Plaintiff v Defendants

2 The defendants, all neighbouring land owners whose lands enjoy the benefit of the restrictive covenant, oppose her application. To succeed, Hivance must prove a negative: it must prove that the proposed variation to the covenant will not cause 'substantial injury' to the beneficiaries of the covenant.

3 Arising from the principal arguments put for and against that proposition, the critical questions appear to be these:

(a) Does the neighbourhood retain a special distinctive character engendered and sustained by the single-dwelling covenant?

(b) If so, has the plaintiff shown that a relaxation of the single-dwelling restriction on the property will not diminish that distinctive character either -

(i) directly (immediately), because of the construction of the proposed three-dwelling development, or

(ii) in the longer term, by establishing or contributing to a body of precedent that allows more multi-dwellings in the area?

4 The area of land which forms the relevant neighbourhood for the property falls within a very large parcel of over 1000 acres first acquired by developers in 1919, and progressively subdivided over the decades since. The process of its acquisition and subdivision was described by Morris J in Stanhill v Jackson [2005] VSC 169 [4]:

It would appear that in about 1919 two entrepreneurs, Thomas Michael Burke and Patrick Deane, purchased 1,119 acres of land at Reservoir and gradually commenced the process of subdividing the land into more than 3,000 lots. Initially the residential lots were transferred directly out of the original title. Later larger lots were transferred out of the original title, then these larger lots were further subdivided into residential lots.

5 The property lies within a plan of subdivision (LP8486) carved out of the original, large parcel of land, described in Stanhill as the 'grandfather title'. By 1925, Thomas Burke had become the proprietor of a sub-parcel of land within plan of sub-division, LP8486, described by Certificate of Title Volume 4984 Folio 720 (the parent title). The parent title is situated toward the eastern end of the grandfather title, in the vicinity of High St, Reservoir.

6 The area bounded by dotted black lines in the figure below shows the land encompassed by the parent title. The lots or groups of lots bounded by dotted lines within the parent title are lots that had been transferred out of the parent title before it was transferred to Burke in 1925.

7 As the legend to the figure indicates, the property is depicted in solid red lines on Allenby Avenue. The restrictive covenant on the property was created and registered on title on 17 September 1928 when the property was first transferred out of the parent title. The covenant prohibited hoardings or advertisements, quarrying operations, the erection of shops, laundries, factories or works and, relevantly for this case, it provides that "not more than one dwelling house shall be erected on the said lot". At that time, 85 of the 162 original subdivided lots - 116 of the present day lots - remained un-transferred and those lots enjoy the benefit of the covenant.

8 The defendants' properties are shown with hatched lines; the tan coloured lots are those with the benefit of the covenant; the grey coloured lots are those without the benefit of the covenant yet within the parent title; and the uncoloured lots (within the internal dotted lines) are those not included in the parent title. Although the uncoloured lots are not part of the parent title, and are not included in what the parties termed the 'covenanted area', nonetheless the parties agreed that they are to be regarded as forming part of the 'neighbourhood' of the property for purpose of assessing neighbourhood character.

9 Hivance was registered as owner of the property on 24 November 2016. It submitted an amended application to the Darebin Council for a three-unit development on 6 February 2018. A plan view of the proposed development is attached as Schedule 1 to these reasons. Darebin Council refused the application after receipt of a number of objections to it. Following that refusal, Hivance brought this application to the court. It seeks to modify the covenant by replacing the words "one dwelling house" with the words "three dwellings" in the pertinent provision quoted above.

10 Section 84(1)(c) of the Property Law Act provides that the court has power to modify a restrictive covenant if satisfied, amongst other things, that "the proposed discharge or modification will not substantially injure the persons entitled to the benefit of the restriction".

11 Although the parties may adduce expert evidence as to the likelihood or otherwise of substantial injury, ultimately it is a matter to be decided by the court upon applicable legal principles.[2] As earlier stated, Hivance bears the onus of proving, as a negative proposition, the absence of substantial injury.

12 In Randell v Uhl, after an extensive review of the authorities, Derham AsJ distilled the following principles, which I gratefully adopt:[3]

(a) a substantial injury must be a detriment to the benefitted land that is real and not fanciful.[4] 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'.[5] That does not mean, however, that s 84(1)(c) of the PLA is restricted to dealing with vexatious or frivolous objections. Although the restriction of s 84(1)(c) of the PLA to 'substantial' injury would enable the weeding out of vexatious objections to the modification or removal of a covenant, the dichotomy in the section is not between vexatious and non-vexatious claims but is between cases involving some genuinely felt but insubstantial injury, on the one hand, and cases where the injury may truly be described as substantial, on the other;[6]

(b) the substantial injury relates to practical benefits, being any real benefits to the person entitled to the benefit of the covenant.[7] 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;[8]

(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'.[9] This consideration is referred to as the 'precedent value';[10] and

(d) whether there will be substantial injury is to be assessed by comparing:

(i) the benefits initially intended to be conferred and actually conferred by the covenant; and

(ii) the benefits, if any, which would remain after the covenant has been discharged or modified;[11]

(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 PLA;[12]

(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';[13]

(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;[14]

(ii) the absence of objectors to the discharge or modification of a covenant will not necessarily satisfy the onus of proof;[15] and

(iii) each case must be decided on its own facts,[16] and each covenant should be construed on its own terms and having regard to the particular context in which it was created;[17]

(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.[18] The Court in exercising its discretion, may consider town planning principles and the precedent value.[19]

13 For evaluating the absence or otherwise of a substantial injury to the covenant beneficiaries in this case, it was agreed by the parties that the two-fold comparison summarised in (d) above was likely to be the critical determinant.

Has Hivance established an absence of serious injury?

14 The essential thrust of the opinion of Mr Milner, the town planning expert called by the defendants, and of the evidence of each of the defendants themselves, was that the neighbourhood had a distinctive single-dwelling character that was special and attractive. According to them, that character had been created and was preserved by the single-dwelling covenants of the kind imposed on the subject property.

15 Despite the existence of some multi-dwelling developments in the relevant neighbourhood, in their opinion the essential single-dwelling character still subsists. The injury they would suffer by the removal of the single-dwelling restriction over the subject property would, to some degree, be an immediate direct loss of amenity. But more significantly, the defendants argued, its removal would, by the effect of precedent, be used to support the modification of yet more covenants and, over the longer term, lead to the loss of the distinctive and attractive single-dwelling character the area possesses.

16 Hivance relied upon the expert opinion of a town planning consultant, Mr Robert Easton. Mr Easton's opinion was that the proposed modification would not substantially injure the persons entitled to the benefit of the restriction because -

(a) A development in accordance with the proposal will not substantially alter the streetscape as there will only be one dwelling at the street frontage based around a single driveway (with a double garage to the rear);

(b) the proposal is a relatively logical infill development given the location of other units developments in the neighbourhood (including one behind the Property);

(c) due to planning policies which now apply:

(i) the site coverage will be similar or less than that of other nearby developments; and

(ii) the amount of open area required for a multi-unit development will actually be greater than required for a single dwelling;

(d) the properties abutting the subject land do not have the benefit of the covenant and, as a result, the defendants' properties are sufficiently remote such that there will be no significant impact from overlooking, overshadowing, view of the proposal or other similar amenity issues;

(e) the covenant does not restrict building materials, height of buildings or any other aspect of the proposed dwellings (such as site coverage);

(f) there will be no reduction in the 'quality of life' for beneficiaries of the covenant within the neighbourhood as the present rear yard does not contribute to their enjoyment;

(g) there will be no significant increase in garbage collection as the property has only one crossover and there will be adequate room to place garbage bins; and

(h) modification of the covenant as proposed will not open the floodgates for further similar development as the proposal is for all intents and purposes an infill development between other similar developments.

17 Hivance submitted that a comparison between the benefits intended and actually conferred by the covenant and those that would remain after the modification, reveals that there would be no substantial injury to the beneficiaries by modifying the covenant so as to permit construction of the three townhouses in accordance with the proposed plan.

18 While relying upon all of Mr Easton's views, in its submissions Hivance concentrated in particular on the 34 lots in the neighbourhood that have already been subdivided for multi-dwelling developments. They were added to the neighbourhood slowly, between 1961 and 2015. In substance, its argument is that, insofar as the covenant, and covenants like it, once served the purpose of creating and preserving a single-dwelling character within the neighbourhood, the 'horse has already bolted'. That is, the multi-dwelling developments that have already taken place have so eroded that character that there is no longer any distinctive character that the maintenance of this covenant could serve to preserve.

19 Hence, as stated earlier, the two critical questions of fact are these: does a distinctive character of the area, intended by and supported through the single-dwelling covenant, remain intact and, if so, would the relaxation of that restriction at 43 Allenby Avenue realistically harm that character and cause an injury of substance to the beneficiaries of the covenant?

Does the neighbourhood retain a special character due to single-dwelling covenants?

20 After hearing the lay and expert evidence my impression was that the area probably did retain an intact, single-dwelling character that had been engendered and was supported by the existence of a network of single dwelling covenants in the neighbourhood. That impression was formed not only from hearing the examination and cross-examination of each of the two expert witnesses, but also from hearing from the defendants what, for them, constituted the attractive character of the area. For a number of them, it was a particular quality and amenity which led them to purchase property in the area in which to raise their families.

21 Such an amenity or ambiance of an area is sometimes hard to put into words. Nonetheless, with remarkable consistency, the defendants highlighted the large and generous proportions of the blocks of land; the sense of open space and privacy; the predominance of family homes, primarily large single dwelling homes with large open garden spaces front and rear; low density living and the absence of congestion; in short, a special mood which set the area apart from others. Indeed, a number of the defendants made direct comparisons between the covenanted area and other places in which they had lived or grown up to highlight the unique and attractive amenity of this particular neighbourhood. In my opinion, the 'lived experience' of those who dwell in the neighbourhood, those who have an occupant's sense of the environment, is not only relevant but weight may be given to it.

22 Whilst each of these statements can be criticised as being subjective, taken as a whole they tended to support the proposition that the network of single dwelling covenants overlaying many of the lots had succeeded in creating a neighbourhood with a distinctive character. The whole of the evidence indicated that this distinctive character remained intact.

23 Both parties urged me to view the area for myself after hearing the evidence. They agreed that I should view the neighbourhood in the absence of the parties or the practitioners. I was satisfied that it was appropriate to do so and that an inspection of the area would assist me in resolving issues of fact and understanding the evidence that had been laid.

24 The impression that I had formed from hearing the evidence was firmly reinforced by the view which I conducted on 13 February 2020 during which I walked for approximately 90 minutes through most of the streets in the neighbourhood. Because the view amounts to evidence in the proceeding from which I may draw any reasonable inference,[20] I will record some of my observations and inferences I drew from them.

25 What was immediately apparent upon entering the neighbourhood was the relative quiet in the streets, particularly those below (to the southwest of) Allenby Avenue. The streetscapes were pleasant and there was relatively little by way of parked cars. The frontages were generally wide and houses were mostly set back. Where older houses had been replaced with new houses, those new houses tended to be of a high quality (albeit large and occupying larger coverage than the older houses). Nonetheless it was generally obvious that they were single dwellings and many had a 'family home' appearance (such as 46 Allenby Ave).

26 Clearly, there were some unit developments. From documents admitted into evidence which I took with me, I was able to identify those properties with subdivisional changes and, in particular, the 10 or 11 lots in Grimwade Street and Allenby Avenue that contained units. A number of those developments were on corners, at least the more obvious ones. Because corners were either irregular in shape (such as the end of Grimwade Street at the Schuylerville Street end), or permitted street frontages for individual units, the multi-dwelling nature of the development was somewhat disguised. That is, they had the appearance of single dwellings on individual lots. Further, many of the existing unit developments were older in style and not particularly bulky - for example many were single storied.

27 Some more modern units were two-storied. An example of one is the three-unit development at 16 Grimwade Street. Interestingly, viewed from Grimwade Street, the second and third units are not immediately visible as they are hidden behind the first. However, when standing outside 46 Allenby Avenue looking across the road, my attention was drawn beyond the rear of 43 Allenby Avenue to the somewhat bulky and prominent two storey units at the rear of 16 Grimwade Street. For me, this demonstrated that even if the layout of a unit development might cleverly conceal its multi-dwelling character from the street frontage, the visual impact of 'through views' to the units from the next street may still potentially affect the overall ambiance or mood of the area.

28 My impression of the streets other than Allenby Avenue, and even Grimwade Street, was that they retained a predominantly single-dwelling character. What was particularly evident throughout was the generous width of the frontages and, in large part, the generous sense of space around the dwellings. There is a cluster of unit developments at the western end of Grimwade Street on the southern side. They are of an older style of unit and, being grouped together, do not tend to predominate in terms of affecting the character of the street as a whole. The other streets further south of Grimwade Street have even less unit development and thus are even more predominantly single dwellings.

29 Allenby Avenue is the widest of all the streets. That in itself contributes to a sense of space in that part of the neighbourhood. Further, the unit development in that street has less physical impact because the impact is somewhat diluted by the distance one feels from one side of the street to the other, so that the closer frontages seem a little less intrusive.

30 What stood out to me was that the existing unit development in that street is almost entirely clustered at the eastern end adjacent to the shopping strip facing Gellibrand Crescent. In a sense, the clustering confines its impact on the whole of Allenby Avenue.

31 In conclusion, from the evidence given during the hearing and from my own inspection, I was satisfied that the relevant neighbourhood surrounding the property retains an intact, special and distinctive single-dwelling character, most likely the result of the network of single dwelling covenants within the parent title of which the covenant affecting the property is an example. That character persists notwithstanding the number of multi-dwelling developments in the neighbourhood. That said, the number of those multi-dwelling developments is reaching the stage whereby a further proliferation of them would probably begin to put that special character in jeopardy.

32 I am also satisfied that the special and distinctive single dwelling character amounts to a real and practical benefit for the members of the neighbourhood, including the beneficiaries of the covenant on the property.

Could relaxation of the covenant over 43 Allenby realistically cause substantial injury?

33 Although some of the defendants considered that the construction of three two-level townhouses on the property would injuriously impact their enjoyment of their own land, that opinion was not supported by either Mr Easton or Mr Milner. They considered that none of the defendants were sufficiently proximate to the property so as to be directly impacted by features of building height and mass, overshadowing, potential privacy impacts and the like. As appears from the figure above, none of the defendants' lots directly adjoins the property.

34 Nevertheless, Mr Milner also took into account the impact and injurious effect of the development on the character of the broader neighbourhood. Where the intended character and outcome provided for by a covenant has been physically realised and delivered on the ground, and over a substantial area (as Mr Milner considered it had been in this case), he thought it was understandable that the resulting distinctiveness could be valued in equal or greater measure by successive owners and beneficiaries as a special character and amenity. It was the impact of inappropriate change on that value that could be seen as a potential and substantial injury to the beneficiaries. He thought that was a relevant consideration in this proceeding.

36 In my opinion, an existing example of how an inappropriate change could impact the special character and amenity valuable to the beneficiaries of the covenant, is the unit development in the middle of the Allenby Avenue stretch, at 35 Allenby Avenue. It is a brick, 4-unit subdivision with a driveway down the left-hand side. On the day of my inspection, cars were parked in the driveway and outside on the street. It was obvious, viewing the block obliquely, that the block contained a line of units even though they were only single storied. Against the surrounding single dwellings, the development appeared out of place and jarred against the area's overall character. Contrary to the opinion of Mr Easton, it did not strike me as a 'logical infill' among its neighbours.

37 That development also illustrated what I noticed about a number of the unit developments in the neighbourhood: they tend to have more vehicles visibly associated with the property whether parked in the street or parked in the driveway. Generally speaking, another aspect that made it obvious that a site contained a number of dwellings, apart from the number of letterboxes a site might have, was the number of rubbish bins visible in front of the property. Parked vehicles, rubbish bins, letterboxes and oblique views down the block all played a role in making it apparent that a property was a multi-dwelling rather than a single dwelling.

38 Effort was made by Hivance to persuade me that the development it proposed to construct on the property would be designed in such a way as to disguise the appearance from the street that there was any more than one dwelling on the site. Further, it pointed out that, by reason of the planning controls, there would be at least as much if not more open space if its proposed three townhouses were constructed on the lot than there would be were a single-dwelling to be built on the site.

39 I accept a number of its contentions. Yet, in my view, it is improbable that even with its designed open space and its appearance from a completely front-on perspective, the proposed development will not be perceived to be a multi-dwelling development from the combination of all of its features. It is the jarring inconsistency of the existence of multi-dwelling developments in a neighbourhood of predominantly single-dwelling character that is in itself an injury to the amenity supported by the covenant on the property. I reject the view of Mr Easton that the proposed three townhouse development of the property would represent a 'logical infill' development along Allenby Avenue.

40 For those reasons I find there is a real, and not fanciful, prospect of the defendants suffering a form of direct injury, one of substance, from the proposed modification of the covenant.

41 Perhaps the more significant form of potential injury to the beneficiaries, however, would arise from the precedential effect of relaxing the covenant.

42 I have little doubt that the generously proportioned lots, established street trees and the quiet ambience of the neighbourhood makes these blocks attractive commercial opportunities for multi-dwelling redevelopment. It is unsurprising that a developer like Hivance would see the opportunity that is presented. But, if not developed as units, they also appear to be suitable for redevelopment as large, good-quality single dwellings with attractive gardens as has occurred on several lots in the neighbourhood and has been the experience of some of the defendants.

43 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.

44 I am satisfied there is 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.

45 In conclusion, I am not persuaded that the beneficiaries of the covenant over 43 Allenby Avenue will not suffer a "substantial injury" if a multi-dwelling development (of three units) is permitted on the subject land. Although not necessary for my conclusion, I consider the beneficiaries are likely to suffer such an injury: that injury would be both direct and of a precedential effect.

46 Accordingly, Hivance has failed to establish the necessary grounds under section 84 of the Property Law Act to have the restrictive covenant modified as proposed, and the proceeding must be dismissed.

SCHEDULE 1 - PROPOSED THREE UNIT DEVELOPMENT OF THE PROPERTY

[2] Re-Young [2019] VSC 755 [4].

[3] Randell v Uhl [2019] VSC 668 [85].

1. [5] 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.

[6] 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].

[7] Vrakas [2008] VSC 281, [30], [34] and the cases cited.

[8] Re Parimax (SA) Pty Ltd (1956) SR (NSW) 130, 133 (Myers J).

[9] Re Stani (Supreme Court of Victoria, Young CJ, Barber and Nelson JJ, 7 December 1976) 11.

[10] Vrakas [2008] VSC 281, [39] and the cases cited.

[11] Prowse v Johnstone [2012] VSC 4, [104] ('Prowse').

[12] Re Cook [1964] VicRp 106; [1964] VR 808, 810-11 (Gillard J) ('Cook'); approved in Freilich v Wharton [2013] VSC 533, [25] (Bell J).

[13] Prowse [2012] VSC 4, [104].

[14] Vrakas [2008] VSC 281, [41] and the cases cited.

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

[18] Cook [1964] VicRp 106; [1964] VR 808, 810; Re Robinson [1972] VicRp 28; [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] VSC 169; (2005) 12 VR 224, 239 ('Stanhill').

[19] Vrakas [2008] VSC 281, [45]-[46].

[20] Section 58 Evidence Act 2008 (Vic). My associates provided the parties a brief report of the view dated 13 February 2020.