Citation : MILLER -v- EVANS [2010] WASC 127

Property law - Breach of restrictive covenant - Grant of mandatory injunction - Appellate review of discretionary decision - Unreasonableness of contravener's conduct - Turns on own facts

Break Fast Investments Pty Ltd v PCH Melbourne Pty Ltd [2007] VSCA 311; (2007) 20 VR 311

Gronow v Gronow [1979] HCA 63; (1979) 144 CLR 513

Jaggard v Sawyer [1995] EWCA Civ 1; (1995) 1 WLR 269

Jessica Estates v Lennard [2007] NSWSC 1434

Leeds v Industrial Co-operative Society Ltd v Slack [1924] AC 851

Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar the Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66

Mallet v Mallet [1984] HCA 21; (1984) 156 CLR 605

Miller v Evans [2010] WASC 127 (S)

Miller v Evans [2010] WASC 127; [2010] ANZ Conv R 10-033

Monteleone v Owners of the Old Soap Factory [2007] WASCA 79

Mortimer v Bailey [2006] EWHC 63_2; (2005) 2 P & CR 9 [35]

PCH Melbourne Pty Ltd v Break Fast Investments Pty Ltd [2007] VSC 87

Shelfer v City of London Electric Lighting Co (1895) 1 Ch 287

Shepherd Homes Ltd v Sandham [1971] Ch 340; (1970) 3 All ER 402

Wood v Conway Corporation (1914) 2 Ch 47

1 This is an appeal against the primary judge's decision to grant a mandatory injunction requiring the appellants to remove certain structures on their property built knowingly in breach of a restrictive covenant. The appellants' contraventions of the restrictive covenant have impeded the respondent's views of the Swan River. The purpose of the covenant when it was registered was to protect such views. The judge found that by reason of the respondent's diminished views, the value of her property has been impaired by over $100,000.

2 In order to succeed in the appeal, the appellants must establish error of law, fact or discretion. No error has been shown. The appeal is without merit and must be dismissed for the reasons which follow.

The applicable principles in respect of appellate review

3 The appellants challenge the judge's exercise of discretion to grant an injunction. The principles of appellate review in relation to discretionary decisions are well known.

4 In Gronow v Gronow [1979] HCA 63; (1979) 144 CLR 513, 534 - 535, Aickin J said:

Those principles have been stated in this Court on many occasions and are not in doubt. It is sufficient to refer to such cases as House v The King, Evans v Bartlam, Storie v Storie and Lovell v Lovell. Two short passages make the position clear. In House v The King [(1936) [1936] HCA 40; 55 CLR 499 at 504 - 505] Dixon, Evatt and McTiernan JJ said:

'The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.'

In Lovell v Lovell [(1950) [1950] HCA 52; 81 CLR 513 at 519] Latham CJ said:

'But when the appellate tribunal is considering questions of weight it should not regard itself as being in the same position as the learned trial judge. In the absence of exclusion of relevant considerations or the admission of irrelevant considerations an appellate tribunal should not set aside an order made in the exercise of a judicial discretion (as to which see Sharp v Wakefield [[1891] AC 173 at 179]) unless the failure to give adequate weight to relevant considerations really amounts to a failure to exercise the discretion actually entrusted to the court. The words used by their Lordships in the House of Lords in this connection are not always easy to apply, but they ought not to be read as denying the long established principle (which, indeed, is expressly recognized in the cases in the House of Lords) that on an appeal from an order founded upon the exercise of a discretion the appellate tribunal has no right to substitute its discretion for the discretion entrusted to the primary tribunal.' (citations omitted)

See also Gronow v Gronow per Stephen J (519 - 520) and Mason & Wilson JJ (525); Mallet v Mallet [1984] HCA 21; (1984) 156 CLR 605, 614; Monteleone v Owners of the Old Soap Factory [2007] WASCA 79 [36].

5 Appellate interference with discretionary judgments on the ground that a consideration was left out of account depends on establishing that the judge did not take into account some material consideration: Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar the Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66 [157] - [158].

6 When a court is invited to make a discretionary decision, to which many factors may be relevant, it is incumbent on parties who contend on appeal that attention was not drawn to particular matters, to demonstrate that the primary judge's attention was drawn to those matters, at least unless they are fundamental and obvious: Macedonian Orthodox Church v Petar [120].

7 The judge made the following findings of fact in relation to the appellants' breaches of the restrictive covenant: Miller v Evans [2010] WASC 127; [2010] ANZ Conv R 10-033 [9], [30] - [44]. Whilst in this appeal the appellants contend that the judge erred in failing to make findings of certain alleged facts, it is not alleged (save in one respect - ground 8, discussed later) that insofar as the judge made the following findings, he committed errors of fact.

8 The restrictive covenant operated to restrict the building of certain structures exceeding 1 m in height from the Australian height datum for that lot. The appellants purchased the lot knowing of the restrictive covenant. The appellants assumed, from the time of purchase up to the time before this dispute emerged, that the relevant datum level was the ground level of their lot. However, that assumption was wrong, because the datum level was 600 mm below ground level. The appellants' assumption was unreasonable, having regard to plans attached to their contract for purchase specifying the datum level for their lot and their signed acknowledgement that information as to the actual level of the lot would be provided subsequently. The appellants knew of the need to comply with the restrictive covenant and that its purpose was to maintain views and amenity. The appellants built a spa knowing that it would be in breach of the height restrictions in the restrictive covenant, but they were mistaken as to the extent of the breach. The appellants could not reasonably have believed that because of the local authority's regulations as to the height for fencing of swimming pools and spas, they had no option but to build a fence in contravention of the restrictive covenant. Any advice which the appellants received from the local authority to the effect that the council's requirements 'overrode' the restrictive covenant would plainly have been misconceived, and the appellants could not reasonably have relied on any such advice.

9 At the time that the appellants built the structures, they appreciated that to the extent that the structures exceeded the height restriction, they could impact adversely on the view from the neighbouring lot, but they sought to minimise the impact by having the upper part of the wall constituted of glass panels.

10 In relation to the dividing fence, the height of which also breached the covenant, the appellants had communicated with the respondent's predecessor in title about the quality and cost of the dividing wall, but there was no evidence that the respondent's predecessor in title was told of, or agreed to, the dividing fence being built in breach of the restrictive covenant.

11 In March 2007, after the respondent had purchased her lot and complained about breaches of the restrictive covenant, the appellants wrote a misleading letter suggesting, contrary to the fact, that everything possible had been done to ensure compliance with the covenant.

12 In relation to the appellants' state of mind when building the structures in breach of the restrictive covenant, the judge found (reasons [45]):

I accept that Mr Evans 'acted with his eyes open and in full knowledge that he was invading the plaintiff's rights': Jaggard v Sawyer (Millett LJ). Whilst the building of the structures was not a contemptuous disregard of the restrictive covenant, it is clear that the defendants knowingly breached the terms of it. Whilst that conduct could be seen as mitigated by the failure to appreciate where the AHD level was and therefore the extent of the breach, any mistake in that regard could not be described as reasonable. Nor was it reasonable to rely upon any advice from the Shire that the restrictive covenant was overridden by safety regulations, even assuming that such advice was given. Unlike Jaggard v Sawyer, this is not a case where it could be said that the defendants acted openly and in good faith and through inexperience had not appreciated the problem of a covenant. In those circumstances the conduct of the defendants does not weigh against a mandatory injunction.

13 In relation to the interference with the respondent's views, the judge found the following (reasons [46] - [61]). The contravening structures are directly in the line of views that would be enjoyed from the ground floor of the respondent's home, and the structures do, in fact, impede the respondent's views. The restrictions on the respondent's views diminished the present market value of her property by $105,000. The glass panels at the top of the wall do not alleviate the detrimental significance of the appellants' breaches because the panels become cloudy with condensation in some weather conditions, the panels are supported by brackets which are not transparent, and the glass panels and their brackets remain visible and are a distraction and impediment to an unhindered view. In addition to the diminution in market value, the respondent has lost the pleasure associated with uninterrupted views to the extent that they would otherwise have been available.

14 In terms of the effect on the appellants if the spa were to be relocated, the judge found that it could be relocated at a cost of $20,000. His Honour also said that if the spa could not be relocated, and had to be removed entirely, it would cost less than $20,000 to remove it. The appellants had not proved the original cost of installing the spa and hence the degree of any 'wasted' expenditure associated with its removal had not been established.

15 The judge concluded (reasons [64]) that the denial of the view was not capable of being quantified in money terms. He held that the diminution in market value of $105,000 could not be regarded as a small sum and that it does not, in any event, reflect the loss of pleasure to be derived from an uninterrupted view.

The covenant applies to many lots in the area and to permit the structures to remain could be seen as undermining the authority of the restrictive covenant to control the height limitations.

17 The judge held that the following legal principles were to be applied in relation to the exercise of judicial discretion to grant an injunction for breach of a restrictive covenant. The goal of the exercise of discretion is to produce a fair result: Shepherd Homes Ltd v Sandham [1971] Ch 340; (1970) 3 All ER 402. The judge recognised that the court must consider whether the plaintiff's injuries can be adequately compensated by an award of damages rather than the grant of an injunction: Wood v Conway Corporation (1914) 2 Ch 47. However, the normal remedy for a breach of a restrictive covenant is an injunction and the court's discretion to award damages in lieu should be exercised with caution: Leeds v Industrial Co-operative Society Ltd v Slack [1924] AC 851. The judge noted that damages should be awarded only where the injury to the plaintiff's legal rights is small, is capable of being estimated in money terms, can be adequately compensated by a small money payment, and where it would be otherwise oppressive to the defendant to grant an injunction: Shelfer v City of London Electric Lighting Co (1895) 1 Ch 287. Although hardship to the defendant is a relevant discretionary factor, the issue is whether the hardship inflicted on the defendant by an injunction would be disproportionate to the benefit to be conferred on the plaintiff: Jessica Estates v Lennard [2007] NSWSC 1434. The judge also noted that the defendant's knowledge of the wrongful nature of his or her act is a relevant discretionary factor: Jaggard v Sawyer [1995] EWCA Civ 1; (1995) 1 WLR 269.

18 The judge's formulation of the relevant legal principles was not challenged on appeal by the appellants.

Grounds of appeal and disposition of the appeal

19 By the first ground of appeal, the appellants allege that the judge erred in fact in not finding that the appellants believed, until March 2007, that the ground level of their lot was the base datum level for the purposes of the restrictive covenant. That ground is not made out, as the judge did find, in effect, that the appellants were mistaken about the datum level for the purposes of the restrictive covenant. The judge found that they held that belief, but that it was unreasonable (reasons [34]). The fact that they unreasonably believed that to be the position is not challenged in the grounds of appeal. Ground 1 has no merit.

20 The second ground of appeal alleges that the judge erred in fact in not finding that the appellants believed that whatever the base datum level for the covenant may have been, they were obliged to build the fences around the spa at a minimum height of 1.2 m. This is intended to be a reference to the council requirements for fencing of swimming pools and spas. The ground discloses no material error by the judge.

21 The ground does not allege that the appellants believed that they were legally obliged to build a fence around the spa in breach of the restrictive covenant. Nor does it allege that they believed they were legally obliged to build the spa at ground level and on that account were obliged, in effect, to have a fence which exceeded the level proscribed by the restrictive covenant. Nor does the ground allege that the council gave them advice to that effect. Moreover, there is no challenge to the judge's findings at [37]:

Any understanding on the part of Mr Evans [the male appellant] that safety regulations relating to swimming pools could override a restrictive covenant could only have been based upon the assumption that there was a necessary inconsistency between the restrictive covenant and such regulations. Of course, as would have been obvious to Mr Evans, any such inconsistency was not one raised by necessity but arose out of the desire of him and his wife to construct a spa in the south east corner of their property. It must have been clear to Mr Evans that it was possible to comply both with the restrictive covenant and the swimming pool regulations by either lowering the spa so that the fences around it remained at the right height or by foregoing the pleasure of a spa entirely.

22 Further, even if it had been contended that the appellants believed that they were required by the council to build a spa fence in breach of their restrictive covenant, the judge's finding that it was not reasonable to rely on any advice that the restrictive covenant was 'overridden' by the council's pool regulations remains unchallenged. The fact asserted by this ground, that the appellants believed that they had to build a 1.2 m fence around their spa, even if true, is accordingly not material for present purposes. There is no merit in ground 2.

23 The third ground of appeal alleged that the judge erred in fact in not finding that the appellants were obliged to build the fences around the spa to a height of 1.2 m. This ground was abandoned at the hearing of the appeal.

24 Ground 4 alleges that the judge erred in fact in not finding that the appellants built the dividing fence at the height and in the form which they did with the consent and agreement of the respondent's predecessor in title. There was no error in the judge not finding that alleged fact. The judge noted that the communication between the appellants and the respondent's predecessor in title concerned in substance the nature and cost of the dividing fence. There is no challenge to the finding that there was no evidence that the respondent's predecessor in title was told of, or agreed to, the dividing fence being built in breach of the restrictive covenant (reasons [40]). Further, there was, on the evidence, no binding agreement between the appellants and the respondent's predecessor in title. Moreover, the appellants do not allege that any agreement they might have had with the respondent's predecessor in title bound, at law or in equity, the respondent.

25 Ground 5 alleges that the judge erred in fact and in law in not finding that the respondent 'could have determined' that the ground level of the lots was not the base datum level for the restrictive covenant and accordingly 'acquiesced' in the appellants' breaches. In substance, it alleges that the respondent acquiesced in the appellants' breach of covenant by her omission to ascertain the true datum level in order to establish whether the appellants' structures were in breach of covenant. It does not lie in the mouth of the appellants to assert that the respondent should have established that the appellants were in breach of covenant before the respondent purchased her lot when the appellants had themselves not taken the trouble to establish the true datum level and had compounded that omission by deliberately building structures to a height which, even on their own erroneous assumption of the true datum level, they knew to be in breach of the restrictive covenant. Further, by this ground, the appellants do not allege laches, but rather acquiescence in what may be regarded as the proper meaning of the term, namely, acquiescence in the sense of abstaining from interference while the violation of one's rights is in progress: Ramsden v Dyson [1866] LR 1 HL 129; Duke of Leeds v Earl of Amherst (1846) 2 PH 117, 122; Meagher RP, Heydon JD & Leeming MJ_, Meagher, Gummow and Lehane's_ Equity: Doctrines & Remedies (4th ed, 2002) [36-010]. It is obvious, as the respondent had not purchased the property at the time that the appellants were carrying out the contravening work, that the respondent could not in any sense be regarded as having stood by whilst she observed the appellants infringing her legal rights. This ground also lacks merit.

26 The sixth ground of appeal alleges, in effect, that the judge erred in failing to find that the respondent's view, which had been impaired by the appellants' breaches, had no real value, or had only negligible value. The ground is put on the basis that the respondent purchased her lot after the appellants had erected the structures in contravention of the breach of covenant, and that she must be taken to have been satisfied with the view when she purchased the lot. There is no challenge to the finding of fact that the appellants' contravening structures do, in fact, impede the respondent's views of the Swan River (reasons [46]). Nor is there a challenge to the finding that the market value of the respondent's property has diminished by $105,000 (reasons [64]). It is evident from this finding that the appellants' breaches of covenant have had a real and significant impact on the value of the respondent's property. Further, the judge correctly observed (reasons [78]):

As regards the claim that the plaintiff is seeking to recover something that she never had, namely a view unobscured by the structures, it seems to me that this is an inversion of the nature of the claim made. The plaintiff did not purchase a view, she purchased a piece of land that had the benefit of a restrictive covenant. There was nothing to suggest at the time of purchase that the benefit of that restrictive covenant had in any way been compromised. There is no obvious reason why the defendants should be relieved from an order to remove the structures they knowingly built in breach of the covenant on the basis that they were living there before the plaintiff.

28 The seventh ground of appeal alleged that the judge erred in fact in not finding that the respondent, when building her own house, excavated the lot below the ground level and thereby impeded her view of the Swan River. This was obviously not a proper ground of appeal and was abandoned at the hearing of the appeal.

29 The eighth ground of appeal alleges that the judge erred in fact and in law in concluding that the appellants built the structures at heights knowingly in breach of the height restriction in the covenant.

30 As a preliminary observation, the unreasonableness of the contravener's conduct is a relevant consideration, even absent proof that the breach was done with actual knowledge that it was in breach of covenant: PCH Melbourne Pty Ltd v Break Fast Investments Pty Ltd [2007] VSC 87 [61], affirmed on appeal Break Fast Investments Pty Ltd v PCH Melbourne Pty Ltd [2007] VSCA 311; (2007) 20 VR 311; Mortimer v Bailey [2006] EWHC 63_2; (2005) 2 P & CR 9 [35], [41] (another case where the infringing works were done following council approval). Here, moreover, the male appellant admitted that he knew that the structures were being built in breach of the restrictive covenant (ts 461, 17 December 2007). He explained, and the judge found as a fact, that he was mistaken as to the extent of the breach (reasons [36]). Nevertheless, the judge further found, and the finding is not challenged, that the appellants assumed that the extent of the breach was less than it actually was because they unreasonably made an assumption as to the true datum level. There is no merit in this ground.

31 In the ninth ground of appeal, the appellants allege that the judge erred in fact and in law in ordering a mandatory injunction without regard to the fact that the 'practical effect of this order is that the [appellants] will live on a block that abuts a sheer 6 metre drop, with the only barrier between this drop and the level of the outdoor yard and main outdoor living area being a 390 millimetre fence'. By this ground, the appellants allege, in effect, that if they were to remove the contravening structures from their southern boundary, which abuts a retaining wall which drops 6 m to the southern ground level beyond the retaining wall, there would be a risk in that the drop would only then be protected by a 390 mm fence. It is alleged that had the judge given proper recognition to the risk, he would not have granted the mandatory injunction.

33 First and foremost, the appellants have not shown that this was a matter which was drawn to the judge's attention. To the contrary, the appellants conceded that this was not a matter actively pursued at trial (ts 29, 24 March 2011). Adopting and adapting the words of the plurality in Macedonian Orthodox Church v Petar [158], if the appellants did not see the matter 'as sufficiently material to merit proper exposition and development, why should [the judge]?'

34 In any event, any risk is not created by the injunction, but is inherent in the nature of the property purchased by the appellants and by reason of the operation of the restrictive covenant on that property. Moreover, there is no evidence that the problem identified is insoluble. The judge found, in connection with the relocation of the spa, that the ground level could have been excavated so that the ground level at the back was below the height of the retaining wall (reasons [58], [60]). The judge also recorded that both the appellants and the respondent had previously excavated the ground level to below the original retaining wall at the rear of their properties (reasons [59]).

35 Ground 10 is a 'wrap-up' ground which alleges that by reason of grounds 1 to 9, the judge erred in fact and in law in concluding that a mandatory injunction should be ordered. This ground fails in consequence of the failure of grounds 1 to 9.

36 Grounds 11 to 15 challenged the costs judgment which was made following the disposition of the matter at first instance. His Honour ordered that the appellants pay indemnity costs to the respondent: Miller v Evans [2010] WASC 127 (S). Grounds 11 to 15 were abandoned at the hearing of the appeal.

37 Two other matters should be mentioned. First, the appellants had filed an application for this court to conduct a view of the two properties. The application was not pressed at the hearing of the appeal. Secondly, towards the end of oral submissions, the appellants foreshadowed a new ground of appeal in relation to the costs judgment. The ground was not fully formulated, it was not in writing, notice of its terms had not been given to the respondent and, the court was informed, it was intended to raise a point which had not been put to the primary judge on the question of costs. The proposed application to amend was accordingly refused.