 4, [58].
[49]Westfield (2007) 233 CLR 528, [37]–[42]; Sertari [2007] NSWCA 324, [15]; Phoenix [2010] NSWCA 64, [148]–[158].

The third party who inspects the Register cannot be expected, consistently with the scheme of the Torrens system, to look further for extrinsic material which might establish facts or circumstances existing at the time of the creation of the registered dealing and placing the third party (or any court later seized of a dispute) in the situation of the grantee…[50]
[50]Westfield (2007) 233 CLR 528, [39].

(d) The words of the covenant should be construed not in the abstract but by reference to the location and the physical characteristics of the properties which are affected by it,[51] and having regard to the plan of subdivision and, depending on the evidence, possibly having regard to corresponding covenants affecting other lots in the estate;[52]
[51]Richard van Brugge v Hare [2011] NSWSC 1364, [36]; Big River Paradise Ltd v Congreve [2008] NZCA 78, [23].
[52]Sertari [2007] NSWCA 324, [16]; See Fermora Pty Ltd v Kelvedon Pty Ltd [2011] WASC 281, [33]; Prowse [2012] VSC 4, [58].

(e) Because the meaning of particular words depend upon their context (including the purpose or object of the restriction in a covenant), cases that consider similar words provide no more than persuasive authority as to the meaning of words in a different document.[53] Further, the decisions upon an expression in one instrument are of very dubious utility in relation to another;[54]
[53]Bradbrook & Neave, [15.4] citing Christie & Purdon v Dalco Holdings Pty Ltd [1964] Tas SR 34, 41.
[54]Ferella (2005) 64 NSWLR 101, [17]; In Re Marshall and Scott’s Contract [1938] VLR 98, 100 where Mann CJ observed that small differences of language can be of great importance and that the decision often turns on them; Prowse [2012] VSC 4, [54].

(f) The rules of evidence assisting the construction of contracts inter partes, of the nature explained by Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales,[55] do not apply to the construction of easements and covenants;[56]
[55](1982) 149 CLR 337 (‘Codelfa’).
[56]Westfield (2007) 233 CLR 528; Ryan v Sutherland [2011] NSWSC 1397, [10]; Prowse [2012] VSC 4, [57].

(g) If the meaning remains in doubt after other rules of interpretation have been applied, as a last resort or ‘very late resort,’ the covenant should be construed contra proferentem, that is, against the covenantor;[57]

(h) Whether a covenant has been breached or not is a question of fact to be determined according to the facts of the case and in the light of the actual language in which the restrictive covenant is framed;[58] and

(i) Generally speaking, the proper construction of an instrument intended to have legal effect is a question of law, not fact.[59] On the other hand, the meaning of a particular word or expression in such an instrument may be a question of fact, particularly where the Court has already determined as a matter of construction that the word or expression is used in its ordinary and natural meaning.[60]

[57]Ferella (2005) 64 NSWLR 101, [21]; Bradbrook & Neave, [15.6].

[58]Per Herring CJ in InRe Bishop and Lynch’s Contract [1957] VLR 179, 181; Prowse [2012] VSC 4, [53].

[59]See, in relation to statutes, S v Crimes Compensation Tribunal [1998] 1 VR 83, 88 (J D Phillips JA). See, in relation to written contracts, FAI Insurance Co Ltd v Savoy Pty Ltd [1993] 2 VR 343, 351 (Brooking J); O’Neill v Vero Insurance Ltd [2008] VSC 364, [10] (Beach J); Prowse [2012] VSC 4, [53].

[60]See S v Crimes Compensation Tribunal [1998] 1 VR 83, 88; cf Phoenix [2010] NSWCA 64, [158]; Prowse [2012] VSC 4, [53].

I should add to these principles that evidence of surrounding circumstances is not admissible to contradict the language of the Covenant when it has a plain meaning.[61]
[61]Codelfa (1982) 149 CLR 337, 352 (Mason J), affirmed in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, [52] (French CJ, Nettle and Gordon JJ) (‘Mount Bruce’).

The terms of para (d) of the Covenant are, in my view, discrete from the other terms of the Covenant, which relate to the uses to which the Land may not be put and to prohibiting the Land or any building on it becoming unsightly or in a state of disrepair. The object of the Signage Restriction is evident from its terms, that is, it limits signs to those that relate to the business activities being carried out by the transferee on the Land and to prevent any third party signage such as commercial advertising signs. This may be seen as prohibiting signage that advertises products or services not related to the owner or owners of the Land.

There are, however, issues of interpretation of the Signage Restriction. The first is whether the restriction limits the signage, in effect, to that which does ‘directly relate to the business activities being carried out by the transferee on the Land’. That is, to the business activity actually carried out on the Land by the transferee. So, to take the case of a company the business of which is building residential houses, can the signage refer to that even though the ‘business activity’ is not actually carried out ‘on the Land’, but at various locations elsewhere?

This construction was put in the VCAT proceedings brought by the defendant. The Member rejected the argument, rightly in my view, saying:

I am not persuaded by the Applicant’s arguments as to what is meant by covenant (d) when it prevents any signage being erected on the Land ‘which does not directly relate to the business activities being carried out by the transferee on the Land’. I regard it as sufficient that any signage related to the business activities of the transferee generally, not that the sign is restricted to only those business activities that are conducted by the transferee on the Land, as opposed to the parts of the business activity that the transferee might undertake off the Land. To read it as suggested by the Applicant, one would need to know and then assess the business activities being undertaken on the Land against the wording used in the signage in order to understand whether the signage breached the Restrictive Covenant. I regard this to be beyond what a reasonable reader would understand was meant by covenant (d) as well as posing difficulties in terms of understanding when the Restrictive Covenant was breached. Accordingly, if Symmetric was the transferee I would have been satisfied that the proposed sign directly related to the business activities being carried out by the transferee on the Land, notwithstanding that Symmetric does not actually build homes on the Land.[62]

[62]Eventpower [2021] VCAT 1002, [44].

In my view, this is the correct construction of the Covenant, and nothing put by the defendant before me seeks to re-agitate the contention made to the Member in the VCAT proceeding.

Submissions

The parties exchanged a sequence of written submissions, two sets each. As will appear, the parties are firmly entrenched in their respective bunkers. I have attempted to reduce the submissions by removing some repetition (without much success) and matters dependant on evidence that has been agreed to be inadmissible. Further, rather than attempt to meld the submissions into one set of coherent submissions for each party, I set out the substance of them seriatim.

Plaintiffs’ first submissions

The plaintiffs’ starting point is to identify what they submit to be the object or purpose of the Covenant, being to prevent what is known as major promotional signage, the sale of products not related to the owners or occupants of land, for example advertising for Coca-Cola on the side wall of a bank. They refer to the observations of the Member in the VCAT proceeding (see above at [13]) that it appears to limit signage erected and displayed on the Land to only signage related to the business activities of the transferee carried out on the Land so as to prevent the potential exploitation of what is arguably a prized advertising position, in light of the location of the Subject Land adjoining one of the busiest freeways in Melbourne.

They submit that:

(a) The Covenant does not restrict the putting up and display of any signage (including advertising signage) on the Land, provided it directly relates to business conducted on the Land by the transferee (in this case, the plaintiffs);

(b) The purpose of the Covenant would be entirely consistent with tenants of the transferee(s), conducting business at physical premises on the Land, displaying signage that directly relates to that business. In the course of oral submissions, Counsel for the plaintiffs clarified this submission. He submitted that the words ‘[a]ny signage to be erected or displayed on the land which does not directly relate to the business activities being carried out by the transferee on the land,’ embraces the business activity of letting the land to tenants. This means that a tenant’s signage is not in breach of the Covenant if it directly relates to the business activity of that tenant and does not offend the prohibition on third party commercial signage.

(c) The modified restriction would still prevent the tenants from displaying any signage relating to any other business than that which they conduct on the Land;

(d) Modifying the Covenant to allow signage directly related to business conducted by tenants or occupiers of the Land would continue to prevent exploitation of the Land’s advertising position and prevent third party signage;

(e) Seen through the prism of the Covenant’s purpose, the proposed modification is unlikely to result in any injury, let alone substantial injury. Rather, it simply aims to remedy a potential ambiguity in the drafting of the Covenant;

(f) Significantly, from the perspective of beneficiaries, it will be difficult to ascertain whether signage related to the business conducted on the Land has been erected by a tenant or a transferee of the Land as there will be no visual difference; and

(g) Given that there will be no substantive difference between what is presently possible, and what will be possible after the proposed modification, it is submitted there will be no difference in benefit conferred by the Covenant before and after its modification, and therefore no substantial injury.

The plaintiffs also submitted that no precedent will be created by the proposed modification because:

(a) Not all land in the Subdivision have signage restrictions. An instance is the land at 36–38 Cook Street burdened by covenant AK114541V (Lot 2 in the Subdivision),[63] which had an identical signage restriction but it has been deleted by being ‘struck through’;
[63]Certificate of Title Volume 11384 Folio 286.

(b) Some lots in the Subdivision have a signage restriction in different terms. The land at 12–18 Cook Street burdened by covenant AK029239T (Lot 10 in the Subdivision)[64] is less restrictive, only disallowing any static billboards and digital super screens (major promotional signage) which are operated by outdoor advertising companies;

[64]Certificate of Title Volume 11384 Folio 294.

(c) Lot 10 in the Subdivision (12–18 Cook Street) is burdened by a different signage covenant which is expressed to cease effect if the land is re-zoned;[65]

(d) Other restrictive covenants enjoy the benefit of sunset provisions. For instance, restrictive covenant AK209222K burdening Lots 4 and 5 in the Subdivision[66] (the land owned by the defendant) includes cl (d) relating to signage with a 15-year sunset clause, resulting in expiry of the restriction in October 2027; and

(e) Moreover, there is nothing wrong with creating a precedent per se, that is, if the effect of the modification is to clarify an ambiguity, it might fairly be described as a positive precedent.

[65]Covenant AK029239T.

[66]Certificates of Title Volume 11384 Folios 288 and 289.

It follows that the approval of the application will not cause substantial injury to the beneficiaries of the Covenant.

Defendant’s first submissions

The object or purpose of the Covenant – expressed as the benefit – is conducting business activities within a relatively peaceful, small industrial estate occupied by businesses that do not generate inordinate noise, dust or numerous movements of persons having no real connection to businesses on the estate, and free from intrusive commercial signage unrelated to the real business activities conducted within the estate.

The plaintiffs have not discharged their onus of establishing on evidence that the extension of the exception for business signage to tenants and occupiers will not facilitate artificial short-term leases and/or licences of small areas within the Subject Land to occupiers whose real purpose is to erect commercial advertising, such as billboards, on the land. Those kinds of leases or licences would undermine the principal benefit conferred on others within the industrial estate.

The fact that there are three sites within the Subdivision that have different signage restrictions to those affecting the Land does not of itself establish that the Covenant does not contribute to any substantial extent to the practical benefit of there being no business signage by occupiers other than owners on the Land. Even if impaired, some practical benefits are still secured by the strict signage restriction operating in conjunction with the other covenants. The further impairment of these practical benefits would constitute a direct injury to the nine lots with the benefit of the covenant.

The modification proposed by the plaintiffs would be the first relaxation of a covenant since the Subdivision was first laid out. Even if the network of restrictions across all lots in the Subdivision is uneven, there is still a risk created by granting this application that similar applications will follow with respect to the other five covenants with the restriction in its strict form.

The plaintiffs have adduced no evidence of what the practical effect would be of relaxing the restriction on signage to permit ‘a tenant of the Land or occupier of the Land’ to erect and display signage which directly relates to the business activities they carry out on the Land.

The plaintiffs have provided some evidence of what the current occupiers propose by way of business signage. However, there is no evidence of what other such tenants or occupiers could otherwise erect in terms of signage in the future, and in particular that they could not erect billboards for commercial advertising directed at the general public outside the estate (e.g. passing traffic on the freeway) rather than those genuinely seeking to find the occupiers’ businesses from within the estate.

The substance of the plaintiffs’ submissions is a mere assertion that, after their proposed modification, the words limiting signage to that which ‘directly relate[s] to the business activities being carried out … on the Land’ will continue to have the same effect, in limiting the extent of signage permitted under the exception and limiting it to business activities carried out on the Land.

This misapplies the test outlined in the authorities. The relevant inquiry is not what the effect of leaving the words unaltered might be, but rather what the effect of adding new words might be, hypothetically. The legal test focusses attention on the benefit that was secured by the covenant initially and in fact was secured for the land benefited by the covenant through limiting business signage to activities of owner occupiers, rather than permitting business signage for all occupiers generally. This inquiry requires that the covenant be construed to ascertain the intended benefits.

Applying the principles of construction outlined in Clare v Bedelis and reading the Signage Restriction in context, the true benefit protected by that paragraph is that it secures a more comprehensive benefit than merely limiting signage to business identification signage:

(a) It begins by prohibiting a specific use – retail food and beverage outlets. Taken in the context of the location of this estate near the West Gate Freeway, the benefits of such a restriction would include not having major food and beverage chains within the Subdivision whose primary business model was attracting custom from the freeway, and which would be likely to generate large numbers of vehicle and people movements on and off the freeway. Large intrusive signage would also be part of such a business model.

(b) The second paragraph prohibits certain other uses by description. An examination of them indicates that they are businesses which are likely to cause nuisance through excessive noise, dust or, again, people and/or vehicle movements, and possibly in some cases undesirable social behaviour by invitees of those businesses.

(c) The third restriction is directed to buildings within the estate remaining in good repair and retaining a reasonable aesthetic quality.

(d) The comprehensive benefit that emerges is an estate which is well suited to the peaceful conduct of business within a well-maintained estate, protected from uses which might cause nuisance by reason of their inherent noise, traffic and dust, particularly food and beverage outlets and commercial advertising which might otherwise be particularly attractive because of the estate’s proximity to the freeway.

The plaintiffs have only referred to the hypothetical posited by their own proposal. They have not provided any evidence to establish that no other reasonable hypothetical outcome might result from their proposed additional words. This is an oversight, as it must be taken as evident to the reasonable reader of the covenant in the context of its location as particularly noteworthy that the exemption for business signage is specifically limited to activities of the owners and does not extend to tenants or other occupiers. There must have been a reason for this. A consideration of other hypotheses of what might occur by the addition of these words is required. No such hypotheses are considered by the plaintiffs in their evidence or submissions.

The defendant puts one hypothesis forward, which is not ruled out on the plaintiffs’ materials before the Court. There is nothing to prevent the current or future owners of the Land from entering into short-term leases or licenses of small areas within the Land to commercial third parties whose sole purpose in entering into that lease or license is to take advantage of the exemption. This would be possible (on this hypothetical case) if the small area was used for some purpose directly connected with the advertiser’s business. Such a lease or licence might have a term that is co-extensive with the term of the commercial advertising. In that way, the whole purpose of the prohibition on advertising, with specific prohibition on third party commercial advertising, would be eroded. This is not a merely fanciful hypothesis. The VCAT Member, in the proceeding that gave rise to this application, has made the point that signage that directly relates to business activities being carried out on the Land does not mean that the only business activities to be assessed are those parts of the business activities carried out on the Land by the permitted erecter of a sign and not those parts carried out off the Land.[67]
[67]Eventpower [2021] VCAT 1002, [44].

There is therefore no requirement that the business advertised on the permitted signs be conducted wholly on the Land. It is entirely consistent with the exception in so far as it applies to a registered proprietor who manufactured plastics, that the manufacturing take place elsewhere and the business activities on the land be limited to distribution and/or administration. The exception as presently worded could permit the advertising of the plastics business generally and would not be limited to just the office use of the Land.

On that reasoning, an owner seeking to extract the commercial advantage of entering into commercial signage contracts with a third party could grant that third party a lease or licence of a small room for a server that was directly related to the third party’s business activities carried out elsewhere. One can hypothesise a soft drink manufacturer or any other retailer of products or services.

It must be that the original parties to the covenant had just such a possibility for circumventing the third party signage restriction in mind when limiting the exception to just businesses conducted on the Land by its registered proprietors. If the covenant permits business activities by any occupier, be they owner, tenant or licensee, there would be no point in having included the words ‘by the transferee’ to limit the exception in the first place. That would be to give the covenant the same effect it would have had if the words ‘by the transferee’ had been left out from the start.

The reasonable inference is that the parties deliberately included the words ‘by the transferee’ because, however arbitrary those additional words may in fact be in terms of their effect on business signage of bona fide tenants, they could see no other effective way of preserving the benefit of the third party signage restriction for other lot owners within the Subdivision.

The defendant therefore submitted that the limitation of the business signage exception to transferees was intended to ensure, and has ensured, that the main commercial Signage Restriction was not able to be defeated by artificial short-term leases or licences. Therefore, the plaintiffs cannot satisfy the Court on the present state of the evidence that there would be no substantial injury to the other lot owners on the plan who have the benefit of that restriction.

In relation to the variations in the restrictions affecting other lots in the Subdivision, the defendant submitted:

(a) The original subdivider did not intend that the estate it was developing should have a uniform restriction on commercial signage. At one end (Lot 10), only billboards and digital super screens operated by outdoor advertising companies would be restricted. Some commercial advertising by third parties might therefore occur, at that end of the Subdivision. At the other end, one of the lots (Lot 2) had no restrictions on any kind of commercial advertising. In the middle, Lots 4 and 5 (the defendant’s land) would only contribute to the typical advertising restriction applying to the Subdivision until October 2027.

(b) The best that can be inferred at this point in time is that the purpose of imposing a strict third party signage restriction in perpetuity on the other six lots was to confine signage on those lots to signage directly related to business activities carried out by registered proprietors on those lots in order to provide all of the other lot owners (including those with non-conforming advertising restrictions themselves) with the benefits of having no third party commercial signage on those lots.

(c) It does not follow from that inference alone that the practical benefits intended by Covenant have not been achieved or are not able to be achieved, such that modifying it to permit third party commercial advertising ‘through the back door’ would cause no substantial injury to other occupiers within the Subdivision.

(d) The position that prevails in this case (on the differences between the covenants as posited by the plaintiffs), is that one lot at one end might have some commercial advertising and one lot at the other end might have very substantial commercial advertising without restriction. Nonetheless, all nine of the lots (other than the Land) have the benefit of the strict restrictions on signage with respect to the eight lots (including the Land) which have the strict prohibition on third party signage until October 2027, reducing to six lots out of 10 in total thereafter.

(e) To modify the Covenant in the manner proposed by the plaintiffs would have the direct effect of depriving the nine lots of the benefit of the strict prohibition that prevails and therefore adding to the diluting effect of the other non-complying covenants in the area, to the extent they may have had such an effect. That further deprivation of benefit in the circumstances of the variety of covenants affecting three sites already would be a direct injury to the nine lots currently with its benefit.

(f) It would also create an indirect injury of substance to each of the nine lots which currently enjoy its benefit, along the lines of the adverse precedential effect Macaulay J found in Hivance Pty Ltd v Moscatiello (‘Hivance’),[68] which would be created by further relaxing a single dwelling covenant within a neighbourhood where there was already a great variance between covenants affecting other lots in the neighbourhood. Macaulay J said:
[68]Hivance Pty Ltd v Moscatiello [2020] VSC 183 (‘Hivance’).

The existence of a number of lots which are excluded from the parent title, and others which are not subject to any single dwelling covenant, and the fact that there are already a number of lots with multi-dwelling developments, enhances the strategic power of each covenanted property to resist the tide of change to the character of the area. Each further relaxation of a restriction either cements the particular precedent as the acceptable norm rather than the exception or, logically, heightens the risk that the next application will bring the situation closer to the flood-gate scenario.[69]

(g) The indirect injury created by the adverse precedential effect is exacerbated if this proposed modification will be the first relaxation of the network of advertising restrictions since the developer first created the Subdivision with the benefit and burden of covenants in their present form. The benefits that were secured by the strict advertising restrictions over the Land for the nine lots with its benefit – even if that benefit was impaired to some extent from the start - would be jeopardized by the relaxation of the restriction over a further lot, making the risk of a further application by other owners with the burden of the covenant so much the easier.

[69]Ibid [43].

Plaintiffs’ reply submissions

The defendant adopts the logic of VCAT’s technical approach to the construction of the Covenant without asking the more fundamental question: what were the parties to the Covenant trying to achieve? There is no logic behind a construction that favours the promotion of property holding corporations, as distinct from the corporate entities actually conducting businesses on the Land. Given its ordinary and everyday meaning, and not using a technical or legal approach, the Covenant acknowledges the community of interests between the transferee and its tenants. In the case of a registered proprietor which is a property holding corporation, its business as the ‘transferee’ includes ensuring that its tenants have adequate business identification signage. Some level of business identification signage is essential for every business — from the brass plaque on a dentist’s door; the shopfront awning sign outside a milk bar; through to the high-wall sign on a bank in the CBD.

The construction adopted by VCAT results in an artificial and absurd outcome that is plainly at odds with the Covenant’s purpose. On the construction advanced by the defendant, even the ‘1 Homes’ signs on the Cook Street-front of the plaintiffs’ building is in breach of the Covenant, even though it is the principle means of ensuring customers enter the correct building. Why would the parties to the Covenant agree to an arrangement in which visitors to the Land could not identify which building they were walking into?

The defendant’s suggested construction is at odds with the Covenant’s ordinary and natural meaning as evidenced by the way other owners of land subject to the same covenant have interpreted the restriction, even by the defendant on its own land. Nothing of substance will change if the relief is granted as sought. As McDonald J found in Re Pivotel,[70] a modification consistent with the original purpose of a covenant had not created a negative precedent.
[70][2000] VSC 264.

The only theoretical injury the defendant has been able to identify has been the creation of artificial short-term leases or licences of small areas within the building on the Land to occupiers whose real purpose is to erect commercial advertising, such as billboards. The evidence of Mr Yorenc shows that the plaintiffs have no intention of creating such occupancies. In any event, it would be difficult for a tenant to show the signage was in support of ‘business activities being carried out on the land’ if the business activity was merely, for example, a data server in a room. Moreover, there is no evidence of such an occupancy occurring on other land burdened with a similar covenant. Seen in this context, the defendant’s hypothetical scenario bears no reflection to the reality of the situation.

The defendant’s argument for injury from the modification therefore falls squarely within the category of ‘fanciful’ as contemplated by Kyrou J in Vrakas v Registrar of Titles (‘Vrakas’).[71]
[71][2008] VSC 281, [30], [34]–[36].

The defendant contends that the plaintiffs have adduced no evidence of what the practical effect would be of relaxing the restriction on signage to permit a tenant or occupier of the Land to erect and display signage which directly relates to the business activities they are carrying out on the Land. The plaintiffs responded that neither has the defendant.

The plaintiffs also made submissions as to the burden of costs if they should be successful.

Defendant’s reply submissions

The evidence of Mr Yorenc goes no further than the plaintiffs’ present intentions. The plaintiffs are not giving undertakings. They may change their mind. They may sell the Subject Land to third parties with different intentions. The evidence does not prove that modifying the Covenant will not open up a real possibility that the principal purpose of the Signage Restriction on third party signage may be undermined by short-term occupiers’ signs.

The evidence of other signage in the area is of no assistance to the Court in its task of determining whether the plaintiffs’ proposed modification will not cause substantial injury to someone with the benefit of the current stringent restriction on signs. The fact that no-one elsewhere in the Subdivision has yet erected signage by short-term occupiers is irrelevant to the question whether the proposed modification may open up that possibility on the Subject Land. There may be many reasons why others have not done so. That issue is outside the scope of this proceeding.

The other covenants in the Subdivision which have either been removed at the outset, or are substantially the same as the Signage Restriction in this case or are wider, as in the prohibition on static billboards and digital super screens operated by outdoor advertising companies on the title to 12–18 Cook Street (see above at [17]), were all in place from the start of the Subdivision. There has been no change to the original pattern of covenants since they were first created. The differences and similarities do not mean that the Covenant in this case is ineffective in securing any real benefit for other lots in the Subdivision.

The possibility that a relaxation of the restriction on signs to permit tenants’ or occupiers’ signage generally could lead to minor occupancies being created which would substantially undermine the prohibition on third party signage is real, and not fanciful in the manner described by Kyrou J in Vrakas. All that would be required, if the Covenant is modified as sought, is that the sign’s owner be an occupier and that the sign relate directly to a business carried on by that occupier on the Land. The occupier’s signs will be permitted, even if the business activities of the occupier on the Land are only a minor part of the totality of business activities being carried out on the Land. Nor is there any requirement that the business activities carried out by the occupier on the Land form a large or substantial part of the totality of the business activities of the occupier.

There is a real possibility, which is more than trivial or fanciful, that a third party could occupy a small part of the Subject Land, carry out some of its business activities on the Land and then fall within the exception for permitted signs.

The plaintiffs have not established the original benefit intended and actually conferred by the Covenant, in order to compare them with the hypothetical benefits remaining if the modification is approved. What remains unexplained is why the original parties to the Covenant included the words ’by the transferee’ after the words ‘business activities carried out on the Land’. It would have been easy to have left those words out altogether or to have included the words now proposed by the plaintiffs, if the intended benefit was merely to require there to be a direct connection between signs on the Subject Land and business activities being carried out on the Subject Land.

It is not for the defendant to establish why the original Covenant permitted only signs directly related to business activities carried out on the Subject Land by the transferee. Nor should the Court be left to speculate.

Consideration
Construction of the Covenant

The presence of ‘by the transferee’ in the wording of the Signage Restriction makes it very difficult to construe it in the way advanced by the plaintiffs. It was contended by the plaintiffs that, properly construed, the Covenant permits tenants and occupiers of the Land to erect and display signage which directly relates to the business activities being carried out by that tenant or occupier on the land because the terminology embraces the business activity of letting the land to tenants. This submission was said to be derived from the purpose of the Covenant deduced particularly from the final words of the Signage Restriction: ‘or allow any third party signage (such as commercial advertising signage) to by (sic) erected or displayed on the Land’.

That led the plaintiffs to submit that the approach adopted by Member Susan Whitney in the VCAT judgment (see above [13]) was an overly literal and technical reading of the Covenant. It was that decision in VCAT that led to this application to make a minor amendment that allows advertising signs to be used to advertise tenants and occupants of the Land, not simply the owners of the Land.

The plaintiffs’ construction seeks to elevate the so-called purpose so as to contradict the clear words of the Covenant. If surrounding circumstances are not admissible to contradict the language of the Covenant when it has a plain meaning,[72] then, by parity of reasoning, nor should the identified purpose, unless it is clear that there has been a mistake or misstatement in the wording that can be corrected or overlooked. The words ‘by the transferee’ cannot be a mistake. It is clearly deliberate, but somewhat misguided as, read literally, it would be limited to the original transferee of the Land named in the Transfer of Land. As I have already said, to conclude that the Signage Restriction applied only to the transferee named in the Transfer of Land by which the Covenant was created would run counter to the evident intention to restrict certain kinds of advertising on the Land by the current transferee, or registered proprietor for the time being (see above at [6]).
[72]Codelfa (1982) 149 CLR 337, 352 (Mason J), affirmed in Mount Bruce (2015) 256 CLR 104, [52] (French CJ, Nettle and Gordon JJ).

If the Covenant properly construed permits business activities by any occupier, be they owner, tenant or licensee, there would be no point in having included the words ‘by the transferee’ to limit the exception in the first place. It is much more likely that in the choice of the words, the leasing of the Land was simply not in contemplation at all.

In my view, the construction adopted by Member Whitney in the VCAT decision was correct. The words of the restriction ‘directly relate to the business activities being carried out by the transferee on the Land’ must be given their ordinary and natural meaning. It is not possible to ignore the words ‘by the transferee’ and to conclude, as the plaintiffs would have it, that the real import of the words is to restrict signage to that directly related to the business activities being carried out on the Land, no matter by whom.

On the other hand, I would not go so far as the defendant in the construction it advanced (see above at [46]) that the original parties to the Covenant had in mind the possibility of the proprietor (transferee) granting to a ‘third party’ a lease or licence of a small room for a computer server that was directly related to the third party’s business activities carried out elsewhere so as to circumvent the third party signage restriction.

The modification sought

In relation to the modification sought by the plaintiffs, being the inclusion of the words ‘or by a tenant or occupier of the Land’ (see above at [7]), the debate basically came down to the proposition that the plaintiffs had failed to prove the negative; namely, that the extension of the exception for business signage to tenants and occupiers will not facilitate artificial short-term leases and/or licences of small areas within the Land to occupiers whose real purpose is to erect commercial advertising, such as billboards, on the Land (see above at [33], [37], [42], [43], [44], [48], [57], [60] and [61]). Moreover, the defendant contended that the plaintiffs failed to prove what the practical effect would be of relaxing the restriction on signage to permit ‘a tenant or occupier of the Land’ to erect and display signage which directly relates to the business activities they are carrying out on the Land (see above at [36] and [42]).

The critical response by the plaintiffs was that the defendant’s fear of artificial short-term leases or licences was fanciful. It was fanciful because evidence shows that the plaintiffs have no intention of creating such occupancies and, in any event, it would be difficult for a tenant to show the signage was in support of ‘business activities being carried out on the land’ if the business activity was merely, for example, a data server in a room. Moreover, the defendant’s hypothetical scenario bears no relation to the reality of the situation within the Subdivision where, so far as can be determined, all the signage is by occupiers, genuine occupiers, rather than by the ‘transferee’, that is by the registered proprietor.

It is common ground that whether there will be substantial injury is to be assessed by comparing the benefits initially intended to be conferred and actually conferred by the Covenant and the benefits, if any, which would remain after the Covenant has been discharged or modified.[73] Those benefits and any injury to them must occur in relation to the person’s enjoyment of their property.[74] If from the evidence it appears that the difference between the two will not be substantial, then the applicant will have established a case for the exercise of the Court’s discretion under s 84(1)(c) of the Act.
[73]ReCook [1964] VR 808, 810-11; Vrakas [2008] VSC 281, [35]; Prowse [2012] VSC 4, [104].
[74]ReCook [1964] VR 808, 810.

Neither party attempted to introduce expert evidence, or indeed any direct evidence, that bears upon the benefits of the Signage Restriction for the benefitted lands. As I said in the course of argument, it is difficult to envisage what such evidence might be. The plaintiffs did, however, introduce extensive evidence of the compliance with the Signage Restriction in the Subdivision. It is revealing. Neither the defendant nor the plaintiffs comply with the Signage Restriction at present on either the Cook Street frontage or the West Gate freeway frontage of their respective properties. Nor does any other registered proprietor of land in the Subdivision which is subject to the Signage Restriction (see above at [16]). The defendant, in its very limited evidence, said nothing about the signage that appears on the building on its land. What does appear from the evidence is that there is no commercial signage unrelated to the business activities conducted on the various lots in the Subdivision. The signage is all business identification signage.

Thus ‘on the ground’, as it were, the purpose of the Signage Restriction as advanced by the plaintiffs is well reflected in the signage displayed. That purpose being to prevent what is known as major promotional signage for the sale of products not related to the owners or occupants of land. The fact that the defendant’s signage is itself in breach of the restriction, along with all the other relevant signage, points to a tacit waiver of the restriction that the signage be directly related to the business conducted by the transferee on the Land. Such a tacit waiver was taken into account by Gillard J in Re Markin[75] with respect to minimum lot sizes, to advance the conclusion that the restriction in that case was obsolete and, importantly to this case, sustained the burden specified in s 84(1)(c) of the Act as defined by him in Re Cook.[76] That is the test identified above (see above at [72]).
[75][1966] VR 494, 496.
[76][1964] VR 808.

Based on a reading of the whole of the Covenant, the defendant contends that the purpose of the Covenant is directed to conducting business activities within a relatively peaceful, small industrial estate occupied by businesses that do not generate inordinate noise, dust or numerous movements of persons having no real connection to businesses on the estate, and free from intrusive commercial signage unrelated to the real business activities conducted within the estate.

I consider that purpose is a ‘long bow’. The framers of the Covenant could not have been unaware of its location next to the West Gate Freeway and almost at the foot of the West Gate Bridge. The restriction on the retail sale of food and beverages can be seen as related to preserving exclusivity for nearby traders, as there is a Hungry Jack’s franchise at the northern end of the Subdivision. The restriction on the use of the Land for the various listed purposes leaves many uses, including warehouses, wholesale or retail sale or hire of vehicles and machinery, office buildings, and the like. It is tolerably clear that the Signage Restriction is, as I have said, discrete from the other terms of the Covenant and must be considered as prohibiting signage that advertises products or services not related to the owner or owners of the Land, who were probably thought to be the occupiers of the burdened lands.

With the agreement of Counsel for the parties, I have undertaken an inspection of the Subdivision, the Subject Land and the defendant’s land from the Cook Street aspect. I have also driven by the Subdivision from the West Gate Freeway side on a number of occasions.

The purpose of the Covenant as advanced by the defendant is not reflected in the terms of the Covenant as a whole nor in location of the Subdivision or any aspect of its development. The terms of the Covenant restrict the uses to which the Land may be put, but not so as to produce a ‘peaceful, small industrial estate occupied by businesses that do not generate inordinate noise, dust or numerous movements of persons having no real connection to businesses on the estate’. The presence of the West Gate Freeway at its doorstep makes the site noisy, dusty and surrounded on both sides by heavy traffic at most times of the day and night. Almost all the movement of traffic around the Subdivision is unrelated to any business conducted in it. Cook Street is used as an exit from the Freeway to access Todd Road and Port Melbourne and surrounds. It abounds with heavy vehicles and general traffic.

With that in mind, it is also clear that the Signage Restriction does not restrict the putting up and display of any signage (including advertising signage) on the Land, provided it directly relates to business conducted on the Land by the transferee (registered proprietor). If modified, as suggested by the plaintiffs, it would still prevent the tenants or occupiers from displaying any signage relating to any business other than conducted by them on the Land. I agree with the plaintiffs that modifying the Signage Restriction to allow signs directly related to business conducted by tenants or occupiers of the Land would continue to prevent exploitation of the Land’s advertising position and prevent third party signage.

I also agree with the plaintiffs’ submission that the proposed modification will not result in any injury, let alone substantial injury, to those having the benefit of the Covenant. There is precious little difference between signage directly related to business conducted by tenants or occupiers of the Land and such signage directly related to business conducted by the registered proprietor. I fail to see any difference of substance at all. This is made obvious by the present signs displayed, which without exception comprise signage that does not identify the registered proprietor, but some other entity. I fail to see any detriment to the proprietors of the benefitted land, in their enjoyment of that land, that is ‘real’ arising from the proposed modification.

I further agree with the plaintiffs that the extension of the exception for business signage to tenants and occupiers will not facilitate artificial short-term leases and/or licences of small areas within the Land to occupiers whose real purpose is to erect commercial advertising, such as billboards, on the Land. I consider that prospect to be fanciful. It is relevant to consider evidence of statutory planning provisions to the extent they show what realistically will be the result of the modification of the Covenant.[77] There are a range of planning restrictions applicable to signage in the Subdivision. As the decision of Member Whitney in the VCAT decision shows, pursuant to cl 66.03 of the Melbourne Planning Scheme, the Head, Transport for Victoria, is a determining referral authority for ‘[a]n application to display an animated or electronic sign within 60 metres of a freeway or arterial road declared under the Road Management Act 2004 (Vic)’.[78] In the Subdivision, the Melbourne Planning Scheme requires a permit for both ‘business identification signs’ and ‘major promotion sign’, if the size is above a certain size (18 square metres).[79] The restrictions on floodlit, high-wall business identification signs are such that there needs to be a sufficient nexus or a reasonable relationship between the business identified and the business carried out on the Land.[80]
[77] Prowse [2012] VSC 4, [104].
[78]Eventpower [2021] VCAT 1002, [5], fn 3.
[79]Ibid [21], [22].
[80]See Fivex Pty Ltd v Melbourne CC [2019] VCAT 138, [18], [26], [27], [43], [44], [45]–[50]

The size of an advertising sign facing the freeway is an important consideration. Traffic along the section of the freeway near the Subdivision travel at up to 80 kmh. At that speed, to notice and take in any advertising sign, it must be quite large. The planning regime will be likely to apply to any effective advertising that might be contemplated in consequence of the modification.

The Signage Restriction will continue to restrict the display of any major promotional advertising by any third party. In light of the planning restrictions that apply to the Subdivision, and the nature of the signage in fact displayed on the various properties burdened by the Signage Restriction, the proposition advanced by the defendant that, in effect, the modification sought will open ‘pandora’s box’ and lead to a device being used to promote businesses with no real connexion to the Land is truly fanciful.

I do not consider the precedential effect of the modification to be a reason to refuse it. That proposition is based on owners of other land in the Subdivision burdened with the same Signage Restriction themselves taking advantage of the precedent to seek similar modifications to their restrictions, resulting in further encroachment and in the long run the object sought when the Covenant was imposed being completely defeated.[81] The restriction of signage ‘which does not directly relate to the business activities being carried out by the transferee on the Land’ has been defeated in practice by all owners of land burdened by the Signage Restriction. Even the defendant has tacitly waived its ability to complain that particular signage does not so directly relate by its own signage on its land.
[81]Re Stani (Supreme Court of Victoria, Young CJ, Barber and Nelson JJ, 7 December 1976) 11.

I also reject any analogy between the circumstances facing Macaulay J in Hivance,[82] referred to by the defendant (see above at [49(f)]), and the circumstances of this case. That was a case of an application to modify a covenant restricting the erection of more than one dwelling on the burdened land so as to allow three such dwellings. The neighbourhood was one where, despite some multi-dwelling developments, the essential single-dwelling character still subsisted. On the particular facts of that case Macaulay J was satisfied there was —

… a real risk that modification of the covenant over the property will lead (through precedential effect) to an escalation of multi-dwellings replacing single dwellings and thus contribute to a longer-term change to the attributes of the area that are desirable and attractive to the residents in general and beneficiaries of the covenant in particular.[83]

[82]Hivance [2020] VSC 183, [43].

[83]Ibid [44].

In my view, there will be no indirect injury to the lands having the benefit of the Signage Restriction along the lines of the adverse precedential effect Macaulay J found in Hivance. Put simply, the ‘tide of change’ is such that no owner of land in the Subdivision complies with the restriction so far as it relates to ‘the transferee’.

Conclusion

For these reasons I consider that the plaintiffs have established that the modification sought will not substantially injure the owners of the lands having the benefit of the Covenant in their enjoyment of their respective lands. I will make an order that the Covenant be modified as sought by the plaintiffs.

The plaintiffs made submissions as to the costs of the application to the effect that the usual order that the plaintiffs pay the defendant’s costs should not be made in this case because, in substance, the defendant’s case was irresponsible, fanciful and/or frivolous. In making this submission, the plaintiffs relied on material that is agreed to be inadmissible before me. There is a significant history of disputation between the parties over the signage to be displayed on the particular east facing wall of the plaintiffs’ building, where they currently have a permit to display a large sign. I will therefore give the parties an opportunity to address the question of costs before making any final order.

SCHEDULE OF PARTIES

S ECI 2022 00007
BETWEEN:
ROJ PROPERTY GROUP PTY LTD	First Plaintiff
K & M PROPERTY INVESTMENTS GROUP PTY LTD	Second Plaintiff
- v -
EVENTPOWER PROPERTY PTY LTD	First Defendant
~~COOK STREET PTY LTD~~	~~Second Defendant~~

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Roj Property Group Pty Ltd v Eventpower Property Pty Ltd [2023] VSC 239

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Roj Property Group Pty Ltd v Eventpower Property Pty Ltd (Costs) [2023] VSC 268

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ROJ Property Group Pty Ltd v Eventpower Property Pty Ltd (Costs) [2023] VSC 268

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[2023] VSC 239

5 May 2023