Plaintiffs/Defendants by counterclaim v Defendant/Plaintiff by counterclaim

PROPERTY LAW - Restrictive covenant prohibiting subdivision of land or creation of two occupancies without consent of proprietor of benefitted land - Whether requirement for consent is to be construed as 'consent not unreasonably to be withheld' - Whether restrictive covenant is subject to an implied term that consent is not to be unreasonably withheld - Consent not sought prior to creation of second occupancy - Lot burdened by restrictive covenant has two large existing buildings - Large commercial warehouse and separate very large commercial freezer - Creation of separate tenancy for commercial freezer in addition to existing tenancy for warehouse - Restrictive covenant breached.

COMPETITION LAW - Restrictive covenant said by plaintiff developer to have the purpose of protecting against competition in the sale or leasing of land in the business park - Pleading by plaintiff owner of the burdened land that if the restrictive covenant has that purpose, it is a contract, arrangement or understanding which has the purpose or effect of substantially lessening competition - Competition and Consumer Act 2010 (Cth), s 45 - Definition of 'competition' for purposes of s 45 - Whether competition in market for sale of land is the subject of s 45.

PROPERTY LAW - Application for modification of restrictive covenant pursuant to s 84(1)(a) and 84(1)(c) of the Property Law Act 1958 (Vic) - Whether continued existence of the restriction imposed by covenant would impede reasonable user of the land without securing practical benefits to other persons - Whether proposed modification of restriction will not substantially injure the persons entitled to the benefit of the restriction - Evidence admissible on questions of reasonable user, practical benefit and substantial injury.

PROPERTY LAW - Application for modification of restrictive covenant pursuant to ss 84(1)(a) and 84(1)(c) of the Property Law Act 1958 (Vic) - Whether the Court can be satisfied of conditions for modification of restrictive covenant to permit two or more occupancies - Modification of restrictive covenant to permit separate tenancies in freezer and in warehouse would not substantially injure the registered proprietor of the benefitted land or other persons - Application for modification under s 84(1)(c) granted.

1 In 2004, the first plaintiff, Merrifield Corporation Pty Ltd, with related companies, purchased approximately 900 ha of land in Mickleham, Victoria, for the purpose of developing a mixed-use development. That land includes an area of approximately 415 ha to be used for commercial and industrial use, and known as Merrifield Business Park.[1]

2 The land earmarked for the Merrifield Business Park was subdivided and part of the land was a lot identified as Lot P, of approximately 70 ha in area. Another part of the land was a lot identified as Lot 301, of approximately 28 ha in area.[2]

3 In June 2018, Merrifield sold Lot 301 to Kaufland Australia Pty Ltd. Kaufland is associated with a German supermarket retailer, which at the time had plans to expand its operations into Australia.[3] Kaufland purchased Lot 301 with the intention of establishing a distribution centre from which Kaufland would distribute goods to a proposed new chain of supermarkets or 'hypermarkets' in Australia.[4] For that purpose it constructed two very large buildings on the land: a Warehouse of approximately 73,229 m2 in area, and a Freezer building approximately 12,559 m2 in area.[5]

4 The contract of sale for the sale of Lot 301 by Merrifield to Kaufland contained a Restrictive Covenant.[6] That Covenant was recorded on the title, pursuant to s 88(1) of the Transfer of Land Act 1958 (Vic).[7] The effect of the Restrictive Covenant was that Kaufland covenanted 'with and for the benefit of the registered proprietors of all or any part of the land in Lot P ... (the Benefitted Land)' to prevent certain uses of Lot 301 (an aspect of the restraint which is not in issue in this proceeding). The Covenant also constrained the proprietor of Lot 301 from subdividing that land, or from creating on the land:

... two or more separate occupancies without first obtaining the written consent of the registered proprietor or proprietors of the Benefitted Land.

5 This component of the Restrictive Covenant which places a restriction on creation of two or more separate occupancies was identified as the Occupancy Restriction throughout the proceeding.

6 In August 2020, after Kaufland decided that it would not proceed with its plans for expansion into Australia, it sold Lot 301 to FAL Mickleham Pty Ltd.[8] FAL became registered proprietor on 15 December 2020.[9] After originally leasing both the Warehouse and the Freezer to DHL Supply Chain (Australia) Pty Ltd between April and September 2021, FAL then entered into a lease of the Freezer to Laverton Cold Storage Pty Ltd on 13 September 2021 (Freezer Lease), while continuing to lease the Warehouse to DHL.

7 Merrifield has continued to be the registered proprietor of Lot P to the time of this proceeding. However it has, by a contract made on 21 December 2018, agreed to sell Lot P to the second to sixth plaintiffs, who are related companies of Merrifield identified as holding companies. That contract has not yet been settled. Those plaintiffs were joined to the proceeding because of their interest in Lot P and the need for them to be bound by the outcome of this case.

8 In this proceeding, Merrifield contends that FAL is, by leasing the Warehouse and the Freezer to separate third parties, breaching the Occupancy Restriction in the Restrictive Covenant. Merrifield seeks an injunction to restrain FAL from continuing to do so. FAL, by its defence, denies that the Occupancy Restriction in the Restrictive Covenant is enforceable against it and denies having breached it. It also seeks an order from the Court pursuant to s 84 of the Property Law Act 1958 (Vic) modifying the Restrictive Covenant in one of three ways, all of which would have the effect of permitting the current situation of two tenants on the land.

9 The plaintiffs originally sought damages for the breach, whether as common law damages in addition to the injunction, or damages as an alternative to the injunction (Lord Cairns Act damages).[10] No evidence or submissions were directed to the question of damages, and no order was made for a split trial with damages to be addressed separately. At the end of closing submissions, I gave leave for further brief submissions to be filed directed to the question of damages and any related questions of relief.[11] However on 3 October 2024, by emails to my chambers following the trial, the plaintiffs informed the Court that their formal position was that they sought only nominal damages in respect of the defendant's breach of the Restrictive Covenant.

10 FAL first says that the Restrictive Covenant does not touch and concern Lot P as the benefitted land, and so is ineffective and unenforceable against FAL as a subsequent purchaser of the burdened land.[12] It says further or alternatively that it did not breach the Restrictive Covenant, because:

(a) the creation of a separate lease for the Freezer on Lot 301 does not constitute the 'creation thereon of two or more separate occupancies' within the meaning of paragraph (i) of the Restrictive Covenant;

(b) the reference to 'consent' in paragraph (i) of the Restrictive Covenant, properly construed, means consent is not to be unreasonably withheld, or alternatively it is an implied term of the Covenant that consent is not to be unreasonably withheld; and

(c) FAL requested consent to lease the Freezer to Laverton Cold Storage, which Merrifield unreasonably refused.[13]

11 In its counterclaim, FAL contends that the Restrictive Covenant should be modified on the basis that it would impede the reasonable user of the land without securing practical benefits to other persons within the meaning of s 84(1)(a) of the Property Law Act. Alternative modifications were proposed, which are identified below.

12 It is also pleaded that such modification would not substantially injure Merrifield within the meaning of s 84(1)(c) of the Property Law Act.

13 The Merrifield parties, in their reply to the defence and defence to FAL's counterclaim, plead, in support of the position that the Restrictive Covenant runs with Lot 301, that the Covenant:

(a) affects the mode of occupation of FAL's land;

(b) gives effect to the MBP development strategy and allows for the strategic and efficient development of Merrifield's land;

(c) limits sales competition within [the] MBP; and

(d) is concerned with and enhances the value of Merrifield's land.[14]

14 Merrifield rejects FAL's interpretation of the consent requirement and denies that there is an implied term in the Restrictive Covenant to the effect alleged by FAL. It contends that even if paragraph (i) of the Restrictive Covenant was to be construed as FAL contends, it was still in breach as it leased the Freezer before seeking consent, and the implied term contended for did not provide for retrospective consent.[15]

15 FAL in its reply to Merrifield's defence to counterclaim, and also by way of rejoinder to Merrifield's reply, pleads that if the Restrictive Covenant limits sales competition as pleaded by Merrifield, it is a contract, arrangement or understanding within the meaning of s 45 of the Competition and Consumer Act 2010 (Cth), which has the purpose, or would be likely to have the effect of, substantially lessening competition in the market of buying, selling, developing, occupying, leasing and licensing the use of land in the Merrifield Business Park.[16]

16 The parties agreed on a joint statement of issues in advance of the proceeding which reflect these issues and identify sub-questions to be addressed in determining the issues above.[17] Having regard to that document and the pleadings, the substantive issues which are to be resolved in this proceeding are:

(a) whether the Restrictive Covenant is enforceable against successors in title to Lot 301, including FAL, which includes a consideration of whether the Covenant touches and concerns Lot P in the sense required for a covenant to be enforceable as against third parties;

(b) whether the Occupancy Restriction is an unlawful restraint of trade in breach of s 45 of the Competition and Consumer Act and is therefore void or unenforceable on that ground;

(c) whether, if the Occupancy Restriction is enforceable, the requirement for consent should be construed as a requirement for consent, which consent is not unreasonably to be withheld, or alternatively there is an implied term to that effect;

(d) whether FAL breached the Occupancy Restriction by failing to seek consent in advance of entering into the Freezer Lease; and

(e) whether the Restrictive Covenant should be modified pursuant to ss 84 and 85 of the Property Law Act which provide that the Court has a discretion to vary a restrictive covenant, including on the application of a defendant in a proceeding to enforce a restrictive covenant.

(a) The Restrictive Covenant is enforceable as against FAL. The Restrictive Covenant touches and concerns the land by restricting uses, configurations or development of Lot 301 that are incompatible with a business park and thereby providing an amenity benefit to the adjacent benefitted land, Lot P. It does not touch and concern the land by reason of any protection against competition in the sale and leasing of land.

(b) The Restrictive Covenant is not void or unenforceable by reason of s 45 of the Competition and Consumer Act.

(c) The Restrictive Covenant is subject to an implied term that the consent of the proprietor of Lot P to the creation or two or more tenancies is not to be unreasonably withheld.

(d) FAL breached the Restrictive Covenant by failing to seek consent prior to entering into a second lease.

(e) The conditions for modifying the Restrictive Covenant in the manner proposed in the Fifth Proposed Modification under s 84(1)(c) are satisfied.

(f) It is appropriate to exercise the discretion of the Court to modify the Restrictive Covenant in the manner proposed in the Fifth Proposed Modification.

Amendment of the pleadings relating to proposed modification of the Restrictive Covenant

18 FAL originally sought one of two alternative proposed modifications pursuant to s 84(1) of the Property Law Act. The proposed modifications were either to delete the reference to 'or the creation thereon of two or more separate occupancies' from paragraph (i) of the Restrictive Covenant which states the Occupancy Restriction (the First Proposed Modification). Alternatively it is proposed to replace the word 'two' in paragraph (i) with 'three' (the Second Proposed Modification).[18] On the first day of trial, an application was made to amend the counterclaim to identify three additional alternative modifications to paragraph (i) of the Restrictive Covenant which were to:

(a) replace in the word 'two' with the word 'four' (defined in the pleading as the Third Proposed Modification); alternatively

(b) add the words '(other than up to three occupancies in total for the Warehouse and the Freezer located on the site as set out in the attached plans)' after the words 'two or more separate occupancies' (the Fourth Proposed Modification); alternatively

(c) add the words '(other than one occupancy for the Warehouse and one occupancy for the Freezer located on the site as set out in the attached plans)' after the words 'two or more separate occupancies' (the Fifth Proposed Modification).[19]

19 In making the application FAL also stated that it would no longer rely on the First Proposed Modification.

20 I granted leave to amend the counterclaim for reasons identified at the hearing of the application on 17 September 2024, and in the orders I made that day.[20] Those reasons were primarily because the alternatives were narrower than the first modification originally identified (which removed the restrictions on occupancies completely) and that it had been confirmed by FAL that no further evidence in addition to that already identified would be led.[21] It was also relevant that the amendments, if allowed, would not prevent Merrifield from taking the point that the proposed uses which would be permitted under the modifications to the Restrictive Covenant had not been sufficiently clearly identified to enable the Court to be satisfied that the conditions for modification under s 84(1) of the Property Law Act were met.[22]

Jurisdictional issue arising from reliance on s 45 of the Competition and Consumer Act

21 Following the conclusion of the proceeding, I raised with the parties the question of whether this Court had jurisdiction to determine the issue, raised by FAL's Further Amended Counterclaim and its Amended Rejoinder, as to whether the Restrictive Covenant was a contract or arrangement in restraint of trade within the meaning of s 45 of the Competition and Consumer Act, and therefore unenforceable or void. The parties had not addressed in submissions the source of, or any limits on, the Court's jurisdiction to exercise that federal jurisdiction.[23]

22 The parties filed submissions to the effect that the Court could proceed to determine the issues relating to s 45. FAL submitted that the Court had jurisdiction to grant the declaratory relief sought by the Counterclaim in this proceeding. FAL acknowledged the 'special federal matter' regime under the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth), under which the primary position is that special federal matters are to be transferred to the Federal Court. However it referred to this Court's power to order under s 6(3) of that Act that the proceeding should be determined in this Court if there are special reasons for doing so. FAL did not seek such an order.[24] Merrifield stated that it did not take a jurisdictional point, and that the declaratory relief sought by FAL would be enabled by s 84(2) of the Property Law Act and s 36 of the Supreme Court Act 1986 (Vic).[25]

23 In April 2025, I listed the matter for mention and requested the parties to address more fully the issue of the source of this Court's jurisdiction. FAL sought leave to file further written submissions. In those submissions, FAL contended that the Court could rely on its inherent common law jurisdiction to determine whether the Restrictive Covenant was void on the basis that it contravenes s 45.[26] FAL submitted that there was also jurisdiction to hear the proceeding under the Jurisdiction of Courts (Cross-vesting) Act (Cth). It submitted that the proceeding was not a 'special federal matter' (which pursuant to s 6(1) must be transferred to the Federal Court), but that if it was, there were 'special reasons' within the meaning of s 6(3) of that Act[27] why this Court should determine the matter itself. FAL filed an affidavit confirming that it had taken the step of informing the Attorneys-General of the Commonwealth and of Victoria, of the proceeding, as required by s 6(4)(a) of the Act in any case where a party to seeks to have a special federal matter determined by a State court.[28]

24 Merrifield submitted that the only jurisdiction to determine arguments based on s 45 was pursuant to the Jurisdiction of Courts (Cross-vesting) Act (Cth), and that the matter was a special federal matter. It did however agree that there were special reasons why the matter should be heard in this Court.[29]

25 On 13 May 2025, I determined[30] that the matter was a special federal matter by reason of the reliance on s 45 by FAL as defendant and plaintiff by counterclaim. I also determined that there were special reasons for the matter to remain in this Court and made orders accordingly. I gave separate reasons for that ruling.[31]

26 It will be necessary to return to the witnesses' evidence in more detail below, in the context of the modification application pursuant to s 84(1) of the Property Law Act, however it is useful to refer to that evidence now as it forms the basis, with the Statement of Agreed Facts[32] and various documents tendered by agreement, of the factual context to the legal issues that arise for consideration. The evidence was largely uncontroversial, insofar as it related to the circumstances in which the relevant land was acquired and developed by Merrifield, the Restrictive Covenant was agreed, and FAL acquired and leased Lot 301. The parties did make objections to evidence which are relevant in the specific context of the modification application and are addressed below.

27 FAL did not call any lay witnesses. Merrifield's lay witnesses were:

(a) Ben Perry, the General Counsel and Company Secretary at MAB Corporation, which is engaged by Merrifield as development manager for Merrifield's operations.[33] Mr Perry joined MAB as General Counsel and Company Secretary in 2011.[34] His evidence primarily addressed the subdivision of land resulting in Lot 301 and Lot P, the sale of Lot 301 and the tender of documentary evidence relevant to those matters. He also gave evidence relating to the circumstances in which Merrifield became aware that FAL had entered into the Freezer Lease and FAL's request for consent for that Lease, including as to a meeting with a representative of FAL on 25 November 2021; and

(b) Michael Martin, who was the General Manager Commercial and Industrial at MAB from some time in 2019, until a date which was not identified.[35] At the time of giving evidence, he was the Chief Development Officer at Hodgson Group, a property development company with no apparent relationship with Merrifield or MAB.[36] Mr Martin also gave evidence relating to the circumstances in which Merrifield became aware that FAL had entered into the Freezer Lease and FAL's request for consent for that Lease, including as to the meeting on 25 November 2021.

(a) David Crowder, a town planner who has practised in that discipline since 1987. His first expert report addressed questions relating to the benefit of the Occupancy Restriction to the owner of Lot P, reasonable uses of Lot 301, and whether FAL's proposed modifications to the Occupancy Restriction would affect the enjoyment, mode of occupation, amenity or future development of Lot P.[37] His second expert report responded to Merrifield's expert evidence;[38]

(b) Nicholas Blakely, who has experience in 'supply-chain dynamics, integrated logistics and industrial property'.[39] His expert report addressed questions relating to the ability to lease the whole of Lot 301 to a single tenant, the impact of a separate tenancy for the Freezer, and whether modification of the Occupancy Restriction would negatively affect the ability of the owners of Lot P to lease that site;

(c) Richard Bowman, a certified practising valuer and fellow of the Australian Property Institute with over 30 years' experience in that discipline.[40] His report addressed questions relating to whether the Occupancy Restriction enhanced the value of Lot P, the impact of a separate tenancy for the Freezer, and whether modification of the Occupancy Restriction would negatively affect the value of Lot P;

(d) Charmaine Dunstan, a traffic engineer, and transport planning consultant, who gave evidence in response to Mr Martin's statement and his view that the road network infrastructure has been designed to cater for one large occupier, where additional occupiers would add a significant volume of traffic and have a detrimental impact on that infrastructure.[41] The report also included her opinion as to whether the road network design of the Merrifield Business Park would be designed differently if there were two, three, four or more occupancies at Lot 301; and

(e) Dr Luke Wainscoat, an economist, who gave evidence on competition in the market in the sale or supply of land in the context of FAL's pleadings based on s 45 of the Competition and Consumer Act.[42]

29 Merrifield relied on one expert, Nicholas Moore, a valuer, who has practised in the valuation of residential, retail, commercial and industrial properties for over 20 years.[43] His first expert report addressed his opinions as to why 'a developer, such as MAB, [would] have created a lot in the size and location of Lot P' and the purpose of the Restrictive Covenant. His second expert report responded to the expert reports of Mr Bowman and Mr Blakely.[44]

30 The Court conducted a view of the premises on the second day of the hearing, in the presence of counsel and instructing solicitors.[45]

31 Observations from that view as relevant to the issues to be determined are referred to below. In summary, my primary observations from the view were that:

(a) the Merrifield Business Park was a large, well maintained precinct with spacious sites, including the Dulux site and Lot 301;

(b) Lot 301 was separated from Lot P by a road, but Lot P was clearly visible as vacant land. Lot 301, Lot P and Lot R were visible to the west and the Merrifield 'town centre' location could be seen further in the distance. The visible buildings included a three-story childcare centre, an aquatic centre, and the Coles Merrifield store;

(c) smaller sites, although still of significant size, were on the land between Donnybrook Road and Titan Drive, south of Lot P and Lot 301, and a narrow landscaped wetland site bordered the Hume Highway;

(d) the internal roads in the precinct, including Titan Drive and the roads on Lot P, were large and well maintained; and

(e) the Warehouse and Freezer buildings were large features built on Lot 301, with multiple access points and roads surrounding them.

32 The following are schematic depictions of the Merrifield Business Park and the broader Merrifield Precinct as contained in the Merrifield Business Park Polaris Release Flyer 3.0, issued by MAB:[46]

33 In addition to tendering a statement of agreed facts,[47] the parties called witnesses who gave evidence about the relevant land and the events leading up to this proceeding. Evidence was given by lay witnesses about matters relevant to the plans for the Merrifield Business Park, and the reasons why the Restrictive Covenant was imposed. Evidence was also given by expert witnesses on behalf of both parties as to the purpose and effect of the Restrictive Covenant.

Lot 301 - the land burdened by the Restrictive Covenant

34 After Merrifield acquired the Mickleham land in 2004, it commenced a process of planning for the development of industrial, retail and residential areas, including for subdivision and sale of the land. On 28 February 2020, a plan of subdivision was registered, which included Lot 301 and Lot P, with Merrifield as registered proprietor.[48]

35 Merrifield sold Lot 301 to Kaufland by contract of sale dated 4 June 2018. The sale price was $30,600,000 (Kaufland Contract). The land was identified as Lot 301 on the proposed plan of subdivision which had not yet been registered, and was conditional on the local council approving the subdivision.[49] The Kaufland Contract included a clause in which Kaufland acknowledged that the Merrifield Business Park development was subject to 'design guidelines' and that it agreed to comply with them in undertaking any development or improvement on the land. It was also acknowledged that the guidelines were not strictly binding, and that constructing buildings on the property in accordance with an annexed plan was deemed to comply with the guidelines.[50] The annexed plan showed the Warehouse and the Freezer, with accompanying loading bays and car parks.[51] The Kaufland Contract was also conditional on Kaufland obtaining the planning permits providing for construction of these facilities in accordance with the annexed plan and for truck access 24 hours a day, 7 days a week with a minimum of 300 movements per day.[52]

36 The Kaufland Contract permitted construction to commence on the Warehouse and Freezer prior to settlement. Those buildings were constructed by the time the contract of sale to Kaufland settled on 30 March 2020.[53]

37 The terms of the Kaufland Contract included the Restrictive Covenant, which is contained in the Memorandum of Common Provisions AA6062. It states:[54]

The owner of Lot 301 on PS810904M (Burdened land) hereby for himself, herself or themselves, his, her, or their heirs, executors, administrators and transferees, the registered proprietor or proprietors (hereafter "covenantor") covenants with and for the benefit of the registered proprietors of all or any part of the land in Lot P on PS810904M (Benefitted Land) that the covenantor will not and will not suffer, cause or permit:

(i) the subdivision of the Burdened Land or the creation thereon of two or more separate occupancies without first obtaining the written consent of the registered proprietor or proprietors of the Benefitted Land;

(ii) the use of the Burdened Land wholly or partly for the retail sale of food and/or beverages;

(iii) the use of the Burdened Land for any of the following purposes:

(A) brothel;

(B) concrete batching plant;

(C) concrete panel plant;

(D) recycling plant;

(E) vehicle wreckers;

(F) junk yard;

(G) panel beaters;

(H) place of worship;

(I) place of assembly;

(J) adult bookshop;

(K) agriculture;

(L) caretakers residence;

(M) circus;

(N) carnival;

(O) crop raising;

(P) animal husbandry;

(Q) mining,

(iv) the Burdened Land or any building on the Burdened Land to become unsightly or in a state of disrepair;

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 Burdened Land and further that this covenant shall forever run at law.[55]

38 The Restrictive Covenant was registered on the title of Lot 301, in favour of Lot P as the benefitted land.[56]

39 In December 2018, Merrifield sold the land the subject of Lot P to the five related companies who are the second to sixth plaintiffs. At this time, a new plan of subdivision had been approved and much of the land which was Lot P had been incorporated in a new Lot S.[57] The sale price was $23,224,812 (exclusive of GST)[58] and the sale was subject to a Memorandum of Understanding in which Merrifield states its intention to transfer its interest in that land to the five companies, which will become registered proprietors of the land as tenants in common.[59] That transfer has not yet occurred.

40 Kaufland agreed to sell Lot 301 to FAL. The contract of sale, which was undated, was entered into around August 2020,[60] and the property was transferred for consideration of $95,500,000 on 15 December 2020.[61] The current registered title records that FAL was registered as proprietor of the land and that the land is subject to covenants including the Restrictive Covenant.[62]

41 Since 1 April 2021, FAL has leased the Warehouse to DHL. On 13 September 2021, FAL leased the Freezer to Laverton Cold Storage for a term of five years.[63]

42 On 3 February 2022, some months after entering into the Freezer Lease, FAL made a request to Merrifield that it consent for FAL to enter into that lease. That request was refused on 4 February 2022. FAL requested reasons from Merrifield for its decision to decline the consent to the Freezer Lease. Merrifield declined to provide reasons.[64]

The development of the Merrifield Business Park

43 It is relevant to understand the way in which Merrifield had approached the development of the Merrifield Business Park, in the period prior to the original sale of Lot 301 to Kaufland, in some detail.

44 Mr Martin, on behalf of Merrifield, gave evidence that the planning for the Merrifield Business Park had commenced in the early 2000s, and had involved having a number of strategic plans approved by the Victorian Government. The key planning documents were as follows and were referred to collectively as 'the Planning Framework':

(a) the Merrifield Structure Plan which set out in broad terms the urban design and planning structure, including the broad subdivision, of the land which was to form the Merrifield Business Park. That plan was approved in 2007. The plan broadly provided for large scale allotments in the centre of the Park, as major strategic sites, with smaller more visually pleasing allotments towards the more visible edges of the Park. This was described by Mr Martin as the 'egg yolk' model of developing a precinct.[65] A concept drawing of the park from the Merrifield Structure Plan is set out below:

(b) the Merrifield Employment Area Development Coordination Plan which was approved in 2018; and

(c) the Polaris Precinct Concept Plan[66] (Precinct 1) which was approved in 2018. It established a more defined subdivision layout for the Merrifield Business Park. It involved large scale allotments intended to attract significant occupants offering employment opportunities, situated centrally within the Park, with smaller scale allotments around it. An image from the Polaris Precinct Concept Plan is shown above at [32], and is marked with the occupants of individual lots which were occupied by the time of the trial of the proceeding, as described below.

45 Lot 301 was the largest of 28 lots subdivided by Merrifield and offered for sale in the first stage of development of the Merrifield Business Park titled the 'Polaris Release'.[67]

46 On 8 December 2015, Lot 101, a site of 17 ha which adjoins Lot 301 on its eastern boundary, was transferred by Merrifield to DuluxGroup (Australia) Pty Ltd.[68] That transfer was subject to a restrictive covenant that prevented various uses, being the same prohibited uses referred to in paragraph (ii) of the Lot 301 Restrictive Covenant, but did not include any restriction on subdivision or multiple occupancies.[69] The restrictive covenant also provides that the covenant would expire on the date that the burdened land was no longer used for or in conjunction with the manufacturing, processing or distribution of paint.[70] The evidence was that this was because Dulux proposed to build another facility on the land for the manufacture of latex, which could potentially be owned by a different company. This would either involve subdivision of the Dulux site or dual occupancy.[71]

47 On 14 August 2020, Lot 401, an 8.764 ha lot, was transferred to Dexus Wholesale Management Limited for it to be leased to Ford Motor Company of Australia Pty Ltd.[72] That transfer was subject to a restrictive covenant expressed to be for the benefit of Lot P. It prevented subdivision up until 2040, but did not contain any occupancy restriction.[73] A second site, Lot 501, was acquired by Dexus in March 2021 with a restrictive covenant in the same terms as that applying to the land occupied by Ford.[74] That site was occupied by RMA Group, and was regarded by MAB as being a strategic site in combination with the Ford site.[75] The building on the RMA occupied site had two tenancies.[76]

48 On 17 August 2023, Lot 702 , a site of 3.658 ha, was transferred to Bunnings Properties Pty Ltd.[77] That transfer was subject to a restrictive covenant which did not restrict the number of occupancies that could be created on the site.[78]

49 Other large lots included Lot 601, of 3.02 ha, sold to Crafty Properties Pty Ltd and occupied by Lincraft Australia Pty Ltd. That sale was subject to a restrictive covenant expressed to be for the benefit of Lot P which prohibits subdivision and also prohibits two or more occupancies without written consent.[79] Lot 203, a 2.97 ha lot, was transferred to Merrifield Property (Vic) Pty Ltd on 31 December 2018 and is leased to a smallgoods company called D'Orsogna.[80] That sale was subject to a restrictive covenant which is expressed to be for the benefit of Lot G, not Lot P, and prohibits subdivision, two or more separate occupancies without written consent, and applications for the development of the site which will have, or will have a reasonable likelihood of resulting in, a materially adverse impact on the use and development of Lot G.[81]

50 There were a range of other smaller lots in the Merrifield Business Park which had been sold or leased at the time of the proceedings.[82] All sales involved restrictive covenants restricting subdivision of the land, and the creation of more than one occupancy. However, one of the covenants was, like the D'Orsogna site referred to above, not in favour of Lot P as the benefitted land,[83] and one covenant prohibited more than one occupancy but permitted the occupier and related parties to create unlimited 'shared' occupancies.[84]

Is the Restrictive Covenant effective and enforceable against FAL?

51 FAL identifies two bases on which the Restrictive Covenant is said to be unenforceable. First, it is said that the Covenant does not 'touch and concern the land', which is a requirement for any covenant to be enforceable as against third parties to the transaction by which the land was alienated. Secondly, it is said that the Restrictive Covenant, insofar as it imposes the Occupancy Restriction, is said to contravene s 45 of the Competition and Consumer Act, which prohibits arrangements which restrict trade.

Legal principles relevant to effect of Restrictive Covenants

The legal principles relevant to enforcement of restrictive covenants against successors in title

52 A covenant, in the sense of a promise made in a contract or a deed, is enforceable by the covenantee against the covenantor pursuant to the general principles of contract law. However, covenants which satisfy certain conditions may run with the land at common law or in equity. In Tulk v Moxhay it was recognised that a covenant affecting land could be enforced in equity against successors in title who took with notice of the covenant.[85] The principles subsequently developed as to the circumstances in which restrictive covenants will be enforceable against successors in title are to the effect that:

(a) the covenant must be a negative covenant;

(b) the burden of the covenant is intended to run with the land; and

(c) the covenant benefits the land of the covenantee (the benefitted land), rather than simply conferring a benefit on the covenantee, and the covenant 'touches and concerns' that land.[86]

53 Under the Torrens system of recognising title by registration, for a restrictive covenant to run with the land and be enforceable against third parties, it is also essential that the covenant be notified in a way capable of identification from the certificate of title or instruments incorporated in the certificate by reference and available for inspection on the Register.[87] Section 88(1) of the Transfer of Land Act specifically provides for the recording or notification of a covenant on the title in the Register. Such recording in the Register does not give the restrictive covenant any greater operation than it had under the instrument creating it.[88] It was undisputed that in this case the Restrictive Covenant was recorded on the title to Lot 301.[89]

54 The requirement that the covenant is a negative covenant is not in issue, as it is plain that the Occupancy Restriction in the Restrictive Covenant is a negative restriction on how the owner of Lot 301 may use the land. The intention that the burden of this restriction is to run with the land is also not in issue in this case, given that the language of the Restrictive Covenant expressly states that '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 Burdened Land and further that this covenant shall forever run at law'.

55 It is the third requirement, that a restrictive covenant 'touch and concern' the benefitted land, which is in issue in this case. It is necessary to consider closely the authorities applicable to this requirement.

56 The central focus of the requirement is that the restrictive covenant must benefit the covenantee's land.[90] In assessing the question of benefit to the land, the authorities focus on two modes of benefit:[91]

(a) the restrictive covenant beneficially affects the land with respect to its mode of occupation, including as to its amenity; or

(b) the restrictive covenant otherwise beneficially affects the value of the land.[92]

57 In P & A Swift Investments (a firm) v Combined English Stores Group plc,[93] an authority relied on by Merrifield, these alternatives of establishing the requirement that the covenant touches and concerns the land were reiterated, in the context of additional considerations. Lord Oliver of Aylmerton observed:

[T]he following provides a satisfactory working test for whether, in any given case, a covenant touches and concerns the land: (1) the covenant benefits only the reversioner [covenantee] for time being, and if separated from the reversion [the relevant land] ceases to be of benefit to the covenantee; (2) the covenant affects the nature, quality, mode of user or value of the land of the reversioner; (3) the covenant is not expressed to be personal (that is to say neither being given only to a specific reversioner nor in respect of the obligations only of a specific tenant); (4) the fact that a covenant is to pay a sum of money will not prevent it from touching and concerning the land so long as the three foregoing conditions are satisfied and the covenant is connected with something to be done on, to or in relation to the land. [94]

58 It is also important in considering the question of benefit to distinguish between a benefit enuring to the covenantee, and a benefit touching and concerning the land. While it is open to accept that the covenantee, if imposing a restrictive covenant in a land transaction, has done so because it provides a benefit, it may be a benefit which, properly understood, is personal to the covenantee, rather than a benefit touching and concerning the land. This is a particularly significant issue where a covenant is intended to protect a business enterprise conducted by the covenantee on the benefitted land. Such a covenant may benefit the covenantee in their personal capacity as the business owner, however properly construed, it may also benefit the land itself.

59 In Newton Abbot Co-operative Society Ltd v Williamson & Treadgold Ltd, Upjohn J, as his Lordship then was, held that a covenant which prevented competition with the covenantee's business did not have that as its sole object, and that it was open to conclude that it would benefit the land and future purchasers of the land or the business operating on the land.[95] However that conclusion has been doubted in subsequent cases including Quadramain Pty Ltd v Sevastapol Investments Pty Ltd.[96] There, Justice Jacobs doubted the correctness of Upjohn J's conclusion, noting that Upjohn J had referred to the possibility that the benefit of the covenant could be assigned to a purchaser of the business who was not also a purchaser of the land. In Jacobs J's view, that possibility raised a question of whether the covenant was indeed for the benefit of the land, or simply for the covenantee as the owner of the business.

60 In McGuigan Investments Pty Ltd v Dalwood Vineyards Pty Ltd,[97] Hope J in the New South Wales Supreme Court considered the effect of a covenant in a sale by Dalwood to McGuigan of a vineyard in the Hunter Valley called Dalwood. The covenant stated that neither the land or any part of it would at any time thereafter 'be used for the purposes of a business or undertaking carried on under a name of which the word "Dalwood" formed the whole or part, or the sale or production of wine products under any name including the word "Dalwood". It also said that if the purchaser conveyed the land the purchaser would require the proposed conveyee to enter into covenants on the same terms.[98] The covenant was expressed to benefit land called Penfold Vale which was 17 miles away in the Hunter Valley.

61 Justice Hope construed the restrictive covenant as only prohibiting the purchaser McGuigan from using the land for the sale or production of wine products under any name including the word 'Dalwood'. He held, so construed, the covenant neither touched nor concerned the Penfold Vale land. His Honour considered that a restriction on the use of the name Dalwood on a single property in the Hunter Valley, 17 miles away from the benefitted land in a region with numerous wineries, would not in any way enhance the value of the Penfold Vale land.[99] The annexation of the covenant to the land was therefore ineffective.[100]

62 In summary, it is necessary to closely consider the terms of the restrictive covenant to ascertain whether the restrictive covenant truly benefits the benefitted land in its mode of occupation or in enhancing its value, or whether it is simply a restriction which will have benefit to the covenantee in their own capacity.

Principles of construction applicable to restrictive covenants

63 Before considering the parties' positions on the enforceability against FAL of the Restrictive Covenant it is necessary to understand the state of legal authority on the question of how restrictive covenants are to be construed, and what evidence is admissible in the process of construction and in considering the effect of a restrictive covenant.

64 In the context of the construction of easements on Torrens system land, the High Court held in Westfield Management Limited v Perpetual Trustee Company Limited[101] that the meaning of the terms of the easement were to be ascertained from what appeared on the Register, and not by reference to extrinsic material. The High Court observed that:

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.[102]

65 In Deguisa v Lynn[103] the proceeding involved a certificate of title to land registered in South Australia which contained a memorandum of encumbrance to the effect that the land was part of a 'common building scheme' and which imposed restrictions including a single dwelling restriction. Neither the certificate of title, nor the memorandum of encumbrance referred to the other lots intended to be benefitted by the encumbrance. The principal issue in the case was whether the common building scheme was sufficiently notified on the title to the land for the purposes of s 69 of the Real Property Act 1886 (SA). The unanimous view of the High Court was that it was necessary for the identity of the other lots in the common building scheme which were benefitted by the restrictions to be identified in the certificate of title or in the memorandum of encumbrance for the notification to be sufficient. The Court referred to Westfield as having established the proposition that 'unless reference to an interest is endorsed on the certificate of title or incorporated by reference in a registered instrument notified on the certificate of title, the interest has not been notified on the certificate of title'.[104] As the other lots which were part of the common building scheme were not identified, the land was not encumbered by the restrictions in the memorandum of encumbrance.

66 The Court of Appeal in Jeshing Property Management Pty Ltd & Bao v Yang & Ors, considered Westfield, Deguisa, and subsequent authorities, in affirming the specific principles as to construction of restrictive covenants_._[105] In a passage later cited with express approval by the Court of Appeal in Sumervale Pty Ltd v Viva Energy Refining Pty Ltd[106], the Court in Jeshing observed:[107]

[T]he principles to be applied in construing restrictive covenants are the same 'established principles' as apply to the construction of contracts, except the rules of evidence as to the admissibility of extrinsic evidence of surrounding circumstances are constrained by the decisions in Westfield and Deguisa. This is evident from the judgment of the Court of Appeal in New South Wales in Phoenix,[108] and the judgment of this Court in Barport Pty Ltd v Baum.[109] On this basis, the principles stated by the High Court in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd[110] with such adaptions as are necessary to reflect the decisions in Westfield and Deguisa, should apply to the construction of the Covenants, as follows:

(1) The meaning of the phrase at issue is to be determined objectively, by reference to its text, context (the entire text of the Covenants as well as any registered instrument or statutory provision referred to in the text of the Covenants) and purpose.[111]

(2) In determining the meaning of the relevant terms of the Covenants, it is necessary to ask what a reasonable person in the position of [the transferor and transferee of the land] would have understood those terms to mean. That enquiry requires consideration of the language used by the parties in the Covenants, the circumstances addressed by the Covenants and the commercial purpose or objects of the Covenants.[112]

(3) A construction of the relevant words in the Covenants which accords with commercial sense and commercial convenience should be preferred over one which does not.[113]

67 The primary issue in Jeshing was whether the relevant restrictive covenants continued to burden the land as against subsequent successors in title to the original covenantor.[114] It was contended in the appeal that the trial judge had erred when determining that the covenants did continue to burden the land, in considering other covenants in other instruments of transfer arising out of a great-great-grandparent title from which the relevant land derived. In that case, however, the language of the covenants themselves referred to the covenantor 'for himself his heirs executors administrators and transferees' covenanting with the covenantee 'and her heirs executors administrators and transferees the registered proprietor or proprietors for the time being' of the land.[115] The question of whether the covenant continued to burden the land was one connected directly with the language of the covenant. The Court of Appeal's observations did not, therefore, strictly address a question which arises in this case. That is whether the principles in Westfield and Deguisa, limiting reference to extrinsic material in the construction of covenants, would also extend to the question of whether a covenant has, properly understood, the quality of touching and concerning the land.

68 In Sumervale,[116] the Court of Appeal considered the issue of construction of restrictive covenants not in the context of the question of whether a covenant touches and concerns the land, but in the context of an application for modification of a covenant pursuant to s 84(1)(c) of the Property Law Act. The Court considered in particular the relevance of the purpose of a covenant in construction, and how that purpose is to be ascertained. The Court held that the purpose or intent of the covenant may be relevant to ascertaining its meaning and the nature of the injury that may be occasioned by modification of the covenant or removal of the restriction for the purposes of s 84(1)(c).[117] The Court observed that identification of that purpose or intent is:

subject to the limiting principle, which derives from the indefeasibility of registered instruments, that the title is an 'accurate and comprehensive statement of the state of the title to that land, as to both the title of the registered owner and the interests of others in that land' and a person dealing with the registered proprietor is entitled to rely on the title and interests notified on it without recourse to other extrinsic material.[118]

69 The Court noted that 'purpose' in the sense relevant to construction of the restrictive covenant is 'objectively determined and fixed' and does not change over time with changes in land use, and 'represents the objectively ascertained intent of the parties on the making of the covenant'.[119] The Court also observed that an important consideration in understanding restrictive covenants is that they must touch and concern the land, and the 'purpose will relate to the use and enjoyment of [that] land'.[120]

70 The discussion in Sumervale does not bear directly on the question of the relevance of the purpose of a restrictive covenant in understanding whether it touches and concerns the land. However the acknowledgement of the relationship between the purpose of the covenant and the use and enjoyment of the benefitted land suggests that the ascertainment of whether a covenant touches and concerns the land should be consistent with the principles as to how the purpose of the covenant is to be ascertained. That is, at least in land held in the Torrens system, it should be determined by the terms of the covenant and other documents available on the title and incorporated documents on the Register, without recourse to extrinsic materials.

71 In Fitt v Luxury Developments Pty Ltd,[121] a judgment delivered in 2000, Gillard J did consider the specific question of what the Court may take into account in determining whether the benefit of a covenant is annexed to the land, and whether it touches and concerns the land. His Honour referred to observations of Farwell J in Rogers v Hosegood to the effect that the question of whether the covenant touches and concerns the land is 'a question of intention ... to be determined on construction', but one on which 'the surrounding circumstances' can be considered to establish the intention.[122] Justice Gillard observed:

Whether or not the benefit of the covenant is annexed to some land is a question depending upon the common intention of the original parties to the covenant. It is necessary to construe the words of the covenant in their natural and ordinary meaning to determine the intention of the parties and whether they intended that the covenant was to be annexed to some land and run with it. In carrying out this exercise the court may take into account the surrounding circumstances objectively known to the parties at the time.

...

It is necessary to find an intention within the wording of the covenant and the surrounding circumstances, to benefit the particular property in the sense that the owners acquire the benefit as part of their ownership of the land.[123]

72 As to whether the covenant touches and concerns the land, his Honour held:

Again the question is one of construction taking into account all relevant circumstances at the time of execution. A covenant does touch and concern the benefited land if it can be shown that it was intended that the covenant should benefit the actual land owned by the covenantee and was not for his personal benefit.[124]

73 Justice Gillard did not expressly identify whether the 'surrounding circumstances' could involve matters extrinsic to the covenant and the title or whether ascertainment of intention would extend to evidence of the subjective intention of the parties, rather than being limited to identifying the common intention through construing the terms of the restrictive covenant itself. Consistent with his observations as to construction applied to the question of whether the benefit of the covenant is annexed to land, it is likely that his Honour contemplated an intention objectively ascertained from the terms of the restrictive covenant and surrounding circumstances objectively known to the parties at the time. Noting the subsequent observations of the Court of Appeal in Jeshing and Sumervale, it may be appropriate to understand those surrounding circumstances as being limited to what may be observed from the Register and (as elaborated below) what might be physically observed about the characteristics of the land in question.

74 There is English authority which takes a wider view of what is relevant in determining the question of whether a covenant benefits or touches and concerns the benefitted land. In Marten v Flight Refuelling Ltd, Wilberforce J, as his Lordship then was, observed that if an owner, upon selling of land, thinks fit to impose a restriction on user, for the purpose of benefitting the land, the court would normally assume that it is capable of doing so.[125] In other cases, courts have concluded that it may not be possible to assume that a restrictive covenant benefits all land identified as benefitted land, if the factual circumstances are to the effect that the land is unlikely to benefit.[126]

75 Both Merrifield and FAL accepted or assumed that expert evidence was admissible for the purpose of determining whether the covenant touches and concerns the land.[127] There is some limited authority, in Marten and another English case[128] to the effect that expert evidence is admissible on the question of whether a covenant does benefit the enjoyment of the land, or enhance its value. In Baramon Sales Pty Ltd v Goodman Fielder Mills Limited, Finkelstein J also considered evidence from a valuer as to the benefit of a covenant prohibiting use of the land for milling of flour, where the benefitted land was the site of a flour mill some distance away.[129]

76 It is necessary, in considering these authorities in which expert evidence was admitted on the issue of the benefit provided by the covenant, to consider the subsequent High Court authority on construction of restrictive covenants on title to Torrens system land in Westfield and Deguisa. Neither case directly addressed the question of how the effect of a restrictive covenant was to be construed, in the sense of what evidence is admissible to determine whether the restrictive covenant touches and concerns or attaches a benefit to the relevant land (rather than the covenantee personally). However, the clear concern of the Court was to protect the operation of the Torrens system of title and the ability of third parties to be able to ascertain all information relevant to title in land from the Register itself.[130] In Deguisa the Court observed:[131]

A person who seeks to deal with the registered proprietor in reliance on the State's guarantee of the title of the registered proprietor disclosed by the certificate of title in the Register Book (or its electronic equivalent) is not to be put on inquiry as to anything beyond that which is so notified. A common building scheme can operate consistently with the scheme of the Act in relation to the enforceability of the benefit of a restrictive covenant only if those rights are notified on the certificate of title of the burdened land, or by express reference in a memorial on the certificate of title to other registered instruments which contain that information.

77 The question of whether the restrictive covenant touches and concerns the land goes directly to the issue of whether the covenant is enforceable by the covenantee against successors in title to the original covenantor. Those successors in title may have no knowledge of the circumstances in which the covenant was agreed. The only reliable means of assessing the common intention in imposing the covenant, and whether it touches and concerns the land and is enforceable against successors in title, is in the Torrens system, to consider the title, the terms of the covenant itself, and any other incorporated document which is available on the Register. It would be consistent with the decisions of the High Court in Westfield and Deguisa, and observations of the Court of Appeal in Jeshing and Sumervale, to limit the evidence admissible on the question of whether a restrictive covenant touches and concerns the land to the common intention and surrounding circumstances which can be ascertained from the information on the title, or incorporated into it by reference to other documents available from the Register.

78 The English cases do not in my view compel a contrary view. Although they addressed registered land charges, this specific issue of admissibility of evidence does not appear to have been considered in any detail. Baramon was a case apparently involving Torrens system land, but was also determined prior to the decisions of the High Court in Westfield and Deguisa. I consider that on the current state of authority, it is not open to have regard to expert evidence on the question of whether a restrictive covenant touches and concerns or provides a relevant benefit to Torrens system land.[132] Expert evidence is, however, admissible in the context of the application for modification of the Restrictive Covenant pursuant to s 84 of the Property Law Act.

79 It was also contended by Merrifield in submissions at the hearing that evidence of the subjective intentions of the parties in agreeing to a restrictive covenant was relevant to whether the covenant benefits the land, in the sense of touching and concerning the benefitted land, as this was not merely a matter of construction.[133] I do not accept that proposition. To take into account the subjective intentions of the parties in determining whether a restrictive covenant on Torrens land has ongoing operation as against successors in title to the burdened land is inconsistent with the above authorities which emphasise the need for the existence and effect of a restrictive covenant to be able to be ascertained from the information available on the Register.[134]

80 One further specific aid to construction of restrictive covenants is relevant. It appears from the authorities that the physical characteristics of the relevant land may be considered in construing a restrictive covenant. In Prowse v Johnstone[135] Cavanough J, after a review of Westfield and authorities of State courts in which it was considered, concluded that while it was not open to have regard to circumstances which would have to be established by evidence outside of the Register, it would be open to have regard to matters referred to in the covenant itself which are available on the Register, and also by a consideration of the physical characteristics of the relevant land.[136] In Suhr v Michelmore, Pagone J noted the authority to the effect that it was permissible to have regard, in construing a restrictive covenant, to the physical characteristics of the relevant land as shown by visual inspection, in addition to the text of the instrument and the documents available on the Register of Titles.[137]

81 Current authority, in my view, supports the position that in considering whether a restrictive covenant applying to Torrens system land touches and concerns the land, it is permissible to have regard to:

(a) the materials admissible on construction of the covenant, namely the terms of the covenant, the title, and any documents incorporated by reference available on the Register; and

(b) the physical circumstances of the land, as shown by visual inspection.

82 As noted above, the Court conducted a view of the premises, and my observations from that view as relevant to the question of whether the Restrictive Covenant touches and concerns Lot P are referred to in my consideration of that issue below.[138]

Does the Restrictive Covenant touch and concern Lot P, the Benefitted Land?

83 The first issue for consideration is whether the Restrictive Covenant does touch and concern Lot P in the relevant sense, so as to be enforceable as against FAL the successor in title to Kaufland, the original covenantor.

Preliminary issue - onus of proof of whether the covenant touches and concerns the land

84 Merrifield submitted that FAL had the burden of proof to establish that the Restrictive Covenant did not touch and concern Lot P.[139]

85 It was submitted by FAL that the party seeking to rely on a restrictive covenant bears the onus of establishing that it touches and concerns the benefitted land, but did not elaborate on the legal basis for that position.[140]

86 The question of onus may in this case have limited importance, in circumstances where (as discussed above) only limited evidence is in any event admissible on the issue of whether the Restrictive Covenant touches and concerns the land. There is no dispute between the parties as to the terms of the Restrictive Covenant or the relevant documents which are on the Register. The main significance of onus in this case would relate to the impact of expert evidence, if admissible, on the question of whether the Covenant touches and concerns Lot P. Expert evidence as to the effect of the Restrictive Covenant on the value of Lot 301 was tendered by both parties. I have concluded, however, that this evidence is not admissible to identify the purpose of the Restrictive Covenant, nor on the question of whether it touches and concerns the land. However it is appropriate to come to a conclusion on the issue of legal onus before assessing the competing arguments of Merrifield and FAL on these issues.[141]

87 The basis for Merrifield's position that FAL bears the onus was, first, because the issue was raised in FAL's defence.[142] That is not a basis on which to determine where the onus lies on this issue. The fact of which party raises a matter in pleadings is not necessarily determinative of where the burden of proving a legal outcome lies. It is true that FAL pleaded in its Amended Defence that the Covenant does not touch and concern the Benefitted Land.[143] However, this was in response to Merrifield's pleas in the Amended Statement of Claim that it was entitled to the benefit of the Restrictive Covenant; that the Burdened Land (Lot 301) remains subject to the Restrictive Covenant; and that it is entitled to relief as against FAL on the basis of the Restrictive Covenant.[144] Satisfaction of the requirement that the Restrictive Covenant touches and concerns Lot P is, even if not discretely pleaded by Merrifield, a necessary condition to be satisfied to establish that the Covenant remains enforceable at Merrifield's instance against FAL.

88 Secondly, Merrifield contended that the onus fell on FAL because the starting point for analysis is that the Restrictive Covenant notified on title was, pursuant to the terms of ss 41 and 42 of the Transfer of Land Act, 'prima facie enforceable'.[145]

41 Certificate to be conclusive evidence of title

No folio of the Register under this Act shall be impeached or defeasible by reasons or on account of any informality or irregularity in any application or instrument or in any proceedings previous to the creation of the folio or the making of any recording on it; and every folio of the Register shall be received in all courts as evidence of the particulars recorded in it and all the recordings of those particulars in the Register, and shall be conclusive evidence that the person named in the folio as the proprietor of, or having any estate or interest in, or power to appoint or dispose of, the land described in the folio is seised or possessed of that estate or interest or has that power.

42 Estate of registered proprietor paramount

(1) Notwithstanding the existence in any other person of any estate or interest (whether derived by grant from His Majesty or otherwise) which but for this Act might be held to be paramount or to have priority, the registered proprietor of land shall, except in case of fraud, hold such land subject to such encumbrances as are recorded on the relevant folio of the Register but absolutely free from all other encumbrances whatsoever, except -

(a) the estate or interest of a proprietor claiming the same land under a prior folio of the Register;

(b) as regards any portion of the land that by wrong description of parcels or boundaries is included in the folio of the Register or instrument evidencing the title of such proprietor not being a purchaser for valuable consideration or deriving from or through such a purchaser.

90 The word 'encumbrance' is defined in s 4(1) of the Transfer of Land Act as:

encumbrance in respect of any land includes any estate interest mortgage charge right claim or demand which is or may be had made or set up in to upon or in respect of the land.

91 Merrifield submitted that the 'indefeasibility and paramountcy provisions' in ss 41 and 42 have the effect that the 'prima facie position' is that a restrictive covenant notified on the title is an encumbrance which is paramount and enforceable. It was accepted that these sections do not have the effect that the Restrictive Covenant is indefeasible, and that they are 'merely recorded on title for notice reasons'.[146] Merrifield did not address why ss 41 and 42, which deal with indefeasibility, did not have the effect of making a recorded restrictive covenant indefeasible, but otherwise had the prima facie effect that it was paramount and enforceable. I took the submission to be a contention that the effect of these provisions, s 42 in particular, was simply to shift the evidentiary burden of establishing whether a restrictive covenant notified on title was enforceable.

92 Merrifield's submission did not address the interaction of ss 41 and 42 with s 88 of the Transfer of Land Act which relevantly provides:

(1) The Registrar may record on the relevant folio of the Register the following -

(a) subject to subsection (1A), a restrictive covenant, if all of the registered proprietors of the land to be affected by the covenant agree to the creation of the restrictive covenant;

(b) subject to subsection (1A), (1B) and (1C), a variation or release of a recorded restrictive covenant.

(3) Apart from the operation of Part III a recording in the Register of any such restrictive covenant easement or right shall not give it any greater operation than it has under the instrument or Act creating it.

93 Section 88(3) makes clear that '[a]part from the operation of Part III' of the Act (in which ss 41 and 42 are found), a recording of a restrictive covenant in the Register will give it no greater force than the instrument creating it. This raises the question as to the effect of 'the operation of Part III', in particular ss 41 and 42, with respect to a restrictive covenant.

94 The primary focus of s 41 is on the proprietor of the land described in the folio of the Register. Section 41 provides that the Register is 'conclusive evidence that the person named in the folio as the proprietor of, or having any estate or interest in, or power to appoint or dispose of, the land described in the folio is seised or possessed of that estate or interest or has that power'. That aspect of s 41 provides for the indefeasibility of the title of the registered proprietor, but does not have anything to say about the effect of a restrictive covenant.

95 More relevantly to the status of a restrictive covenant, s 41 also provides that:

every folio of the Register shall be received in all courts as evidence of the particulars recorded in it and all the recordings of those particulars in the Register...

96 It is clear that this provision has the effect that a reference on a folio of the Register to a restrictive covenant is prima facie evidence of the existence of a restrictive covenant, which has been agreed and expressed to apply to the land the subject of the folio and that it is in the terms recorded on the Register. However, that is not the same thing as whether that restrictive covenant is enforceable against all proprietors of that land, according to its terms.

97 Similarly, s 42 has the effect that the registered proprietor of land will, subject to fraud, hold that land 'subject to such encumbrances as are recorded on the relevant folio of the Register', including a restrictive covenant which falls within the definition of 'encumbrance'. However, accepting that where the title to land registers a restrictive covenant, the land will be subject to that covenant, it does not resolve the question of what force the restrictive covenant has in substance, and whether it is enforceable against the registered proprietor. That continues to depend on the principles of law and equity applicable to restrictive covenants.

98 This was recognised in the decision of Gillard J in Fitt.[147] There his Honour considered the enforceability of a restrictive covenant imposed in the context of a building scheme. His Honour first noted the orthodox position that:[148]

Where both landowners are not the original covenantor and covenantee respectively, in order for a plaintiff to succeed in a proceeding to enforce a restrictive covenant by the grant of an injunction, he has to prove that he is entitled to enforce the benefit of the covenant in his favour and to enforce the burden of the covenant against the defendant.

99 His Honour later considered the position with respect to land held under the Torrens system and in particular the effect of s 88 which permits the Registrar to record a covenant on a certificate of title. His Honour raised the question of what the effect was of a notation of a restrictive covenant on title, and concluded that the answer was to be found in s 88(3).[149] He stated, having regard to that provision:[150]

It is clear, in my opinion, that the recording of a restrictive covenant on the folio of the land subject to the burden is no more than notification of the claim that there is a restrictive covenant burdening the land, and the recording does not in any way establish or effect the validity or otherwise of the restrictive covenant.

What the recording does is to give notice to anybody who wishes to acquire an interest in the burdened land that a claim is made by another that there is a valid restrictive covenant affecting the land. But it is viewed as a claim only and the recording on the folio in the Register for Land does not establish its validity.

100 Justice Gillard noted that by reason of s 42 of the Transfer of Land Act, the proprietor holds the land subject to encumbrances as are recorded on the relevant folio of the Register. He went on to observe:[151]

However there is nothing in the Act which affects the obligation of the person seeking to enforce the covenant of proving that the covenant is enforceable in law against the encumbered land. The recording of the covenant as an encumbrance does not affect in any way its validity, as an equitable interest, and the right to have the covenant recorded as an encumbrance does not qualify or alter in any way the principles of law which determine whether or not a restrictive covenant is enforceable as between successors in title to the original parties to the covenant.

101 These observations were referred to with approval by Riordan J in Owners Corporation PS 501391P v Balcombe[152] and Pagone J in Suhr v Michelmore.[153]

102 Justice Gillard's observations in Fitt are consistent with the principle recognised in Re Dennerstein[154] confirming that notification on title of a restrictive covenant does not give it the protection of indefeasibility.

103 More recently, the Full Court of the Tasmanian Supreme Court in Olympus Superannuation Fund (Tas) Pty Ltd v Recorder of Titles[155] considered the effect of ss 39 and 40 of the Land Titles Act 1980 (Tas), which are equivalent to ss 41 and 42 of the Transfer of Land Act, on an easement registered on the title. Specifically, the question was whether the recording of an easement on the title would make the easement indefeasible, and prevent any amendment of the easement by the Recorder of Titles exercising the statutory power to correct the Register.[156] Relevant too was the provision that notification on title of the easement was not to be construed 'so as to give effect as an easement to a right which is not recognized as an easement at common law'.[157]

104 The Court in Olympus concluded that these considerations had the effect that the substantive legal requirements for an effective easement, in particular the requirement that a dominant tenement be identified, remained essential even where an easement was registered. The Court observed:[158]

This view is consistent with authorities which establish that the mere recording of an instrument on what is purported to be the dominant tenement is not of itself conclusive of the existence of an easement. These authorities establish that it is necessary to examine what is recorded in the memorial on the title, as well as any instrument referred to in the memorial which forms part of the Register, in order to determine the true nature of the estate or interest protected by provisions, which in this State have the effect of s 39 and 40.

105 Sections 41 and 42 will have the effect that the notation of the restrictive covenant on the title to land on the Register is conclusive evidence of the existence of the covenant as an encumbrance on the title. However, its effect - and whether it is enforceable as against third parties including successors in title to the original covenantor - depends on the true nature of the restrictive covenant, including whether it touches and concerns the land, as disclosed by the underlying instrument.[159]

106 If the enforceability of a restrictive covenant remains to be established, notwithstanding its notification on title on the Register, there is nothing in my view that would alter the usual burden of proof with respect to enforcement of a restrictive covenant. The party seeking to enforce that covenant against a successor in title to the original covenantor has the burden of proving that the necessary conditions are met, including that the restrictive covenant touches and concerns the land.

The submissions on whether the Restrictive Covenant touches and concerns Lot P

107 Merrifield submitted (consistent with its submission that FAL bore the onus of proof on this issue) that the Court will start with a presumption that the retained land will be touched or concerned by the covenant, relying on observations of Wilberforce J, as his Lordship then was, in Marten:[160]

If an owner of land, on selling part of it, thinks fit to impose a restriction on user, and the restriction was imposed for the purpose of benefiting the land retained, the court would normally assume that it is capable of doing so.

108 Merrifield submitted that FAL had failed to establish that the Restrictive Covenant touched and concerned the land 'due to the overwhelming evidence that the covenant protected the development opportunities on Lot P and so the future value of that land'.[161] In its analysis of the evidence it did not clearly identify the evidence said to be relevant (and admissible) on this issue (as distinct from being relevant to the modification application).[162] However, Merrifield did appear to rely, in submissions on the question of whether the Covenant benefits or touches and concerns the land (as well as in resisting the modification application), on the plans and proposals of Merrifield which were discussed by the board of MAB at a meeting in June 2016 and tendered through Mr Perry.[163] Those minutes record the Board of MAB discussing a 'hold strategy' in relation to land in the Merrifield Business Park, which was said to be relevant to the intention of Merrifield to hold Lot P. That in turn was said to show the benefit that Lot P would enjoy arising from the Restrictive Covenant.[164]

109 Applying the P & A Swift criteria, Merrifield submitted that the Covenant:[165]

(a) is of benefit to the covenantee for the time being only. If the plaintiffs are separated from the land, it ceases to be of benefit.

(b) is for the protection of the benefitted land.

(c) is concerned with and affects the value and the development potential of the benefited land.

(d) affects the mode of occupation of the burdened land.

(e) gives effect to the MBP development strategic and efficient development of the plaintiffs' land and ensure compliance with the various planning permits.

(f) limits sales competition within the MBP.

(g) is not expressed to be personal.

(h) is intended to run with the covenantor's land.

(i) is not expressed so as to pay a sum of money.

110 Merrifield acknowledged that the purpose of the Restrictive Covenant was relevant to the question of whether it touched and concerned the land, and submitted that the Covenant had more than one purpose. It was contended that the purpose of the Restrictive Covenant was twofold. The first was to 'improve its value and its saleability and its leaseability', through limiting the potential competition for sale or lease of parts of Lot 301, and second to 'comply with the planning scheme' and development strategy for the Merrifield Business Park.[166]

111 More specifically, it was said that the purpose evidenced by paragraphs (ii) and (iii) of the Restrictive Covenant, which prohibits use of the land for retail food sales and various specific purposes, was 'to exclude things that the subdividers believed would be inconsistent with the industrial subdivision'.[167] As to the purpose of paragraph (i) of the Restrictive Covenant, containing the Occupancy Restriction, Merrifield submitted that it was to 'prevent the subdivision or multiple occupancies of Lot 301 to the benefit of Lot P, Lot P being the retained land of the subdivider'.[168] It was said that although this was close to simply repeating the language of the Covenant, it was nevertheless an appropriate identification of the purpose.[169] It was also submitted that although the language of the Restrictive Covenant does not refer to protection of Lot P against competition in development, it was plain from the language of the Covenant that it is 'intended for the purpose of not allowing competition in respect of future development from Lot 301'.[170] It was also said that this purpose is reinforced by the fact that the parent titles of both Lot P and Lot 301 were originally both held by Merrifield, which was the subdivider, from which it could be inferred that it is in the business of land development.[171]

112 In summary, on the question of whether the Covenant touches and concerns Lot P, Merrifield submitted that:[172]

A covenant that protects the development options of the owner from competition from the adjoining burdened lot is one that is plainly directed to protecting the options of the owner and ultimately the value of the land.

113 FAL contended that the Occupancy Restriction did not touch and concern Lot P, because:

(a) it does not enhance the enjoyment of Lot P;

(b) it does not increase the value of Lot P; and

(c) there is no benefit accruing to the benefitted land itself, as distinct from accruing to Merrifield as developer of the Merrifield Business Park.[173]

114 FAL submitted that the purpose of the Restrictive Covenant is to be determined objectively, by reference to the terms of the Covenant and any registered instruments referred to in the title.[174] Having regard to the Covenant read as a whole, as is required, the objectively determined purpose is an 'incipient planning or amenity purpose, to promote large industrial - or at least non-food related retail - use which was not offensive in an amenity sense.'[175] It was submitted that there is nothing in the text of the Covenant or the incorporated documents available on the Register that support a construction of the Covenant as protecting the commercial interests of the owner of Lot P by preventing competing supply of occupancies on Lot 301.[176]

Consideration - does the Occupancy Restriction in the Restrictive Covenant touch and concern Lot P?

Focus is on the Occupancy Restriction component of the Restrictive Covenant

115 The application of the requirement that a restrictive covenant touch and concern the land to a covenant with multiple elements having potentially different purposes and effects was not specifically addressed by the parties. The relevant authorities do not appear to address such a situation. In a covenant like the Restrictive Covenant, with individual requirements in each paragraph, it is possible that if one component which is expressed in such a way as to have an independent operation does not touch and concern the land, it would not affect the enforceability of other elements of the Covenant. Restrictive covenants are, broadly, to be interpreted according to general principles of construction of contracts.[177] It would be consistent with principles of severance of invalid components of contracts to take the approach that if a discrete component of a restrictive covenant was unenforceable on the basis that it does not touch and concern the land, but other parts of the covenant did satisfy that requirement, those parts would remain enforceable against successors in title.[178] There being no issue taken with any part of the Restrictive Covenant other than the Occupancy Restriction, it is appropriate to focus on whether that element of the Covenant touches and concerns the land of Lot P.

The terms and purpose of the Restrictive Covenant

116 The issue for determination is whether the Restrictive Covenant benefits Lot P, and whether it touches and concerns that land. The construction of the Restrictive Covenant, including its purpose, is relevant to that question. By reason of the authorities addressed above,[179] that construction is to be determined by reference to the terms of the Restrictive Covenant, in the context of the registered title and any other documents incorporated by reference in the title which are available on the Register.

117 In this case, those documents are the title search of Lot 301,[180] and the following documents which are referred to in that title search:[181]

(a) Memorandum of common provision, AA6062, in which the terms of the Restrictive Covenant are stated;[182]

(b) The title to Lot P, referred to in the terms of the Restrictive Covenant;[183]

(c) Plan of Subdivision 810904M;[184]

(d) Transfer of Lot 301 between Merrifield and Kaufland, numbered AT115636A and registered on 30 March 2020;[185]

(e) The parent titles to Lot 301;[186] and

(f) Agreements under s 173 of the Planning and Environment Act 1987 (Vic) between Merrifield and responsible authorities including Hume City Council and the Roads Corporation.[187]

118 Merrifield contended that evidence of subjective intentions[188] were relevant to determining the benefit provided by the Restrictive Covenant, and FAL did not resist that proposition.[189] For the reasons discussed above, I do not accept that it is open to consider evidence of the subjective considerations of the parties (less still one party) to a contract imposing a restrictive covenant in determining whether that covenant touches and concerns the benefitted land. I have not, therefore, in considering the question of whether the Restrictive Covenant touches and concerns Lot P, had regard to the June 2016 minutes of the MAB Board in which a 'hold strategy' for parts of the Merrifield Business Park was discussed. That evidence is relevant to and admissible on questions of benefit in the context of the modification application and is considered below in that context.

119 Accordingly, I first consider the terms of the Restrictive Covenant. The Covenant has multiple components, the first of which, in paragraph (i), contains the Occupancy Restriction as well as the restriction on subdivision:

The owner of Lot 301 on PS810904M (Burdened Land) hereby for himself, herself or themselves, his her or their heirs, executors administrators, and transferees, the registered proprietor or proprietors (hereafter "covenantor") covenants with and for the benefit of the registered proprietors of all or any part of the land in Lot P on PS810904M (Benefitted Land) that the covenantor will not and will not suffer, cause or permit:

(i) the subdivision of the Burdened Land or the creation thereon of two or more separate occupancies without first obtaining the written consent of the registered proprietor or proprietors of the Benefitted Land; ...

120 Of itself this clause indicates an objective of preserving the site encompassed by Lot 301 for use as a single site for one occupier or user. Looking at the plan of subdivision PS810904M, which is referred to and available on the Register, it can be seen that Lot P is adjacent to Lot 301.[190] That plan of subdivision is reproduced here:

121 It can also be seen from the plan of subdivision that there are multiple large sites and that the subdivided land is referred to as 'Merrifield Business Park - 3'.

122 The remainder of the Restrictive Covenant then, in paragraph (ii), prevents use for retail sale of food and beverages, and in paragraph (iii) prevents a range of uses. Some of these uses are heavy industrial type uses (concrete batching plant, concrete panel plant, recycling plant, vehicle wreckers, mining), some are uses which would affect the land visually (junk yard, panel beaters) and other uses might broadly be regarded as inconsistent with a business park intended to be occupied by significant commercial enterprises (brothel, places of worship or assembly, circus, carnival, agriculture, crop raising, animal husbandry).

123 The limitation on subdivision and multiple occupancies, which has the effect of requiring Lot 301 to remain one large site in unsubdivided form used by one major occupier, together with the various restrictions on use, can be regarded, from the perspective of Lot P as the benefitted land, as being directed to visual amenity, and to ensuring that Lot 301 is restricted to uses consistent with a large business park.

124 The only documents on the Register which were said by Merrifield to evidence an objective of limiting competition in sales or leasing of land were the parent titles which are identified on the title. Reference to the parent titles referred to on the title to each property, which show that both Lot P and Lot 301 had the same parent titles and were originally owned by the same owner, does not in my view go further to establish that the original owner and proprietor of Lot P was in the business of land development. Merrifield did not refer to the Agreements under s 173 of the Planning and Environment Act 1987 which were referred to on the title of Lot 301. These agreements with responsible authorities address matters such as Merrifield's contributions to arterial roads servicing the land, road development, and local and community infrastructure. I accept that these agreements which are referred to in the title and available on the Register do provide an objective indication that Merrifield was acting as developer at the time of subdividing and selling Lot 301.[191]

125 A relevant contextual matter to which it is permissible to have regard is, therefore, that Merrifield was acting as developer of the Merrifield Business Park at the time of the sale to Kaufland. This nevertheless does not establish that the Restrictive Covenant was intended to benefit the land in Lot P by restricting potential competition from Lot 301 in the business of land sales and leasing.

126 Contrary to Merrifield's position, an objective of preventing competition in the business of land development and leasing was not plain from the terms of the Occupancy Restriction and prohibition of subdivision.[192] No aspect of the language of the Restrictive Covenant indicated such a purpose. Taking into account the language of paragraph (i) of the Covenant in its context, the underlying objective which is more evident from the language of the Restrictive Covenant as a whole is that it promotes configuration, development and use of the site consistent with a planned business park involving commercial or light industrial uses. Put another way, the Restrictive Covenant prevents uses or development incompatible with the configuration, use and development of the site for purposes consistent with a business park.

127 That remains my conclusion accepting that Merrifield's status as developer at the time of imposition of the Restrictive Covenant is a contextual fact which can be understood from documents on the Register, and could be taken into account in understanding the effect of the Restrictive Covenant, and the possibility that a single restrictive covenant has more than one purpose.

128 Further, even if there was some objective or effect of limiting competition, the question still remains whether the limitation on competition is for the benefit of the Lot P land; or simply for the benefit of Merrifield as its proprietor, which was in the business of land development. Merrifield's primary contention as to how the Restrictive Covenant increased the value of the land, thereby benefitting the land in the relevant sense, was by reason that it (emphasis added):

protects the development options of the owner from competition from the adjoining burdened lot [and so] is one that is plainly directed to protecting the options of the owner and ultimately the value of the land.[193]

129 Similarly, in defence to FAL's Further Amended Counterclaim, Merrifield pleads that the purpose of the restriction in the Restrictive Covenant is to 'facilitate the development of [the] MBP and protect Merrifield from competition in relation to the ongoing development of the land'.[194]

130 In my view, this submission and pleading confirms that if the Occupancy Restriction had any purpose (whether subjective or, contrary to my view, objective) of limiting competition in land sales and leasing, it was intended to benefit the proprietor of Lot P. That is, it is for the benefit of Merrifield as the developer of the Merrifield Business Park in which Lot P is located. It may theoretically present some benefit to Merrifield specifically as the owner of Lot P, in that it may reduce some possibility of Lot 301 providing alternative premises to Lot P which may be leased to prospective tenants in the Merrifield Business Park.[195] However, that would be a benefit to Merrifield in its capacity as a developer of the Merrifield Business Park and owner of Lot P rather than a benefit attaching to the land itself. It is a different thing to say that any owner of Lot P would benefit in the same way, so that the land itself can be regarded as having an enhanced value per se. That enhanced value would only arise if any future entity owning Lot P is also a developer with the same objective as Merrifield of not subdividing and selling the lot but retaining and leasing it.

131 The final consideration admissible on determination of the purpose of the Restrictive Covenant is the physical aspect of Lot 301 and Lot P on visual inspection. As indicated by the plan of subdivision, the view of the land shows an expansive business park, where both Lot P and Lot 301 are large sites, with other sites of significant size in the vicinity of Lot 301. This is consistent with the consideration that various sites in the Merrifield Business Park, in which Lot 301 and Lot P are situated, are intended to remain as large sites laid out in an ordered and consistent way, and are not intended to be used by multiple small occupants for different uses.

132 In summary, I consider that the Restrictive Covenant properly understood has the objective of restricting uses, configuration or development of Lot 301 that is incompatible with a business park. The Occupancy Restriction specifically, in preventing more than one occupancy on Lot 301, restricts uses incompatible with that purpose by ensuring that the lot will be occupied by a significant tenant capable of using the land and likely to be a significant commercial enterprise.

133 On a related note, the observations of Wilberforce J in Marten on which Merrifield relied, to the effect that it may be assumed that if an owner of land imposes a restriction on user with respect to land, the Court would normally assume that it is capable of doing so, do not assist Merrifield in its submissions as to whether the Restrictive Covenant touches and concerns the land. His Honour specifically qualified the observation with the requirement that 'the restriction was imposed for the purpose of benefiting the land retained'.[196] As the anti-competitive purpose does not benefit the land retained, but is in my view for the benefit of Merrifield as proprietor and developer, any presumption that can be drawn from Wilberforce J's observations do not assist Merrifield in this case.

Conclusion - the Occupancy Restriction does touch and concern the land in its effects on amenity, not by reason of limiting competition

134 Although I do not accept that the terms of the Occupancy Restriction evidence an intention to protect Lot P from competing land leasing or development from Lot 301, I do accept that the Occupancy Restriction does confer some benefit on Lot P.

135 The benefit broadly conferred by the Restrictive Covenant is in restraining uses of Lot 301, the neighbouring land to Lot P, that would not be consistent with use as a site for a major occupier in a business park. That is, the Restrictive Covenant demonstrates an intention that Lot 301 be used for commercial or light industrial use, and (having regard to the subdivision prohibition and Occupancy Restriction) have a single major occupier of Lot 301. That specific restriction is consistent with an intention to protect Lot P's amenity, in that one occupant of the large site would provide a major anchor occupant of the park, and one which may maintain Lot 301 in a way that is more visually harmonious than multiple different occupants.

136 The situation of Lot P and Lot 301 as observed on the Court's view of the sites confirms this conclusion. Both sites are very large, in the context of the Merrifield Business Park setting which has, in the immediate vicinity of Lot 301 and Lot P, a series of large sites of fairly consistent appearance. Smaller sites, which are still significant in size, are situated consistently along the southern side of Titan Drive. Unlimited subdivision of Lot 301 or unlimited occupancies involving different businesses on Lot 301, would not be visually consistent with the established layout of this part of the Merrifield Business Park. Lot P benefits from that possibility being precluded by the Occupancy Restriction and the remainder of the Restrictive Covenant.

137 For completeness on this issue, it is appropriate to address the specific contentions of Merrifield based on the criteria in P & A Swift as to why the Restrictive Covenant touches and concerns the land. They do not lead to any different conclusion as to the basis on which the Restrictive Covenant is properly understood to touch and concern the land, being an amenity based benefit rather than one of preventing competition.[197]

(a) First it was said to be 'of benefit to the covenantee for the time being only. If the plaintiffs are separated from the land, it ceases to be of benefit'. If the benefit is, as contended by Merrifield, a benefit of limiting competition in sales and leasing of Lot P, I do not accept that this is necessarily the case. Merrifield being the developers of the Merrifield Business Park, it retains ownership of other land in the vicinity of Lot 301 and could at least in theory, in that personal capacity, benefit from restricting Lot 301 being offered for sale in subdivided parcels, or leased to multiple occupants. However, if the benefit is more in the nature of amenity to Lot P in reinforcing compliance of Lot 301 with the development strategy and the planning scheme, it can be accepted that this particular benefit accrues to the owner or occupier of Lot P for the time being.

(b) The Restrictive Covenant was said to be 'for the protection of the benefitted land'. As the question of whether the Covenant does benefit Lot P is a central issue in determining whether it touches and concerns the land, this does not assist in ascertaining the answer. It merely restates the question in conclusionary form.

(c) It is submitted that the Restrictive Covenant is 'concerned with and affects the value and the development potential of the benefited land'. This contention can be accepted in a general way, in that the amenity related benefit I have identified may have a beneficial effect on the value of Lot P and its future development. I have not accepted that the Restrictive Covenant is concerned with preventing competition in land sales and leasing from Lot 301.

(d) The Restrictive Covenant was said to '[affect] the mode of occupation of the burdened land'. This can be accepted, given that the Covenant prevents more than two occupiers and prevents subdivision on Lot 301, the burdened land. However it is the 'mode of occupation' of the benefitted land (Lot P) which is the relevant consideration for these purposes.[198] The Restrictive Covenant does not affect the mode of occupation per se, but may be accepted to affect the quality of occupation to the extent that it protects amenity.

(e) It is submitted that the Restrictive Covenant 'gives effect to the MBP development strategic and efficient development of the plaintiffs' land and ensures compliance with the various planning permits'. In understanding the effect of the Restrictive Covenant, the available aids to construction, being the terms of the Covenant, the title, and any incorporated documents available on the Register, do not include extraneous matters such as what Merrifield's development strategy was, nor the terms of planning permits. It is not, therefore, possible to accept this submission as put. However I do accept that the Restrictive Covenant gives effect to a limitation on uses of Lot 301 which would be incompatible with the surrounding business park. It is evident from the plan of subdivision referred to on the title that business park is the character of the precinct in which Lot 301 and Lot P are located.

(f) The Restrictive Covenant is also said to 'limit sales competition within the MBP'. For the reasons above, the Restrictive Covenant properly understood does not evidence a purpose or necessary effect of limiting competition with respect to sales of land in the Merrifield Business Park. Although expert evidence from Nicholas Moore was adduced by Merrifield on the issue of the benefit to the land of the Restrictive Covenant, it is not in my view admissible on the issue of whether the Covenant touches and concerns the land for reasons addressed above. In any event, as discussed below, the expert opinion is based on Mr Moore's own views as to why the Restrictive Covenant was imposed on Lot 301 and the purpose of that Covenant.[199] His views are then expressed as to how the Covenant with that purpose impacts on value for Merrifield.[200] It is clear, again for reasons discussed above, that extrinsic evidence such as an expert's opinion (based in turn on other materials external to the Restrictive Covenant such as MAB planning documents, or examples from other developments[201]) is not admissible to determine the purpose of a restrictive covenant on Torrens system land.[202] As the opinion as to purpose is not admissible, Mr Moore's evidence as to the value of the Covenant, based in significant part on that opinion, is of limited, if any, assistance.[203] The evidence is also to the effect that removal of the Restrictive Covenant will result in loss of value to Merrifield in its capacity as developer of the Merrifield Business Park, rather than a loss in value of Lot P.[204] Thus even if the expert evidence could be accepted on the issue of whether the Restrictive Covenant touches and concerns Lot P, it tends against the conclusion urged by Merrifield, as it posits a benefit and value to the proprietor of Lot P, rather than attaching to the land itself.

138 The amenity related benefit, which I have accepted does arise from the Restrictive Covenant, can be regarded as concerning the mode of occupation of Lot P in that it enhances the amenity of that site as a lot in a business park by ensuring the adjoining land also remains consistent with that usage. It could also be expected to create some increase in the value of Lot P. Having regard to the authority in Rogers v Hosegood,[205] the benefit is therefore one which establishes that the Restrictive Covenant relevantly touches and concerns Lot P and enables the Restrictive Covenant to be enforced against successors in title.

Does the Occupancy Restriction imposed by the Restrictive Covenant contravene s 45 of the Competition and Consumer Act?

FAL's argument based on s 45 and Merrifield's position

139 Merrifield's case, as pleaded in its Reply to FAL's Amended Defence, was relevantly that the Restrictive Covenant 'gives effect to the MBP development strategy and allows for the strategic and efficient development of Merrifield's land' and 'limits sales competition within [the] MBP'.[206] Merrifield also pleaded in its Defence to the Further Amended Counterclaim that the purpose of the Restrictive Covenant is to 'facilitate the development of [the] MBP and protect Merrifield from competition in relation to the ongoing development of the land'.[207]

140 FAL pleaded by its Amended Rejoinder and its Reply to the Defence to the Further Amended Counterclaim that if the Restrictive Covenant does limit sales competition within the Merrifield Business Park as alleged by Merrifield (which was denied), and the purpose of the Restrictive Covenant was as pleaded by Merrifield, the Covenant was a contract, arrangement or understanding within the meaning of s 45 of the Competition and Consumer Act. It was pleaded that it had the purpose, or would have or be likely to have the effect, of substantially lessening competition in a market; and was therefore in contravention of s 45(a) and/or (b) of the Competition and Consumer Act and unenforceable, further or alternatively void.[208] As to the nature of the market in which competition was affected, FAL pleaded that:

The relevant market is the market for buying, selling, developing, occupying, leasing and licensing the use of land in the MBP. [209]

141 FAL tendered evidence of an expert economist, to the effect that assuming that the Occupancy Restriction has the effect of substantially increasing the value of Lot P by limiting sales competition, then the Occupancy Restriction must necessarily and substantially lessen competition.[210]

142 Merrifield pleads that the Restrictive Covenant is not a contract, arrangement or understanding within the meaning of s 45, and that the types of market and competition to which s 45 applies, by reason of the provisions of s 45 and relevant definitions, does not extend to a market in land but is limited to competition in markets for goods and services.

Section 45 of the Competition and Consumer Act and related provisions

143 Part 4 of the Competition and Consumer Act governs restrictive trade practices. Section 45 relevantly provides:

1. Contracts, arrangements or understandings that restrict dealings or affect competition

(1) A corporation must not:

(a) make a contract or arrangement, or arrive at an understanding, if a provision of the proposed contract, arrangement or understanding has the purpose, or would have or be likely to have the effect, of substantially lessening competition; or

(b) give effect to a provision of a contract, arrangement or understanding, if that provision has the purpose, or has or is likely to have the effect, of substantially lessening competition; or

(c) engage with one or more persons in a concerted practice that has the purpose, or has or is likely to have the effect, of substantially lessening competition.

(3) For the purposes of this section, competition means:

(a) in relation to a provision of a contract, arrangement or understanding or of a proposed contract, arrangement or understanding - competition in any market in which:

(i) a corporation that is a party to the contract, arrangement or understanding, or would be a party to the proposed contract, arrangement or understanding; or

(ii) any body corporate related to such a corporation;

supplies or acquires, or is likely to supply or acquire, goods or services or would, but for the provision, supply or acquire, or be likely to supply or acquire, goods or services; or

...

144 Section 4 of the Consumer and Competition Act provides certain definitions as follows:

(a) competition from goods that are, or are capable of being, imported into Australia; and

(b) competition from services that are rendered, or are capable of being rendered, in Australia by persons not resident or not carrying on business in Australia.

contract includes a covenant.

...

covenant means a covenant (including a promise not under seal) annexed to or running with an estate or interest in land (whether at law or in equity and whether or not for the benefit of other land).

...

goods includes:

(a) ships, aircraft and other vehicles;

(b) animals, including fish;

(c) minerals, trees and crops, whether on, under or attached to land or not; and

(d) gas and electricity.

The parties' submissions on s 45 of the Competition and Consumer Act

145 FAL acknowledges that pursuant to the High Court's determination in Quadramain,[211] the common law doctrine of restraint of trade does not apply to restrictive covenants on land. It therefore relies exclusively on the statutory prohibition in s 45.[212]

146 FAL refers to the definition of 'contract' in the Competition and Consumer Act, which includes a 'covenant'. 'Covenant' is in turn defined as a covenant 'annexed to or running with an estate or interest in land (whether at law or in equity and whether or not for the benefit of other land)'. FAL says that the Restrictive Covenant therefore falls within the scope of a 'contract, arrangement or understanding' for the purposes of s 45(1). It also submits that the definition of competition for the purposes of s 45(1) in s 45(3)(a), even if limiting the scope of application of s 45(1), includes competition in the sale of 'goods', a term with a 'broad and non-exhaustive' definition. It is submitted that 'there is no basis for reading down the term "goods" to exclude land'.[213]

147 Merrifield submits that the limitation of the competition in a market to which s 45(1) applies, by the terms of s 45(3) means that s 45(1) applies only to competition in a market for the supply of goods or services. That does not extend to the market for land.[214]

148 FAL responds that the limitation of the market in s 45(3) does not mean that s 45 is inapplicable, as 's 45(1) is the operative provision' and 'does not refer to goods or services at all'. FAL submits that a 'contract' is specifically defined to extend to covenants in a way which makes clear that the contract may be in respect of land. That definition of 'contract' was inserted into the Competition and Consumer Act in 2017 by the Competition and Consumer Amendment (Competition Policy Review) Act 2017 (Cth), which also removed the former s 45B of the Competition and Consumer Act relating to covenants in real estate transactions, on the basis that these would be covered by s 45 and other provisions.[215] FAL relied in particular on the observation in the explanatory memorandum to the Competition and Consumer Amendment (Competition Policy Review) Bill 2017 that:

In a legal sense, there are technical differences between contracts and covenants. However, the Harper Review found that these technical differences have little to no impact on the agreement's effect on competition. [216]

149 FAL also observed that s 45B had originally been introduced into the Trade Practices Act 1974 (Cth) in response to the High Court's decision in Quadramain, as was explained in the explanatory memorandum to the Trade Practices Amendment Bill 1977 as follows:

Covenants affecting competition: The High Court has recently made it clear (in the case of Quadramain v Sevastapol) that the existing section 45 does not cover all anti-competitive covenants running with an interest in land. New section 45B now makes specific provision for restrictive covenants which have the purpose or effect of substantially lessening competition.[217]

150 In response to this argument, Merrifield submits that the fact that s 45 will apply to contracts that include covenants annexed to or running with land does not mean that the competition in the relevant market for the purposes of s 45 also extends to competition in the market in land. Merrifield argues that the effect of the legislation is that it applies to a restrictive covenant on land, the purpose or effect of which is to substantially lessen competition in a market for goods or services.[218]

151 I have concluded that s 45(1) of the Competition and Consumer Act does not apply to contracts, arrangements or understandings to lessen competition in a market in land. This follows from the terms of s 45, including the way in which 'competition' is defined for the purposes of that section.

152 Section 45(1) only applies to contracts, arrangements and understandings a provision of which has the purpose, or would like to have the effect of 'substantially lessening competition'. Section 45(3) defines 'competition' 'for the purposes of this section', meaning section 45 as a whole. The definition of 'competition' in s 45(3)(a) is then an exhaustive definition, commencing 'For the purposes of this section, competition means...'. Competition as then defined is plainly restricted to competition in which participants supply or acquire 'goods or services'.[219] The definition of 'competition' in s 4 of the Competition and Consumer Act, which is an inclusive definition, is not applicable. It is noteworthy however that it also refers specifically to goods and services and does not refer to competition in land sales.

153 'Land' plainly does not fall within the scope of 'services'. FAL contended only that 'goods' should be construed to encompass 'land', given it was an inclusive definition of broad scope, which includes a range of things including 'minerals, trees and crops, whether on, under or attached to land or not'.

154 I do not accept that land falls within the definition of 'goods' in the Competition and Consumer Act. It clearly does not fall within any of the categories listed in the definition. The inclusion as an element of the definition of 'minerals, trees and crops, whether on, under or attached to land or not' serves only to contrast the concept of land with the identified things under or attached to it. The non-exhaustive nature of the definition of goods also does not assist, as the ordinary meaning of 'goods' does not encompass land. That observation appears in some respect so obvious as to go without saying. The Macquarie Dictionary definition of 'goods', for example, includes the following relevant definitions:

1. possessions, especially movable effects or personal belongings.

1. articles of trade; wares; merchandise, especially that which is transported by land.

...

5. goods and chattels,

a. all movable properties. [220]

155 The ordinary understanding of goods as encompassing moveable properties and merchandise may be why the parties did not identify any authority directly on the question of whether 'goods' could include land. My researches also did not reveal any authority directly addressing whether a reference to goods could include land.

156 However there is authority which is indirectly on point. In Mutual Pools & Staff Pty Ltd v Federal Commissioner of Taxation (Cth)[221] the High Court considered a provision of the Sales Tax Assessment Act (No 1) 1930 (Cth) which deemed swimming pools constructed in situ to be manufactured goods. Justices Dawson, Toohey and Gaudron, with whose reasons Chief Justice Mason and Justices Brennan and McHugh agreed, rejected the idea that swimming pools in situ and attached to land could be goods. Their Honours observed (emphasis added):

'Goods' is not a word or precise meaning but, in the context of excise duties, it signifies articles of commerce or things which, even if not saleable, or without or without any discernible sale value, may be the subject of trading or commercial transaction. Under s 3(1) of the Sales Tax Assessment Act (No 1) 'goods' includes commodities.

Quite clearly, while the materials which are used in the construction of a swimming pool constructed in situ may be goods, the finished product is not. On the contrary, a swimming pool constructed in situ forms part of the land and is denied the character of goods. Indeed, the Commissioner of Taxation concedes that a swimming pool constructed in situ is a fixture although 'fixture' is, perhaps, not an appropriate term because an inground swimming pool constructed in situ never has any separate existence as a chattel apart from the land. That is why the legislature found it necessary to deem a swimming pool constructed in situ to be manufactured goods. In doing so it recognised that it was not that.[222]

157 The Court's view that a swimming pool in situ forms part of the land and so is denied the character of goods suggests a broader implicit view that land does not have the character of goods.

158 As to the other arguments relied on by FAL, it is no answer to say that s 45(1) is the operative provision and does not refer to goods or services. Section 45(1) must be read in its full context, using terms which are defined expressly for the purposes of that section.

159 The express inclusion in the definition of 'contract' of a 'covenant', and the definition of covenant to mean one 'annexed to or running with an estate or interest in land' also does not compel a conclusion that to achieve a harmonious construction, s 45(1) must be construed to apply to all covenants running with land, including one with the purpose or effect of substantially lessening competition in the market in land. Section 45(1) may have an operation with respect to covenants in land even if it cannot apply to contracts, agreements or arrangements limiting competition in a market for the sale of land. It could operate on covenants running with land which have the purpose or effect of substantially lessening competition in a market for goods or services. Examples are the covenant restricting sales of wine under a particular name, the subject of McGuigan, or restricting the use of land as a service station selling fuel, the subject of consideration in Sumervale.

160 FAL's reliance on the legislative history, explanatory memoranda and the Harper Review does not alter that conclusion.[223] It is clear that changes to the Trade Practice Act following Quadramain were intended to extend the anti-competitive measures of the Trade Practices Act to covenants attaching to land. It is an entirely different matter to contend that the provisions were amended to extend to covenants attaching to land as they relate to competition in the market for land, rather than markets for goods and services. Quadramain related to a restrictive covenant running with the land which provided that the burdened land not be subject to a liquor licence, so involved a restraint on the use of the land to sell liquor. It was, therefore, a covenant that was directed to restraining competition in the market for sales of goods. It was not a covenant directed to restraining competition in sales or leasing of land. The objective identified in the explanatory memorandum of addressing the decision in Quadramain does not, therefore, provide any indication that the changes were intended to permit the Act to address competition in the land sales and leasing market.

161 Taking into account the context and legislative history of s 45, there is nothing to contradict the ordinary meaning of the terms of s 45 including s 45(3), which have the effect that the application of s 45 is limited to competition in markets for the sale and acquisition of goods or services.

162 In view of my conclusion that s 45(1) does not apply to competition in a market for the sale of land, FAL's reliance on s 45 cannot succeed. It is unnecessary to consider Merrifield's further argument in opposition that FAL had defined the market too narrowly in defining it as the market in land in the Merrifield Business Park.[224] Nor is it necessary to consider the expert evidence of Dr Wainscoat.

Is the requirement for 'consent' in the Restrictive Covenant to be construed as 'consent not to be unreasonably withheld'?

163 By its Amended Defence to the Amended Statement of Claim, FAL pleads that the reference to 'consent' in paragraph (i) of the Restrictive Covenant, properly construed, means consent which is not to be unreasonably withheld.[225]

164 The Restrictive Covenant was a term of the contract of sale for Lot 301 between Merrifield and Kaufland.[226] It is a commercial contract, to which the general principles applicable to construction of commercial contracts apply, subject to the limitations already discussed of the nature of the evidence which can be taken into account in the construction of the Covenant.

The parties' submissions on the interpretation of the consent requirement

165 FAL submitted that the reference to 'consent' in paragraph (i) of the Covenant should be construed as a reference to 'consent not to be unreasonably withheld'. It did not elaborate on that submission as to construction and placed more emphasis on its argument that a term to that effect should be implied into the contract of sale of which the Restrictive Covenant was a term.[227]

166 The Merrifield parties contended that the plain English meaning of the words in the Restrictive Covenant weighs heavily against this argument, as there is no basis on which paragraph (i) of the Covenant should be construed other than by its plain and ordinary meaning. It was said that the 'natural and ordinary meaning of the words in the covenant would be understood by a reasonable business person as entitling Merrifield to refuse consent to any request made by the owner of the Burdened land'.[228] FAL also had not complied with the term that it contended should be implied, as it had not sought the consent before leasing the Freezer, and the term that it sought to be implied was that the consent referred to in the Covenant 'must not be unreasonably withheld'. The term, properly construed, did not provide for retrospective consent.

Conclusion - the reference to 'consent' in the clause is to be construed without the qualification proposed by FAL

167 It is useful to repeat paragraph (i) to the Restrictive Covenant, which is in the following terms:

the transferee will not and will not suffer, cause or permit:

(i) the subdivision of the Burdened Land or the creation thereon of two or more separate occupancies without first obtaining the written consent of the registered proprietor or proprietors of the Benefitted Land;

168 There was no real basis put forward by FAL as to why the requirement for 'written consent' in that paragraph must as a matter of construction be read as a requirement for 'written consent not unreasonably to be withheld'. There is no element of that paragraph, even when read in context, to support reading the terms of paragraph (i) in that way. The submissions of FAL in effect acknowledge this point in emphasising why a term must be implied into the contract to this effect; such an implication is necessary only if the clause, properly construed, does not already involve that requirement.

169 I accept the contention of Merrifield that the natural and ordinary meaning of the words 'written consent' in the Covenant are not qualified, as a matter of construction, by that written consent being not unreasonably withheld.

Is there an implied term requiring that consent not be unreasonably withheld?

170 FAL submitted that a term should be implied into the Kaufland Contract that the 'consent' referred to in paragraph (i) of the Restrictive Covenant was not to be unreasonably withheld. The term was said to be implied by business efficacy, having regard to the language of paragraph (i) construed in the context of the Covenant and relevant surrounding circumstances. The circumstances were said to satisfy the requirements for implication of such a term, having regard to the decision in BP Refinery (Westernport) Pty Ltd v President, Councillors and Ratepayers of the Shire of Hastings.[229] In that case, a majority of the Privy Council held that the conditions for the implication of a term into a contract are as follows:

(1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that 'it goes without saying'; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.[230]

171 It was submitted that implication of the term would be reasonable and equitable, is necessary to give business efficacy to the Restrictive Covenant, is so obvious that it goes without saying, and is clear and does not contradict any express term of the Covenant.[231]

172 FAL also relied on the English cases, 89 Holland Park (Management) Ltd v Hicks[232] and Rickman v Brudenell-Bruce,[233] where it was accepted that where a restrictive covenant included a consent requirement, a term may be implied that the consent not be unreasonably withheld.

173 In 89 Holland Park the Court considered a restrictive covenant which prohibited the making of applications for planning permissions for buildings on the land, unless the owner of land benefitted by the covenant consented to those plans.[234] It was contended that this requirement was subject to an 'implied proviso' that the consent would not be unreasonably withheld. It was held that the question of whether there was such an implied proviso was to be 'approached by considering the terms and purposes of the provision in question, the other terms', and the 'commercial purpose' of the contractual dealing as part of which the restrictive covenant was imposed.[235] The Court concluded:

In my judgment, if the parties had been asked in 1968 whether the Adjoining Owner was to be able to withhold his consent under clauses 2(b) and 3 unreasonably, arbitrarily, or capriciously, the parties would have said "of course not". In my judgment reading the Deed as a whole, in its commercial context, and in light of its purposes, it is necessary to imply a proviso into these clauses in order to give business efficacy to the agreement; and to give effect to the reasonable expectations of the parties as set out in the agreement as a whole. [236]

174 In Rickman[237] it was contended that a covenant requiring consent to build on land from the adjoining owners (the vendors of the land burdened by the covenant) should be construed to be subject to an implied term that such consent was not unreasonably to be withheld. The Court accepted the argument that the question was to be determined by reference to the ordinary law of contracts and in particular the conditions identified in BP Refinery (Westernport). The Court accepted that a term must be implied that the consent may not be unreasonably withheld.[238]

175 Merrifield pleaded in its Reply that the relevant term cannot be implied because it was not required to give business efficacy to the Covenant; was not so obvious that it goes without saying and was 'neither reasonable nor equitable in circumstances in which FAL took a transfer of the land from Kaufland knowing it was burdened by the Covenant'.[239] Merrifield referred in written closing submissions to the conditions for implication of a term as stated in BP Refinery (Westernport),[240] although without making specific submissions as to why those principles were not satisfied in the present case. In oral closing submissions, Merrifield focussed on the submission that in this case, what FAL would need to have implied into the contract to establish that it had not breached the Restrictive Covenant would be not only a term that consent was not unreasonably to be withheld, but that it was open to seek that consent retrospectively. There was no basis on which such a term could be implied.[241]

176 Merrifield also submitted that where there is an implied term to the effect that consent may not be unreasonably withheld, consent is not unreasonably withheld in circumstances in which the relevant party was entitled to protect its legitimate commercial interests.[242] It was said that even where terms requiring a party to act in good faith are implied, that obligation does not extend to subverting their own commercial interests.[243]

A term is to be implied into paragraph (i) of the Restrictive Covenant that the consent is not to be unreasonably withheld by the registered proprietors of Lot P

177 I accept that the conditions identified in BP Refinery (Westernport) for the implication of a term - in this case an implied term that the consent to subdivision or creation of two or more occupancies not be unreasonably withheld - are satisfied.

178 The proposed implied term satisfies the last two conditions identified in BP Refinery (Westernport): it is capable of clear expression and there is no suggestion that it contradicts any express term of the contract.

179 I also consider that to require that consent not be unreasonably withheld is reasonable and equitable. Reasonableness of conduct in this context, in which a significant restriction is imposed on a buyer and owner of land, is not a demanding standard. It does not mean, contrary to the pleading in Merrifield's Reply, that in determining whether or not to give consent, the proprietor of Lot P cannot prefer its own commercial interests. If the refusal of consent is in fact rationally likely to advance its commercial interests, it is likely to be an entirely reasonable basis on which to withhold consent.

180 In the context of a contract of sale for a very significant piece of land, between significant commercial parties, to imply a term that the consent may not be unreasonably withheld - that is, not refused without some rational basis, or withheld capriciously or maliciously - is also in my view necessary to give business efficacy to the contract. If the contract provides for the potential for consent to be granted, this opportunity must be intended to be a meaningful one. For the same reason, a term of this nature is also so obvious that it goes without saying; it is the most obvious way to ensure that the opportunity to obtain consent specifically provided for in the Restrictive Covenant is not a hollow one.

181 A further consideration relevant to the conditions that a term must be reasonable, equitable and necessary to give business efficacy to the contract, is that the Restrictive Covenant was intended not only to bind Kaufland, when it entered into the contract, but all future proprietors of Lot 301. The Restrictive Covenant involved Kaufland as owner of Lot 301 covenanting that it 'will not and will not suffer, cause or permit ... the subdivision of the Burdened Land or the creation thereon of two or more separate occupancies' without first obtaining the consent of the owners of Lot P. It was obviously within the parties' contemplation that Kaufland may sell the land in the future, but at that time, unknown who the future owner would be and what use they would seek to make of Lot 301. It is unlikely in the extreme that Kaufland or a reasonable party in its position would have contemplated that it could not only be prevented from having more than one occupancy by the registered proprietor of Lot P unreasonably or capriciously withholding consent, but that future owners to whom it may seek to sell Lot 301 in a commercial transaction could also be prevented from having more than one occupancy by the registered proprietor of Lot P acting unreasonably or capriciously.

182 In Rickman, in the context of considering the requirement for consent to building on the land subject to the restrictive covenant, the Court observed:

It is to be remembered that the restriction in clause 4(c) is in theory perpetual. Suppose then that the dwellinghouse on the Property was destroyed. In that case, I have no doubt, the Defendants would expected to be consulted about any plans to rebuild. On their case, however, it would be open to them to refuse arbitrarily to permit any rebuilding. In that situation, as a consequence of clause 4(a), the owners of the Property could not use it for any purpose whatsoever. In my judgment that result cannot possibly have been within the parties' contemplation. [244]

183 Similarly, a restriction that the registered proprietor of Lot P could for any reason, including a capricious or arbitrary reason, withhold consent to more than one occupancy on Lot 301, no matter what the proposed occupancies, and regardless of the circumstances of the future proprietor and the prevailing commercial and economic conditions, would entail an extraordinary and irrational outcome. That outcome could not have been in the contemplation of Merrifield and Kaufland or reasonable parties in their position at the time of the sale of Lot 301. There is nothing to support a conclusion that a party in Kaufland's position would reasonably have anticipated that it would have such an uncommercial restriction on the sale of the property in future.

184 For these reasons, I conclude that the conditions for implication of a term that the consent in paragraph (i) of the Restrictive Covenant are satisfied, and that the consent referred to therein is a consent which must not unreasonably be withheld.

185 However, it remains important that even when that term is implied, the consent must, on the express terms of the Restrictive Covenant, be sought and obtained before two or more separate occupancies are created. Paragraph (i) of the Restrictive Covenant refers to 'the creation ... of two or more separate occupancies without first obtaining the written consent'. This is relevant to the consideration below of whether FAL breached the Occupancy Restriction in the Restrictive Covenant.

186 Having concluded that the Restrictive Covenant is enforceable, although subject to an implied term that the requirement of consent in paragraph (i) is not to be unreasonably withheld, it is necessary to consider whether FAL breached the Covenant.

187 Merrifield pleads that FAL has breached the Restrictive Covenant by creating a separate tenancy without its consent.[245] FAL admits that it created a separate lease for the Freezer on Lot 301 without the consent of Merrifield, and further and alternatively to its pleading that the Restrictive Covenant is void, pleads the following further or alternative defences:

(a) the creation of a separate lease for the Freezer does not constitute the 'creation of two or more separate occupancies' on Lot 301 within the meaning of paragraph (i) of the Covenant properly construed;[246]

(b) it was unreasonable for Merrifield to withhold its consent to the Lease of the Freezer in circumstances where the existence of a separate lease for the Freezer does not negatively impact on Merrifield's enjoyment of Lot P or its value and does not otherwise substantially injure Merrifield;[247] and

(c) the building by Kaufland of the Warehouse and the separate Freezer on the Burdened Land constituted the creation of two 'separate occupancies' on the Burdened Land for the purposes of the Restrictive Covenant, to which Merrifield consented.[248]

188 The essential facts relating to the creation of the second lease on the property are not in dispute. The parties agreed, in the Statement of Agreed facts, that FAL has leased the Warehouse to DHL since 1 April 2021, and from 13 September 2021 had leased the Freezer to Laverton Cold Storage. It was also agreed that FAL requested consent to the Freezer Lease on 3 February 2022, and subsequently on 4 February 2022, Merrifield refused consent to the Freezer Lease.[249]

189 The evidence was that FAL had not informed Merrifield that it proposed to lease the Freezer to Laverton Cold Storage. The issue was only raised between the parties when Merrifield heard that the Freezer was being separately leased, and Mr Martin of Merrifield asked Marty Bourke, an asset development manager at FAL, whether that was true.[250] No evidence was given on behalf of FAL to the contrary.

190 The circumstances in which the consent was sought are also relied on by Merrifield as a matter relevant to the exercise of the Court's discretion as to whether to modify the Restrictive Covenant, and it is also convenient to recount that evidence here.

191 Mr Martin gave evidence that on 19 October 2021, when he asked Mr Bourke of FAL whether the Freezer was being leased, Mr Bourke stated that FAL was not leasing the Freezer.[251]

192 Mr Perry, General Counsel for MAB which acted as advisor to Merrifield, gave evidence that:

On 25 November 2021, I attended a meeting with Michael Martin of MAB and Ben Fife of FAL. Mr Martin told Mr Fife that he had heard that FAL had leased the freezer. Mr Fife told us that FAL had leased the freezer to Laverton Cold Storage but only as a short term lease. Mr Martin asked Mr Fife to provide details of the lease but he said he would not provide them. Mr Martin asked Mr Fife what his intentions were for the site. At some point during the discussion, Mr Fife said that FAL had no intention of competing with MAB and just wanted to lease the site to a single tenant (even though FAL was not doing that). Towards the end of the meeting I said words to the effect that FAL was in breach of the covenant and would be writing to him about this. [252]

I told Mr Fife that despite Mr Bourke having told me that FAL had not leased the freezer, I had heard that FAL had leased the freezer. Mr Fife told us that FAL had leased the freezer to LCS but said that this was just a short term lease. I asked him to provide details of the lease but he said he would not provide them. I asked him what his intentions were for the site. At some point during the discussion, he said that FAL had no intention of competing with MAB and just wanted to lease the site to a single tenant (even though FAL was not doing that). [253]

194 The evidence was then that FAL requested consent for the Freezer Lease to Laverton Cold Storage by letter dated 3 February 2022. That request was then refused by Merrifield by letter dated 4 February 2022.[254]

The alternative arguments as to why FAL did not breach the Restrictive Covenant

FAL's first alternative defence - FAL did not create two or more occupancies

195 FAL did not elaborate in written submissions on the contention in its pleading that it had not created more than two occupancies. It also was not addressed by Merrifield, and is readily able to be dismissed. Even if in creating the Freezer Lease itself (the event identified by Merrifield in its pleading as the fact giving rise to breach of the Occupancy Restriction), FAL did not create two or more occupancies, and it is necessary to take into account that there was already an existing occupancy on the site, being the occupancy of DHL pursuant to its lease. The entry into the lease of the Freezer with Laverton Cold Storage created the second occupancy. More broadly, looking at FAL's conduct since acquiring the site by entering into a lease with DHL and then from 13 September 2021, leasing the Freezer to Laverton Cold Storage, while DHL is still leasing the Warehouse, it has plainly created two occupancies on Lot 301. This argument cannot succeed.

FAL's second alternative defence - consent was unreasonably withheld

196 FAL submitted that the consent requested by FAL was 'simply for two occupancies to exist within the building footprint that the first plaintiff condoned by its Contract of Sale with Kaufland.' In those circumstances, and in the absence of any reasons being given for refusal of consent, it was unreasonable and in breach of the implied term of the Restrictive Covenant.[255]

197 Merrifield submitted that because FAL sought consent to the Freezer Lease only after it had entered into the lease and Laverton Cold Storage was in possession, no consent would satisfy the prohibition in paragraph (i) of the Restrictive Covenant on creating two or more separate occupancies 'without first obtaining the written consent' of Merrifield. Thus it was submitted that even if the term that consent is not to be unreasonably withheld is implied, FAL still had not complied with the requirement to seek prior consent.

198 It was also submitted by Merrifield that it was unreasonable for FAL to seek consent after having already granted the Freezer Lease. It was not unreasonable to withhold that consent in the circumstances because it was not unreasonable for Merrifield to look after its own commercial interests, and nor to refuse consent when it was sought some months after a second occupancy had been created.[256] FAL had the onus of establishing 'unreasonableness' and had not met its burden, as it was not unreasonable for Merrifield to protect its own proprietary and commercial interests and refuse consent.

Conclusion - consent was not sought prior to leasing, as required, and was not unreasonably withheld

199 I accept Merrifield's submission that the Restrictive Covenant, even in the context of the implied term, requires consent to be sought before proprietor of Lot 301 creates two or more tenancies. The language of the Restrictive Covenant in specifically referring to 'first obtaining' written consent to two or more occupancies makes it clear that the consent must be sought before the occupancy is created.

200 It is uncontentious that FAL did not seek consent before creating the second occupancy: it is admitted by FAL that it leased the Freezer to Laverton Cold Storage on 13 September 2021, and that it created that lease without seeking the consent of Merrifield.[257] It is evident from the Statement of Agreed Facts and the evidence of Mr Martin, which I accept in this respect, that FAL sought Merrifield's consent to the Freezer Lease not only after the lease had been entered into, but also after Merrifield communicated with FAL in October 2021 to ask whether the Freezer had in fact been leased to a second occupier.[258]

201 I also do not accept FAL's argument that it was unreasonable to withhold consent when it was sought after the Freezer Lease had been entered into. Although it was open to Merrifield to grant consent at that time, it was not obliged to do so when the consent had not been sought in accordance with the requirements of the Restrictive Covenant that it be done prior to any further occupancy being created. Further, even putting that issue to one side, FAL has not established that Merrifield's refusal to give consent was unreasonable. The evidence was that the only communication in which consent to the lease was sought was the letter of FAL's solicitors to Merrifield's solicitors dated 3 February 2022.[259] That letter stated, relevantly:

2. Your client's position (as set out in your letter of 21 December 2021) is that our client is in breach of the Covenant AT115636A (the Restrictive Covenant) because it did not obtain written consent prior to entering into a lease with Laverton Cold Storage.

3. Our client seeks consent from your client for the lease with Laverton Cold Storage.

4. Please provide a response to this request in writing.[260]

202 The request for consent was made almost five months after the Freezer Lease was entered into with Laverton Cold Storage. It was also over two months after Merrifield first asked whether the Freezer had been leased to another party in October 2021. The request was not accompanied by any information to explain the reasons for the creation of the second lease, or why in FAL's view it would be reasonable for Merrifield to consent. It was not unreasonable for Merrifield to refuse this request.

203 Whether it would have been unreasonable for Merrifield to withhold consent to FAL's request to lease the Freezer if it had been sought prior to entering into the lease with Laverton Cold Storage does not arise.

FAL's third alternative defence - two occupancies for the Warehouse and Freezer had already been created by Kaufland and consented to by Merrifield

204 FAL and Merrifield did not address specific submissions to this aspect of the defence. As with the first of the alternative defences, it can be readily determined.

205 Kaufland was authorised by Merrifield, by the terms of the Kaufland Contract, to build both the Freezer and the Warehouse. It was plain from the terms of the contract that both would be in use. However it was also the clear intention of the contract that it would be Kaufland, the purchaser and proprietor of Lot 301, which would be using both buildings.

206 For FAL's argument to succeed, it would be necessary to accept that the sole owner of land, by occupying the land and using two separate buildings on the land, was creating two occupancies. That is not the meaning of 'occupancies' either in its ordinary usage, nor in any legal usage. More than one occupancy on land involves the concept of more than one person or entity occupying the land, rather than a single person or entity being present and using more than one building on the land. In legal usage, it is used in the same way that the words tenancies, leases and licenses are used.[261]

207 For this reason, the contention that Kaufland created two or more occupancies in building the Freezer and the Warehouse cannot be accepted.

Conclusion - FAL did breach the Occupancy Restriction in the Restrictive Covenant

208 FAL did breach the Occupancy Restriction in the Restrictive Covenant by leasing the Freezer to a second tenant, thereby creating two occupancies on the site, without first having sought the consent of Merrifield as proprietor of Lot P.

209 Although Merrifield had sought damages for this breach in its Amended Statement of Claim, it did not tender evidence going to the quantification of any loss, and did not press that claim for damages. I will make a declaration that by entering into the Freezer Lease with Laverton Cold Storage, without the consent of Merrifield, FAL breached the Restrictive Covenant.

Modification of the Restrictive Covenant pursuant to s 84 of the Property Law Act

210 Given the conclusion that the Occupancy Restriction in the Restrictive Covenant is enforceable, it is necessary to determine FAL's application for modification of the Covenant under s 84(1) of the Property Law Act.

The Property Law Act provisions relating to amendment of restrictive covenants

211 FAL relies on both s 84(1)(a) and s 84(1)(c) in its application for modification.

212 Section 84 of the Property Law Act provides, relevantly to this application, as follows:

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 -

(a) that by reason of changes in the character of the property or the neighbourhood or other circumstances of the case which the Court deems material the restriction ought to be deemed obsolete or that the continued existence thereof would impede the reasonable user of the land without securing practical benefits to other persons or (as the case may be) would unless modified so impede such user; or

(b) that the persons of full age and capacity for the time being or from time to time entitled to the benefit of the restriction whether in respect of estates in fee-simple or any lesser estates or interests in the property to which the benefit of the restriction is annexed have agreed either expressly or by implication by their acts or omissions to the same being discharged or modified; or

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

Provided that no compensation shall be payable in respect of the discharge or modification of a restriction by reason of any advantage thereby accruing to the owner of the land affected by the restriction unless the person entitled to the benefit of the restriction also suffers loss in consequence of the discharge or modification nor shall any compensation be payable in excess of such loss; but this provision shall not affect any right to compensation where the person claiming the compensation proves that by reason of the imposition of the restriction the amount of consideration paid for the acquisition of the land was reduced.

(2) The Court shall have power on the application of any person interested -

(a) to declare whether or not in any particular case any land is affected by a restriction imposed by any instrument; or

(b) to declare what upon the true construction of any instrument purporting to impose a restriction is the nature and extent of the restriction thereby imposed and whether the same is enforceable and if so by whom.

(3) ...

(4) Any order made under this section shall be binding on all persons whether ascertained or of full age or capacity or not then entitled or thereafter capable of becoming entitled to the benefit of any restriction which is thereby discharged, modified or dealt with and whether such persons are parties to the proceedings or have been served with notice or not.

(5) ...

(6) This section shall apply to restrictions whether subsisting on the thirty-first day of December One thousand nine hundred and eighteen, or imposed thereafter and whether the land affected thereby is registered or not, and in the case of registered land the registrar shall if the restriction has been noted on the register give effect on the register to the order when made.

213 Section 85 provides:

85 Defendant may apply for order

Where any proceedings by action or otherwise are taken to enforce a restrictive covenant any person against whom the proceedings are taken may in such proceedings apply to the Court for an order to be made under the last preceding section.

The four alternative modifications sought by FAL

214 FAL, following amendment of its counterclaim at the commencement of trial, sought four alternative modifications to the Restrictive Covenant. Each involved an amendment to paragraph (i) of the Covenant, which provides:

the covenantor will not and will not suffer, cause or permit:

(i) the subdivision of the Burdened Land or the creation thereon of two or more separate occupancies without first obtaining the written consent of the registered proprietor or proprietors of the Benefitted Land;

215 As noted above, the modifications to be considered are:

(a) the Second Proposed Modification to replace the word 'two' with 'three';

(b) the Third Proposed Modification replace the word 'two' with the word 'four';

(c) the Fourth Proposed Modification, to add the words '(other than up to three occupancies in total for the Warehouse and the Freezer located on the site as set out in the attached plans)' after the words 'two or more separate occupancies'; alternatively

(d) the Fifth Proposed Modification, to add the words 'other than one occupancy for the Warehouse and one occupancy for the Freezer located on the site as set out in the attached plans)' after the words 'two or more separate occupancies'.[262]

The principles as to exercise of the Court's discretion to modify a restrictive covenant

Onus of proof on s 84(1) application

216 FAL as the applicant for modification of the Occupancy Restriction in the Restrictive Covenant bears the burden of establishing the requirements for the exercise of the Court's discretion under ss 84(1)(a) or 84(1)(c).[263]

Section 84(1)(c) - modification will not substantially injure the persons entitled to the benefit

217 FAL has put its case on s 84(1) primarily pursuant to s 84(1)(c), and it is convenient to consider that subsection first.

218 For the Court to exercise its discretion to modify pursuant to s 84(1)(c), FAL must prove that the proposed modification 'will not substantially injure the persons entitled to the benefit of the restriction'.

219 The principles relevant to the application of s 84(1)(c) were recently considered by the Court of Appeal in Sumervale. The Court considered the authorities on s 84(1)(c) and how the principles of construction of a restrictive covenant, informed by the High Court decisions in Westfield and Deguisa, inform the application of s 84(1)(c) to a covenant. It then made the following observations:[264]

(a) An important aspect of the context in which s 84(1)(c) applies is that a restrictive covenant touches or concerns land, and its purpose will relate to the use and enjoyment of land. For that reason, the context strongly suggests that the relevant injury must be related to the use and enjoyment of the affected person's property.[265]

(b) Section 84(1)(c) 'hinges on the existence of a substantial injury and not merely the loss of the benefit of the restriction. The concept of injury connotes some harm or detriment and its use in the subsection suggests that is not the same thing as the loss of the benefit of the restriction itself. Rather, it is something that arises as a consequence of the loss of the benefit of the covenant.'[266]

(c) Because of the variable nature of the benefit and its relationship to the use of the land, it is something the value of which is not readily easily measured in money, and there is no reason to construe 'injury' to be limited to economic loss such as loss of value of the land.[267]

(d) The textual distinction between 'injury' and the loss of the benefit of the restriction directs attention to the practical consequences that the removal or modification of the restriction might produce. This requires 'an up-to-date practical inquiry about injury'.[268]

220 The Court in Sumervale held that the purpose of a restrictive covenant is relevant in applying s 84(1)(c), and in particular, informs consideration of the nature of the injury to which s 84(1)(c) is directed. As the issue of the purpose of the Restrictive Covenant assumes some importance in this case, generally, and specifically in relation to the application of s 84(1)(c), it is useful to set out the Court's specific observations on this issue (emphasis added):

A covenant confers a proprietary right to prevent the particular use of the burdened land for the benefit of the title holder of the benefitted land. In looking at whether the person will be harmed by its modification or removal, it is necessary to determine the nature of the benefit the restriction was designed to confer, and whether the injury is one that the restriction was designed to protect. Section 84(1)(c) does not prevent the removal of a restriction where the injury is unrelated to its intended benefit. To construe the section in that way would produce an entirely adventitious benefit and have the effect of extending the covenant to a circumstance that was never in contemplation. It would give an operation or effect that the covenant, properly construed, was not intended to have.

Moreover, to construe the concept of injury as tantamount to the loss of any benefit still being enjoyed would, in effect, compel the refusal of an application unless the restriction was obsolete. Given the application of s 84(1)(a) in cases of obsolescence, that construction would leave s 84(1)(c) with very little, if any, work to do. This is unlikely to have been intended. ...

Contrary to the submission of the applicants, using the purpose of the covenant as a means of limiting the scope of a relevant injury for the purpose of s 84(1)(c) does not offend the Torrens system. Nor does it require a departure from the plain and ordinary words of the covenant. As the applicants accepted, purpose is a legitimate tool in the construction of covenants, and it does no further violence to use the ascertained purpose to identify an injury for the purpose of removing a restriction. Purpose is not subjective, and can only be discerned by reference to the text of the covenant having regard to the title and other instruments referred to in the title.

For these reasons, the purpose of the covenant constrains the kind of injury that might be occasioned by the modification or removal of the restriction. That construction produces a more harmonious result between the restriction and its purpose and the power of the court to order its modification or removal based on substantial injury.[269]

221 The Court in Sumervale concluded that the various authorities on s 84(1)(c) reflect an interpretation of that subsection which required a comparison of existing benefits which had been the objective of the covenant when made, and those which would subsist if the covenant was removed.[270] This is consistent with the observation of Kyrou J in Vrakas v Registrar of Titles as to the operation of s 84(1)(c):[271]

In relation to s 84(1)(c), the test for whether a discharge or modification of a covenant would "substantially injure" a person entitled to the benefit of the covenant is similar to that in relation to "practical benefits" in the second limb of s 84(1)(a).[272]

Section 84(1)(c) requires a comparison between 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 - if the evidence establishes that the difference between the two (that is, the injury, if any) will not be substantial, the ground in s 84(1)(c) is made out.[273]

The injury must not be unsubstantial, and must be real and not a fanciful detriment.[274]

222 In this case, where Merrifield is the proprietor of Lot P, as well as the developer of the Merrifield Business Park, and a significant amount of the evidence was directed to its broad interests as developer in addition to its interests as proprietor of Lot P, it is useful also to repeat the observation of Gillard J in Re Cook (emphasis added):

From the nature of the proprietary right arising from the restrictive covenant clearly the injury must occur in relation to the person's enjoyment of his property.[275]

223 In Stanhill Pty Ltd v Jackson,[276] Morris J expressed the view that the powers in s 84(1) to modify or discharge restrictive covenants were conferred on the court to serve the public interest in cases where the use or development of land is restricted in a manner that is contrary to the public interest.[277] That view has not been universally approved.[278] While the parties gave some attention to the divergence in the authorities on this point, it is not a matter that, in my understanding of the submissions, assumed any particular significance in the application of s 84(1)(c) to the facts of this case, and it is unnecessary for me to express any view on that issue.

224 Whether a person entitled to the benefit of the covenant will be substantially injured by the proposed modification is a question of fact, to be determined on the evidence.[279]

Section 84(1)(a) - impediment to reasonable user without securing practical benefit

225 The alternative basis for FAL's application is s 84(1)(a). That subsection relates to two broad circumstances with separate operation. Only one set of circumstances need be established to enliven the Court's jurisdiction to modify a restrictive covenant.[280] The first is that 'by reason of changes in the character of the property or the neighbourhood or other circumstances of the case which the Court deems material the restriction ought to be deemed obsolete'. FAL does not rely on that obsolescence limb of s 84(1)(a) as a basis for modification.

226 This second limb of s 84(1)(a) involves two elements which must be established for the Court's discretionary power to modify a restrictive covenant to be enlivened.

(a) The first is that the continued existence of the covenant as unmodified 'would impede the reasonable user of land'. The word 'user' in this context is a reference to the concept of 'use', 'usage' or 'enjoyment' of land.[281]

(b) The second element is that the impediment arises 'without securing practical benefits to other persons'.

227 The first requirement entails that the applicant for modification establish that the continuance of the covenant:

hinders, to a real, sensible degree the land being reasonably used, having due regard to the situation it occupies, to the surrounding property, and to the purpose of the covenants.[282]

228 The word 'impede' means to retard, obstruct or hinder but does not mean 'prevent'.[283]

229 Justice Kyrou observed in Vrakas, in a passage cited and followed by Cavanough J in Prowse, that it is necessary to establish that the restriction impedes all reasonable uses.[284] Justice Kyrou, in stating that this was the principle, cited the cases referred to in Stanhill,[285] but did not refer to any observation of Justice Morris in that case. The ultimate conclusion of Morris J in Stanhill was to a different effect than the principle taken by Kyrou J from the cases cited in Stanhill. The conclusion reached by Morris J was that if 'land was reasonably suited to be used for a shop, office or restaurant - and the restriction only prohibited use of the land as a shop - the restriction would impede the reasonable user of the land'.[286] That conclusion was not endorsed by Kyrou J in Vrakas nor by Cavanough J in Prowse. Justice Cavanough considered that established authority supported the view that s 84(1)(a) required all reasonable uses of the burdened land to be precluded by the covenant, and that Morris J's approach in Stanhill departed from that long standing principle.[287]

230 The weight of authority thus supports the view that the restriction must impede all reasonable uses.[288] It will, therefore, be insufficient to prove that the continued existence of the covenant would impede a particular reasonable use identified by the owner of the burdened land. Put another way, even if the restrictive covenant impedes uses of the land which are the most profitable or useful potential uses, if other reasonable uses remain possible, the requirements of s 84(1)(a) are not established.[289]

231 Whether a restrictive covenant has the effect of hindering all reasonable uses of the land is a matter of fact, to be determined on the evidence.[290]

Without securing practical benefits to other persons

232 'Practical benefits' for the purpose of s 84(1)(a) have been described as any real benefits to a person entitled to the benefit of a restrictive covenant, including but not limited to the sale value of the benefitted land.[291] Practical benefits must have some substance, not be a trifling benefit, and must not be theoretical.[292] Whether there are practical benefits to other persons is a question of fact.[293]

233 A question arises as to the scope of the benefits relevant to the inquiry required by the second limb of s 84(1)(a). Specifically, the issue is whether the practical benefits must be benefits that were intended to be conveyed by the restrictive covenant. This issue arises because of the Court's determination in Sumervale with respect to s 84(1)(c) that 'in looking at whether the person will be harmed by [a covenant's] modification or removal, it is necessary to determine the nature of the benefit the restriction was designed to confer, and whether the injury is one that the restriction was intended to protect'.[294]

234 It is established that the criteria for identifying 'practical benefits' are similar to those applicable to 'substantial injury' in s 84(1)(c).[295] There is good reason why the analysis in Sumervale with respect to s 84(1)(c) should be applied to s 84(1)(a) so that 'practical benefits' in s 84(1)(a) should be benefits of a kind that the covenant was intended to confer. That intention is to be ascertained pursuant to the construction principles applicable to a registered restrictive covenant. To construe s 84(1)(a) as permitting an inquiry at large about any practical benefit, including benefits that the proprietors of the benefitted land subjectively intended or which third parties such as experts could identify, but which do not reflect the benefit intended by the restrictive covenant properly construed, would permit an adventitious benefit of the kind rejected in Sumervale.[296] Such an approach would have the effect of extending the operation of the covenant beyond that originally intended by the parties who agreed to it, and beyond the scope which could be ascertained by successors in title seeking to understand the scope and effect of a restrictive covenant by examining the Register. One purpose of the limitations on the circumstances in which restrictive covenants can be modified or discharged under s 84(1) is to preserve property rights.[297] It would be inappropriate to permit s 84(1)(a) to have an operation which gave proprietors of benefitted land any greater rights in the property than were ever intended.

235 Finally, in considering whether a restrictive covenant secures practical benefits, it is relevant to consider whether a relaxation of the restriction imposed by the covenant would have the precedential effect of leading to further applications of a similar nature, resulting in a detrimental change to the relevant area.[298]

236 If the conditions in ss 84(1)(a) and or (c) are established, the Court's discretion to discharge or modify a restrictive covenant is enlivened. The relevant matters which the Court may take into account in the exercise of the discretion include the conduct of the owners of the burdened land and the benefitted land;[299] the specificity of the proposed use to which the owner of the burdened land wishes to put the land, including as identified to the proprietor of the benefitted land and to the Court;[300] and town planning considerations in determining whether a modification or discharge may have precedential effect.[301]

Notification of the application for modification of the Restrictive Covenant

237 Section 84(3) refers to the power of the Court to order that notice of any application to modify or discharge a restrictive covenant be given to such persons who appear to be entitled to the benefit of the restriction.

238 In this proceeding, Lot P is specifically identified in the Restrictive Covenant as the benefitted land. Merrifield did not identify any other beneficiaries of the Covenant. However, Merrifield did take the position that it was appropriate that the five Merrifield holding companies which had entered into a contract for the purchase of Lot 301 be joined to the proceeding.[302] On 1 February 2023, orders were made for those Merrifield holding companies to be joined as the second to sixth plaintiffs.[303]

239 On 9 February 2023, a declaration was made by Associate Justice Matthews, as her Honour then was, that FAL had given notice as required by s 84(3) to potential beneficiaries of the Restrictive Covenant being Merrifield, the related Merrifield companies, and Australia and New Zealand Banking Group Limited.

Principles as to evidence admissible on a modification application under s 84(1)

240 Both parties tendered expert evidence on which they relied in their submissions as to whether the conditions of s 84(1)(a) and s 84(1)(c) were satisfied. Most was admitted on the basis that issues of relevance and weight would be addressed in final submissions. The evidence was also tendered to establish the purpose of the Restrictive Covenant. As is apparent from the discussion above, I did not accept the expert evidence as admissible in the context of the construction of the Restrictive Covenant and on the issue of whether it touches and concerns Lot P. The position is different with respect to evidence admissible on establishing the criteria in s 84(1). Before considering the evidence tendered by the parties, it is appropriate to consider the authorities on the nature of evidence admissible on an application under s 84(1).

241 It was common ground between the parties that evidence extrinsic to the terms of the Covenant and documents on the Register would be relevant and admissible on the application for modification of the Covenant pursuant to the Property Law Act. In particular it was accepted that extrinsic evidence could be admitted on the following issues:

(a) the practical benefits secured by the Restrictive Covenant to Merrifield for the purposes of s 84(1)(a);

(b) whether there would be substantial injury to those entitled to the benefit of the Covenant for the purposes of s 84(1)(c);

(c) the Court's discretion to make the modification under s 84(1).[304]

242 Notwithstanding the parties' position, it is appropriate to consider the scope of the extrinsic evidence which can properly be admitted on those issues, and exactly how it can be used. This is because of the recent authority restricting the evidence admissible in determining the purpose of a restrictive covenant on land in the Torrens system, and the acknowledgement in Sumervale of the role of the purpose of the covenant (properly construed) to the application of s 84(1).

243 Merrifield relied, in its submissions as to the scope of the extrinsic evidence which is admissible on the s 84(1) application, on the decision of Derham AsJ in Conlan v Benton.[305] Associate Justice Derham considered the various authorities addressing what evidence is admissible in the context of a s 84(1) modification application. His Honour concluded that evidence of matters external to the covenant itself and incorporated documents could be considered in assessing:

(a) whether practical benefits are secured by the covenant for the purposes of s 84(1)(a); and

(b) injury, in the sense relevant to s 84(1)(c), to the individuals entitled to the benefit of the covenant arising from the discharge or modification of the covenant.

244 Associate Justice Derham expressed the view in Conlan that the evidence which could be taken into account for these purposes included the subjective views of those entitled to the benefit of the covenants, and that where 'an individual with the benefit of the covenants believes they secure "practical benefits", and the beliefs are objectively reasonable, those beliefs will be taken into account'.[306] Given the relationship between the nature of the benefits secured by a covenant, and the purpose or object of the covenant, a question arises as to whether recent authority, postdating Conlan, should be construed as limiting the nature of the evidence to which reference may be had in the s 84(1) context.[307]

245 The authority cited by Derham AsJ for the proposition that the subjective views of residents in the neighbourhood could be taken into account on an assessment of the injury arising from any modification or discharge of the covenant were Prowse, two authorities of judges of the Supreme Court of New South Wales( Webster v Bradac[308] and Frasers Lorne Pty Ltd v Burke[309]) and the authoritative text Bradbrook and Neave's Easements and Restrictive Covenants.[310] His Honour also held that subjective views as to whether the covenants secure practical benefits could be taken into account for the purposes of s 84(1)(a), citing Bradbrook and Neave.[311] In Prowse, Cavanough J also cited Bradbrook and Neave in stating his conclusion that the court applies a subjective test which may involve intangibles.[312]

246 All of these cases, and Conlan itself, were decided (and in the case of Bradbrook and Neave, published) prior to the cases of Deguisa in the High Court, and Jeshing and Sumervale by the Court of Appeal. In those cases, the principles relevant to notification and construction of restrictive covenants were closely considered, and limitations which apply to construction in the context of Torrens system land were identified. Most relevantly for present purposes, it was determined in Sumervale in the context of a s 84(1)(c) application, and drawing on the decisions of Deguisa, Westfield and Jeshing, that it is necessary first to construe a restrictive covenant before turning to the operation of s 84(1), and that '[p]urpose in this sense is objectively determined and fixed...[and] represents the objectively ascertained intent of the parties on the making of the covenant'.[313] Sumervale also affirmed that there is a direct relationship between the purpose of the covenant and the scope of a relevant injury that is relevant for the purposes of s 84(1)(c).[314]

247 In light of these recent authorities, it is necessary to bear in mind that while extrinsic evidence, including subjective views of persons affected, may be admissible on the issues of the practical benefits for the purposes of s 84(1)(a) and substantial injury for the purposes of s 84(1)(c), that sort of extrinsic evidence cannot be used to identify the purpose or intended benefit of the covenant. Insofar as it is necessary to consider the purpose of the covenant in order to construe the kinds of injury that might be occasioned by the modification or removal of the restriction,[315] that purpose is to be determined according to the established principles of construction, informed by the rules of evidence limiting recourse to extrinsic evidence of surrounding circumstances, as stated in Jeshing.[316] Thus, at the starting point of the s 84(1)(a) or (c) analysis, determining the purpose of the covenant, it would be inappropriate to substitute the parties' subjective views of the purpose for the purpose as determined by reference to the terms of the restrictive covenant, the title and incorporated documents on the Register. Nor is it open to substitute the opinions of third parties as to purpose, even where those opinions are given by experts.

248 However, it remains the case that the question posed by s 84(1)(a) of what 'practical benefits are secured' by the covenant, like the question of injury for the purposes of s 84(1)(c), involves considerations going beyond the purpose of the covenant. So, while it is established that the injury for the purposes of s 84(1)(c) must be related to the intended purpose of the restriction imposed by the covenant,[317] a factual question remains: whether 'the proposed discharge or modification will not substantially injure the persons entitled' to the intended benefit. Whether there will or will not be a substantial injury caused by discharge or modification goes beyond an understanding of the purpose of the restrictive covenant, to the practical consequences that the discharge or modification of the covenant may produce.[318] That is a question of fact on which evidence is admissible, including expert evidence, evidence of the views of those entitled to the benefit of the restriction, and evidence of surrounding circumstances.

249 Similarly, in considering s 84(1)(a), once the nature of the intended benefit or benefits is ascertained, it is necessary to consider whether those benefits are in practice real and available. This second aspect, whether there are practical benefits, is a question of fact on which a range of evidence is admissible, including the views of the parties entitled to the benefits as to whether they are enjoyed in practice.

250 Finally, on questions of evidence, it is necessary to consider the admissibility of town planning evidence, as FAL sought to rely on the evidence of an expert town planner in establishing the criteria in s 84(1)(a) and 84(1)(c). This was resisted by Merrifield as inadmissible.

251 Merrifield submitted that evidence of a town planner was inadmissible on the question of whether grounds in s 84(1) are established, and only goes to residual discretionary considerations.[319] It relied on the observation of Kyrou J in Vrakas, and the cases his Honour cited for that proposition, including Re Robinson:

Town planning principles and considerations are not relevant to the Court's consideration of whether an applicant has established a ground under s 84(1).[320]

252 FAL submitted that it was too broad an approach to say that evidence relating to town planning considerations was inadmissible on the question of whether the criteria in s 84(1) are satisfied. The true breadth of the authority on that issue is that the Court is not to act as a planning tribunal in assessing the criteria under s 84(1), by applying town planning principles to determine what would be advantageous as a matter of planning.[321] FAL noted that in Vrakas, as well as other cases, evidence was in fact given from town planning experts for both parties.[322]

253 FAL also relied on Jeshing in which the evidence of three town planning experts was tendered at trial for the plaintiffs and the defendants.[323]

254 In my view, FAL is correct in submitting that town planning evidence is admissible on establishing the grounds in s 84(1). The authorities are consistent with the position that while it is not open to apply town planning principles in a s 84(1) application to determine the most appropriate or favourable use of the land, there are other ways in which the evidence of an expert town planner may be relevant to whether or not the criteria in s 84(1)(a) or (c) are established. Reference to the main authorities relied on by both parties establish this.

255 In Re Robinson, Adams J, in rejecting the use of town planning principles as to what is desirable as a matter of planning to inform the consideration of the criteria in s 84(1), did not reject the relevance of the relevant town planning scheme. His Honour did have regard to the planning scheme and the fact of the land being zoned 'commercial' which had the effect that dwellings could not be built on the land.[324]

256 In Vrakas, the case relied on by Merrifield, evidence was in fact given from town planning experts for both parties. It was apparently admitted on the questions of the effect on amenity of modification of a single dwelling covenant, and what would be reasonable uses of the land, and was taken into account by Kyrou J on these matters.[325] It is apparent that Kyrou J's statement as to the inapplicability of town planning principles was directed to the inappropriateness of the Court considering town planning principles to determine the most appropriate or desirable use of the land. It was not authority to the effect that town planning evidence generally was irrelevant and inadmissible to the consideration of whether the criteria in s 84(1)(a) or (c) were established.

258 In Koller v Rice, evidence of a town planner was given assessing the effect of removal of a single dwelling covenant, and assessing plans for a second dwelling on the site for consistency with the applicable planning scheme and whether it would have detrimental impact on the neighbourhood.[326] That evidence was taken into account by John Dixon J in making the comparison exercise required by s 84(1)(c), and determining that there would be no significant precedential effect from modification.[327] His Honour did not, however, consider that the town planning expert's evidence that the two dwelling subdivision usage represented a reasonable and proper use of the land in a period of population growth and housing shortages was relevant.[328]

259 In Prowse, Cavanough J assumed, without deciding, that in assessing the benefits which would remain after a modification or discharge of the restrictive covenant, the Court could consider the protections afforded to neighbouring properties by statutory planning provisions. His Honour considered that such evidence would be relevant because it shows what the result will be of modification or discharge, and it would be artificial and wrong to disregard the reality of the situation.[329] I respectfully agree with the observations of Justice Cavanough. This is a distinct issue from considering town planning principles and objectives on questions of reasonable user or whether there will or will not be substantial injury in the context of s 84(1). Consideration of the contextual statutory or regulatory planning scheme applicable to the relevant land is directly relevant to a realistic comparison between the benefits intended to be conferred and actually conferred by the restriction, and the situation if the restriction is discharged or modified.

260 Expert evidence was also admitted at trial in Jeshing. Matthews AsJ, as her Honour then was, considered the evidence of the three town planning experts on issues including the original benefits of the covenants, whether the covenants would impede the reasonable user of land, and the impact and reasonableness of potential uses.[330] Her Honour's use of that expert evidence was not the subject of any ground of appeal before the Court of Appeal, nor the subject of any adverse comment by the Court.

261 It is, therefore, too absolute to say, as Merrifield did, that any evidence from a town planning expert is irrelevant and inadmissible on the issue of whether the grounds in s 84(1) are made out. Evidence is inadmissible on town planning principles and considerations directed at the most desirable uses. However it is consistent with the authorities, and with the uncontroversial starting point that questions of practical benefits, reasonable user and substantial injury are questions of fact on which evidence is admissible, to recognise that expert evidence in the town planning discipline may be relevant to whether the grounds under s 84(1)(a) and (c) are established. In particular, I consider that evidence of an expert town planner may be relevant to:

(a) the application of the relevant planning scheme to the benefitted and burdened land, to the extent that this is relevant context to understanding practical benefits, reasonable user and substantial injury;

(b) the effect of a proposed modification and the potential uses of land which that may permit; and

(c) the comparison between the contemporary situation of the benefitted land subject to the covenant and the situation if the covenant is modified.

The evidence relied on by the parties in the s 84(1) application

262 The evidence relied on by FAL in support of the modification application was the evidence of four experts: David Crowder, a town planner;[331] Nicholas Blakely, with experience in 'supply chain dynamics, integrated logistics and industrial property',[332] Richard Bowman, a certified practicing valuer,[333] and Charmaine Dunstan, a traffic engineer and transport planning consultant.[334]

263 Merrifield made objections to the evidence of all of FAL's witnesses other than Ms Dunstan. The objections were that the evidence was irrelevant for particular uses, so that it should be admitted subject to limitations, including as to the weight that could be given to the evidence. The trial proceeded on the basis that the evidence was admitted subject to weight, and any appropriate limitations on use, to be addressed in closing.[335]

264 Merrifield submitted that the evidence of Mr Crowder should be limited in its use on the basis that evidence based on town planning expertise is not admissible on the question of whether grounds in s 84(1) are established, and only goes to residual discretionary considerations.[336]

265 Mr Crowder identified in his reports that the basis of his opinion evidence was his town planning knowledge. Merrifield submitted that this made it inadmissible to establish any of the grounds set out in s 84(1) and that the Court should ignore Mr Crowder's Reports to the extent that FAL sought to use it for those purposes, rather than on purely discretionary considerations.[337]

266 FAL sought to rely on Mr Crowder's evidence as to whether the Occupancy Restriction created benefits in terms of amenity and future development, and a comparison with the situation if the Occupancy Restriction is modified; and whether it is a reasonable use of Lot 301 to accommodate a particular number of occupancies. This evidence was said to be relevant to the comparison exercise required under s 84(1)(c); whether there are practical benefits of the kind contended for by Merrifield for the purposes of s 84(1)(a), and whether the number of occupancies proposed by FAL constitutes a reasonable use of Lot 301, for the purposes of s 84(1)(a).[338]

267 I consider that a significant amount of Mr Crowder's evidence is admissible. In particular, Mr Crowder made various observations and expressed certain opinions based on his review of the planning regulatory framework and public development policies and strategies. He considered the context of the planning permit issued for Lot 301 which did not restrict the number of occupancies on the land, but provided for certain uses.

268 He also considered the context of the existing planning controls applicable to Lot 301. The Lot is in the Comprehensive Development Zone - Schedule 2 (CDZ2) of the Hume Planning Scheme, which is the Merrifield Employment Precinct. Relevantly to his opinions the purposes of CDZ2 are identified as follows (emphasis added):

The purposes of the schedule are as follows:

• To provide for the development of the site as an integrated, contemporary employment node.

• To encourage the development of an intensive employment node.

• To provide for the comprehensively planned development of land, in a way that has efficient linkages with nearby existing and planned urban land.

• To provide for the orderly planning and development of new roads and other physical infrastructure, to complement existing and proposed road networks, and to provide ease of access into and out of the area.

• To provide for the use and development of land generally in accordance with the Merrifield Comprehensive Development Plan, Development Co-ordination Plan and relevant Precinct Concept Plans.

• To protect and conserve areas of environmental and heritage significance.

• To encourage the development of a high amenity business park with high standards of building design in attractively landscaped streetscapes.[339]

269 The CDZ2 also provides, by clause 4.0, certain limitations on uses of the land in the zone, including:

Must not adversely affect the amenity of the neighbourhood, including through the:

- Transport of materials, goods or commodities to or from the land;

- Appearance of any building, works, stored goods or materials;

- Emission of noise, artificial light, vibration, odour, fumes, smoke, vapour, steam, soot, ash, dust, wastewater, waste products, grit or oil.[340]

270 These matters are relevant to understanding the uses to which Lot 301 and Lot P can be put, which are relevant context to the parties' submissions on the practical benefits arising from the Occupancy Restriction.

271 Mr Crowder also identified as relevant to the planning context the Development Coordination Plan, and 'Polaris Precinct Concept Plan (Precinct 1)' prepared by Merrifield. The Polaris Precinct Concept Plan was developed by Merrifield and approved by Hume City Council on 14 November 2018. Most relevantly, Mr Crowder noted aspects of the 'Urban Design Approach' chapter of the Polaris Precinct Concept Plan, which he summarised as follows (emphasis added):

• 'Subdivision Layout' seeks to encourage a subdivision layout which (inter alia):

• 'Facilitates a range of lot sizes, layout / orientation option and settings'

** - 'Provides opportunities for large scale and large footprint developments to be located centrally within the development'**

• 'Is responsive to existing site conditions and features'

• 'Built form' acknowledges:

• 'The built form of employment precincts, particularly those with an industrial base, are highly influenced by the physical site and design requirements of individual users, users and their respective business operations.'

• '... an emphasis must be placed on ensuring that design and built form outcomes in combination with landscape treatment engender a high level of amenity, both in the public and private realm'

... .

• 'Land use and urban design treatments' encourages employment uses to be consistent with the following Precinct objectives:

• 'Encourage major strategic sites with larger building footprints to locate centrally within Precinct 1, (i.e. with the size of lots and built form footprints generally reducing towards the more visible edges)'

• 'Encourage a comprehensive landscape and urban design theme that provides diversity in treatments to break up the large expanses of land and a degree of consistency to contribute to a defined character to the Precinct'.[341]

272 I consider that it is open for Mr Crowder to express views on how any modification of the Restrictive Covenant would impact on consistency with the planned strategic development of the Merrifield Business Park, taking into account these documents.[342] It is relevant in the context of the modification application that these strategic planning documents were consistent, particularly in the content which is bolded above, with the amenity related purpose of the Restrictive Covenant as I have construed it, so that they are appropriately taken into account in considering the practical benefits of the Occupancy Restriction.

273 Other opinions expressed by Mr Crowder essentially reflected his views as to desirable or undesirable uses or impacts from a town planning perspective, expressed in terms of what is 'reasonable'. The criterion of 'reasonable' was not further explained other than that it involved town planning considerations. I regarded it as being in substance the type of town planning evidence as to desirable uses which has been held not to be relevant to the establishment of the s 84(1) grounds. For example, Mr Crowder expressed some conclusions by reference to whether impacts 'would be unreasonable or unacceptable in the circumstances'.[343] He described those concepts of unreasonable and unacceptable as involving 'a town planning approach'.[344] He also was asked to give his opinion on whether it was a 'reasonable' use of Lot 301 to have two occupancies, or three or more occupancies,[345] without further elaboration of what that criterion of reasonableness involved. I infer that it was primarily, if not entirely, an opinion expressed by reference to town planning principles and objectives. For that reason I have not had regard to the opinions given in response to those questions as to the number of occupancies that is 'reasonable'.

274 In his second report, Mr Crowder noted that there was general agreement between Merrifield's evidence and his first report relating to the design strategy for the Merrifield Business Park based on the strategic planning documents that he had considered. The area of agreement was that these documents showed an objective of facilitating, at the centre of the precinct, major strategic sites for anchor tenants with larger building footprints with uses such as freight and logistics, and a periphery of the precinct involving a more diverse mix of smaller lot sizes along the abutting major roads, accommodating developments that are more commercial in nature.[346] I regarded this evidence as admissible evidence of the planning context.

275 Mr Blakely's report addressed questions relating to the ability to lease the whole of Lot 301 to a single tenant, the impact of a separate tenancy for the Freezer, and whether modification of the Occupancy Restriction would negatively affect the ability of the owners of Lot P to lease that site. His evidence was admitted subject to Merrifield's objection as to the weight which could be afforded to it,[347] on the basis that he did not have any relevant expertise. Merrifield submitted in closing submissions that the evidence of Mr Blakely should be disregarded.[348]

276 Mr Blakely's field of expertise was identified in his report only in very general terms, as being derived from his experience in 'supply chain dynamics, integrated logistics and industrial property' and 'operational and commercial expertise in lease and freehold acquisitions'.[349] He is a Principal and Executive Director of ResolveXO, a firm described as 'Australia's largest independent corporate property advisory firm, proving strategic advice (including leasehold and freehold acquisition and divestment, portfolio management, capex and opex modelling)'.[350]

277 Mr Blakely was asked questions relating to leasing of both Lot 301 and Lot P, including:

(a) How easy or difficult it would be to find one tenant who is prepared to lease both the Warehouse and Freezer at a reasonable commercial rate;

(b) Whether the Occupancy Restriction impedes Lot 301 being reasonably used;

(c) Whether the existence of a separate tenancy for the Freezer on Lot 301 impacts the commercial ability of the owners of Lot P to lease some or all of that lot at a reasonable commercial rate; and

(d) Whether proposed modifications of the Occupancy Restriction would impact on the owner of Lot P being able to lease some or all of that land at a reasonable commercial rate.[351]

278 Merrifield, in addition to the objection based on a lack of relevant expertise, made a specific objection to the second question to Mr Blakely, which referred to 'reasonable use'. Mr Blakely's response to that question in his report was that in his opinion, the Occupancy Restriction does significantly impede Lot 301 being reasonably used.[352] It was said that this is framed in such unspecific terms as to be of no assistance. I agree with Merrifield that a generally expressed view on the issue of what is or is not 'reasonable use' does not assist the Court in determining the question, and I have not taken that opinion into account.

279 As to the primary objection made by Merrifield that Mr Blakely's report did not identify a field of specialised knowledge, I agree that Mr Blakely's report does not set out clearly and with specificity what specialised knowledge is relied on which qualifies him to give all of the expert opinions in his report. Mr Blakely's report does however set out his experience in working in firms which deal with leases of commercial and industrial premises.[353] I accept that Mr Blakely's experience in working in that field is adequate to give rise to specialised knowledge in industrial leasing,[354] and noting precedent for receiving expert evidence from persons with specialised knowledge in leasing,[355] I will treat his opinions on that issue as admissible.

280 The very limited information provided in the expert report of Mr Blakely about the length and nature of his specific experience in industrial leasing is relevant to the weight to be afforded to his opinions.

281 Ultimately, in closing submissions FAL relied on limited aspects of Mr Blakely's evidence, on the following issues.

(a) The opinion expressed by Mr Blakely that the Occupancy Restriction significantly impedes Lot 301 being 'reasonably' used. I have not had regard to this opinion for the reasons identified at [278] above.

(b) Mr Blakely's evidence that commercial freezers are very expensive to build and for that reason a developer was unlikely speculatively to build a freezer facility.[356] This evidence was not challenged, and is to a significant extent self-evident with a large industrial freezer of this scale. Although as expert evidence it carries limited weight, the plaintiffs' expert, Mr Moore, agreed with the conclusion of Mr Blakely,[357] and it is appropriate to take this evidence into account.

(c) The following further opinions which in my view draw on specialist knowledge of commercial or industrial leasing, and are admissible:

(i) The existence of a separate tenancy for the Freezer does not impact upon the ability of the owner of Lot P to lease some or all of that lot at a reasonable commercial rate.[358] Mr Moore agreed with that opinion.[359]

(ii) Even if the Occupancy Restriction was removed in its entirety, it would not negatively impact on the ability of the owner of Lot P to lease some or all of its land at a reasonable commercial rate.[360]

(iii) Leasing both the Warehouse and the Freezer to a single tenant at a commercially viable rate is and will be extremely difficult, for various reasons individually identified by Mr Blakely.[361]

282 Richard Bowman is a certified practicing valuer and fellow of the Australian Property Institute with academic qualifications in a Bachelor of Business (Property) and over 25 years' experience in the discipline of valuation.[362] He was asked questions and gave opinions as to whether the Occupancy Restriction enhanced the value of Lot P and whether modification of the Occupancy Restriction would negatively affect the value of Lot P. He also gave opinions as to whether a separate tenancy for the Freezer would impact the value of Lot P.

283 Mr Bowman was then asked further questions[363] on whether the Occupancy Restriction created benefits to enjoyment, amenity, or mode of occupation to Lot P and whether a separate tenancy for the Freezer affected those matters.

284 Questions 7 and 8 went to whether certain uses of Lot 301 were 'reasonable'.

285 Questions 9 to 12 related to the effect of the Fourth and Fifth Proposed Modifications and a comparison between the benefits currently conferred and those which would remain after modification. The answers to these questions involved Mr Bowman proceeding from his assumption that the benefits which were intended to be conferred by the land were those said to have been asserted by FAL in its Reply and Defence to Counterclaim, that the Covenant:

i Affects the mode of occupation of FAL's land;

1. Gives effect with the MBP development strategy and allows for the strategic and efficient development of Merrifield's land;
2. Limits sales competition within MBP; and
3. Is concerned with and enhances the value of Merrifield's land.[364]

286 Those matters were in fact identified by Merrifield's in the Reply and Defence to Counterclaim.

287 Merrifield objected to the evidence of Mr Bowman insofar as it did not involve a valuation exercise but asked whether the restriction imposed by the Restrictive Covenant results in benefits of enjoyment, mode of occupation or amenity.[365] FAL submitted that this evidence was admissible and within a valuer's expertise. FAL submitted that it was not put to Mr Bowman that he was not qualified to give them. It also submitted that some of the opinions go to matters relating to enjoyment and mode of occupation of land and amenity, on which a valuer is qualified to give an opinion; and that Merrifield's valuation expert Mr Moore had been asked to give his own opinions on these issues by reason of having been asked to give his opinion on Mr Bowman's report.[366]

288 I accept that the answers to questions 5 and 6, which address matters including the features of the land which produce benefits in terms of enjoyment, mode of occupation or amenity, are matters on which Mr Bowman is qualified to express an opinion. He has both qualifications in valuation and 25 years' experience in the field of real estate valuation, and also experience in performing highest and best use options analysis.[367] His opinions as to amenity and mode of occupation of Lot P are, in my view, matters with which valuers deal as part of a valuation exercise, and within the scope of his expertise.

289 The answers to questions 7 and 8, which address whether uses of Lot 301 are 'reasonable', are inadmissible largely for the same reasons as addressed at [278] above. The concept of what is 'reasonable' was insufficiently specific in the question to be clear that it engaged concepts that Mr Bowman was qualified to express a view on, and left open a wide area in which the expert's own view of reasonableness could be called on. I gave an opportunity for a further question to be asked in examination in chief as to what was meant by the word 'reasonable' in this context, and Mr Bowman's answer did not elaborate on any specific criteria by which 'reasonable' should be[368]derstood.368

290 The answers to questions 9 to12 involve Mr Bowman's opinions as to the effect on benefits to the owner of Lot P if the Restrictive Covenant was modified. They involve views relating to mode of occupation and amenity of Lot P, which I accept that Mr Bowman is qualified to give. To the extent that the responses proceed from certain assumptions as to the purposes of the Restrictive Covenant, this affects impair the relevance and weight of the opinions.

291 Ms Dunstan is a traffic engineer and transport planning consultant. She gave evidence in response to the view expressed by Mr Martin in his statement that the road network infrastructure has been designed to cater for one large occupier, and additional occupiers would add a significant volume of traffic and have a detrimental impact on that infrastructure. She expressed the opinion that the road network design of the Merrifield Business Park would not be designed differently if there were two, three, four or more occupancies at Lot 301, and that Lot 301's existing internal road design would accommodate two, three, or four tenancies.[369] Merrifield did not make any objection to her evidence.

Merrifield's lay evidence on the modification application

292 Merrifield's lay witnesses were Mr Perry, the General Counsel and Company Secretary of MAB, and Mr Martin, the former General Manager Commercial and Industrial at MAB. No officer of Merrifield, nor of the plaintiff holding companies, gave evidence.

293 There was limited evidence as to the relationship between MAB and Merrifield. Mr Martin and Mr Perry both stated in their witness statements, without elaboration, that:

MAB is engaged by the First Plaintiff in the Proceeding (Merrifield) as development manager for Merrifield's operations.[370]

294 Mr Perry gave evidence that documents prepared by MAB relating to strategic planning for the Merrifield Business Park discussed at a 2016 MAB board meeting had been prepared for the directors of Merrifield.[371] No other evidence was given as to the role of MAB with respect to Merrifield's operations in the Merrifield Business Park. In particular, no evidence was given as to whether MAB had any role in the sale transaction in which Lot 301 was sold to Kaufland subject to the Restrictive Covenant.

295 Some documentary evidence was tendered through Mr Perry which was said to be relevant to the reasons for Merrifield introducing the Restrictive Covenant, and the practical benefits to be obtained pursuant to it.[372] His evidence did not otherwise address issues directly relevant to the modification application.

296 The documentary evidence consisted primarily of a June 2016 MAB Advisory Board Meeting Agenda, prepared for an advisory board meeting on 8 June 2016, and extracts of the Board papers.[373] The significance attributed to the documents by Merrifield was that it was said to evidence a 'Merrifield Business Park Hold Strategy'.[374]

297 The agenda stated in relevant part, under the heading 'Agreements & Actions':

The strategy for Merrifield as outlined in the Merrifield Development Strategy was generally agreed.

...

Undertake a review of the holding and trading structures for Merrifield entities to ensure that they remain appropriate to deal with those parts to be held and those to be traded. This review should confirm whether the proposed 'held' industrial land for pre-leasing should be held in a specific and separate 'hold' entity.

...

The meeting did not confirm the size of the allocation to investment assets in the desired asset portfolio. This is a matter for continuing discussion which may evolve out of the discussions in relation to Merrifield Business Park and the GMH land.

(a) A document said to be 'a summary of the more detailed Shareholder Objectives and Project Strategies contained in the Merrifield Development Strategy 2020 document'. Under the heading 'Merrifield Business Park', that document said:

Ensure that the master planning, further planning approvals and development strategy for the project provides maximum flexibility to attract and accommodate a diverse range of lot sizes and new business requirements (in including both land sales and value-add development) in a timely manner.

Withold land or development along key frontages and select high-value location, until a desired land use or specific operator can be secured.

(b) A document titled 'Merrifield Business Park - Hold Strategy', which stated:

REPORT SUMMARY

The concept of 'holding' a part of the Merrifield Business Park was discussed at the previous MAB Strategy Session.

Following completion of the Merrifield Business Park Concept Master Plan, a financial analysis has been prepared and discussed with Andrew Buxton. This report summarised the work undertaken.

RECOMMENDATIONS

For discussion.

...

CONCLUSIONS

Following discussion with Andrew Buxton, a further analysis has been undertaken to better understand the capacity of MAB to commit to the following in the future:

...

• Merrifield Business Park Hold Strategy (noting that a decision to implement the strategy could be reviewed at any time. That is, the shareholders could review and change the strategy at any time [in] the future)

(c) A concept plan for the Merrifield Business Park which showed that the land which ultimately comprised Lot 301 would be divided into at least four or more lots, the largest lot of which would be 11.5 ha and the smallest 1.92 ha.[375]

299 Also tendered was a document titled 'Merrifield Development Strategy >>2020', dated September 2015.[376] On a page headed 'Merrifield Business Park', under the heading 'Project Strategy', the document relevantly stated as follows:

Planning, Design & Development:

• Secure Precinct Concept Plan approvals to activate the balance of the landholding and maximise ability to attract/deliver large lot requirements in a timely manner.

• Embed unrivalled flexibility in the masterplan to attract diverse range of new business / industry requirements - including a mix of lot types which can be scaled-up (combine lots for larger users) or scaled-down to accommodate further subdivision and support smaller grain of subdivision / value add-development.

• ...

Product:

• Maintain a diverse product offering - lots ranging from 6,000 sqm up to circa 50ha, with short-term focus on super-sized product offering (1 ha to 20+ ha) to attract the anchor tenants that will activate the precinct.

• Introduction of increased range and flexibility of lot sizes (circa 5,000 sqm to 10,000sqm lots) once project matures and required level of amenity has been provided to service smaller businesses/operators.

• Pre-lease activity /value add development focus on predominantly larger requirements (2ha up to 50 ha).

....

Delivery

• Open multiple development fronts through the commencement of the Section A subdivision (Stage 1) in order to activate supply of both trading (land sales) and pre-lease product simultaneously.
• Subsequent stages will remain flexible and be delivered in response to market demand and key requirements, in accordance with shareholder objectives and sales and development strategies.

300 Mr Perry gave evidence that he did not know whether the concept plan was a proposal moving forward or just a concept analysis, and that the plans which were being developed over time.[377]

301 In the witness statement of Mr Perry there were some errors and inaccuracies relating to documents and description of the changes to the subdivisions relevant to the Merrifield Business Park which were corrected in cross-examination.[378] In his limited evidence he was willing to acknowledge those errors readily so I accept his evidence was reliable. I did conclude, however, that his direct knowledge of matters relating to Lot P and Lot 301 was limited, and that his evidence did not materially supplement the documentary evidence that was referred to in his witness statement.

302 Mr Martin gave evidence relevant to his understanding of the reason for the introduction of the Restrictive Covenant, primarily to the effect that it was to protect against competition and to promote the design strategy for the Merrifield Business Park.[379]

303 Mr Martin's evidence as to his views as to why the Restrictive Covenant was introduced is inadmissible on the question of the purpose of the Restrictive Covenant, for the reasons addressed at [63] to [79] above.

304 Mr Martin gave evidence as to the development of the Merrifield Business Park, including that it had been necessary to secure large scale anchor occupiers in the earlier stages of the development. The Dulux site, Lot 301 and the Ford and adjoining RMA sites (both owned by Dexus) were among several major strategic sites in the business park.[380] He gave evidence that Lot P had been identified as the preferred location for Merrifield to implement a 'develop to hold strategy'.[381]

305 Mr Martin gave evidence of his views as to three outcomes which could occur 'if the Covenant were not in place'. First, the owner of Lot 301 could 'lease, sublease, subdivide and sell land within Lot 301 to prospective Merrifield clients in direct competition to Merrifield', which would 'take away Merrifield's ability to develop and market land within Lot P in the way it chooses'.[382] This opinion was inadmissible insofar as it is premised on his subjective opinion of the purpose of the Restrictive Covenant.[383] Secondly, he considered that there could be detrimental impact on the road network infrastructure if there were 'multiple tenants' or 'multiple occupiers' of the land.[384] Thirdly, he said 'the urban design and strategy objectives of the "egg yolk" model could be jeopardised'.[385]

306 Finally, evidence was given by Mr Perry and Mr Martin that Merrifield was involved in a competitive process to secure Regent Caravans as a tenant in the Merrifield Business Park. However no evidence was given as to why Regent Caravans declined to take up a tenancy in the Merrifield Business Park or whether it had any real interest in an occupancy on either Lot 301 or Lot P.[386] Mr Martin accepted in cross-examination that Merrifield did pursue the opportunity but that it 'made it more difficult' that FAL had also submitted a proposal to Regent Caravans.[387]

307 Merrifield relied on the evidence of Nicholas Moore, a property valuer of residential, retail, commercial and industrial properties with over 20 years of experience.

308 Mr Moore was asked the following questions which he addressed in his first expert report:

1. In your opinion, having regard to the assumptions, why would a developer, such as MAB, have created a lot in the size and location of Lot P?
2. In your experience, for what reasons or purposes would a developer, such as MAB, place a covenant of the type of the existing Covenant over lots in a business park development such as Merrifield?

309 In response to the first question, Mr Moore expressed the view that a developer would have created a lot in the size and location of Lot P to reserve it for future development of the Merrifield Business Park, and that Merrifield 'will likely further subdivide Lot P into various sizes to meet market demand.'[388] Specifically, Mr Moore said:[389]

Lot P, being a significant englobo parcel positioned towards the rear, and later stages of Merrifield Business Park, is likely reserved for future development.

...

Lot P is one of the last logical development fronts for the Merrifield Business Park and, in my opinion, has been likely been [sic] reserved for future development of the Merrifield Business Park. To elaborate, the size (79.03 hectares) and location of Lot P allows for future development which leverages on the established infrastructure, the above-mentioned anchor occupants and the interface with a future town centre.

...

The subdivision and staging that the first plaintiff has undertaken provides them with the benefit of being able to respond to the market. To elaborate, the first plaintiff will likely further subdivide Lot P into various sizes to meet market demand. Further, and arguably more importantly, the first plaintiff can control the supply (timing of lot releases) so as not to 'flood' the market and potentially erode prices achieved.

310 The second question is directed to the purpose of the Restrictive Covenant. Mr Moore expressed the opinion that:[390]

The Covenant placed on the Burdened Land, together with the restrictive Covenants placed upon other lots within the Merrifield Business Park has, in my opinion, been done for the following broad reasons:

- To assist the first plaintiff in delivering their masterplan for the Merrifield Business Park;

- To mitigate the prospect of increased supply (land and built-form) which could compete with the sell down of the remaining Estate; and

- To preserve the value of their remaining asset.

In my view, the purpose of introducing the Covenant is to ensure that any future demand for either land or built form is supplied by the first plaintiff within the remaining undeveloped portion of the Estate.[391]

312 FAL did not object to Mr Moore's evidence, including this expression of opinion as to the purpose of the Restrictive Covenant,[392] although it did take issue with Merrifield's characterisation of the purpose. However, I did raise with counsel for Merrifield the necessity for the Court to determine the purpose of the Restrictive Covenant in the context of applicable authority on construction.[393] I have concluded that most of the ultimate opinions expressed by Mr Moore are either not admissible or should be accorded very little weight. My reasons for that conclusion are as follows.

313 First, question 1 essentially asks, indirectly, why a developer such as 'MAB'[394] created a lot the size and location of Lot P.[395] Mr Moore, in response, expresses opinions as to the 'likely' intentions of Merrifield with respect to Lot P.[396] Insofar as that evidence goes to the purpose or object of the Restrictive Covenant, it is extrinsic evidence of a kind which is inadmissible.[397]

314 Secondly, to the extent that the evidence could be regarded as relevant background evidence on the question of the practical benefits of the Covenant for the purposes of s 84(1)(a), it is weak evidence. The best source of evidence as to Merrifield's objectives and future intentions for Lot P would be an officer of Merrifield itself. Merrifield did not tender any such evidence. No officer of Merrifield gave evidence, and the evidence given by MAB employee Mr Perry, and former MAB employee Mr Martin, did not extend to evidence of Merrifield's contemporary intentions for the development of the Merrifield Business Park. The evidence as to Merrifield's original intentions was limited, primarily constituted by documentary evidence from the 2016 MAB Board papers. It was evidence of MAB's Board, not reinforced by any evidence from Merrifield officers (nor by evidence of the precise relationship between MAB and Merrifield).[398] The evidence of a third party expert as to the intentions that an entity in the position of Merrifield may have had for Lot P or the Merrifield Business Park is not in my view a reliable substitute for evidence of Merrifield's own officers as to its future strategic plans.

315 It is also not clearly apparent why views as to the likely motivations of Merrifield, or MAB as its advisor, in creating Lot P involve application of Mr Moore's expertise as a valuer. I am prepared to accept that those opinions do involve some application of expertise, by reason that he has experience gained through the practice of valuation of why other developers create lots of similar size and context, and arising from his analysis of certain other business park examples.[399] However given the different contexts for each development and the potential for individual circumstances to affect each of them, extrapolating from these relatively few examples does not give the resulting opinion (as to Merrifield's objective in creating Lot P) significant weight.

316 With respect to the answer to question 2, again in view of the principles discussed above as to how a restrictive covenant is to be construed, I have concluded that it is not open to take into account extrinsic material such as the opinion of a third party as to the purpose of the Restrictive Covenant. I have not, therefore, had regard to Mr Moore's conclusion as to the purpose for which Merrifield imposed the Restrictive Covenant on Lot 301.

317 In its submissions, Merrifield emphasised Mr Moore's opinion as to the likely objective of the Restrictive Covenant being to mitigate potential supply to compete with the sale or leasing of its remaining asset.[400] This was described in his evidence as going to the purpose of the Restrictive Covenant, but it was implicit that it was also tendered as evidence of the practical benefits to Merrifield of the restrictions, for the purposes of the s 84(1) application. Mr Moore's view on the effect of removal of the Restrictive Covenant, having regard to that purpose, was:

While it is difficult to quantify the likely or precise reduction in value or lost revenues to the first plaintiff if the Covenant(s) were removed, it is clear, in my view, that the removal of any such covenant could cause rise [sic] to an increase in supply within the Estate.[401]

318 The necessary relationship between practical benefits (and substantial injury) and a proper understanding of the benefit intended to have been conferred by a restrictive covenant, determined in accordance with the principles as to construction of covenants on Torrens land, has been discussed above.[402] As Mr Moore's evidence is premised on a characterisation of the purpose of the Restrictive Covenant as a protection against competition, which is not consistent with its purpose as properly construed, his evidence is to that extent not relevant on the s 84(1) application. I have, however, also addressed that evidence below, in considering the issue in case I am wrong as to that competition purpose.

319 There are limited further aspects of Mr Moore's evidence that are relevant insofar as he identifies one benefit of the Restrictive Covenant as being to 'assist Merrifield in delivering their masterplan for the MBP'.[403]

320 Mr Moore identifies as one basis for his opinion his research into Merrifield's 'masterplan vision for the Merrifield Business Park', which is in turn based primarily on the development strategy documents, which are in evidence.[404] Mr Moore states that Lot 301 was initially sold to Kaufland for owner occupation and that:

Like many of the facilities which have been developed within the early stages of the Merrifield Business Park, the improvements on the Burdened Land consist of a significant scale as one of the key 'anchor' occupants of the precinct.

By securing these large 'anchor' occupants early in the project this, in my view, increased the attention and market presence of the Merrifield Business Park.[405]

321 This opinion as to the significance of securing large anchor tenants, derived from the development strategy documents, is connected to the amenity focussed purpose of the Restrictive Covenant which arises from its proper construction. I accept it is relevant and admissible on the question of the practical benefits that the Restrictive Covenant conferred. Mr Moore's opinions in his Report as to the uses that could be made of Lot P, having regard to its features,[406] are also relevant.

322 A second report of Mr Moore was tendered in which he gave his opinions in response to those expressed by Mr Bowman and Mr Blakely. I have rejected Mr Bowman's opinion as to the reasonableness or otherwise of certain uses of Lot 301 as inadmissible, and Mr Moore's views on those issues are also not admitted. Mr Moore's responses to Mr Bowman's views on other questions was largely, but invariably, to disagree. The disagreement was primarily based on Mr Moore's opinions as to the purpose of the Restrictive Covenant, namely that it was primarily intended to limit competition in supply of land for sale or lease within the Merrifield Business Park.[407] Again, although I regard evidence based on that premise not relevant for the purposes of the s 84(1) application, I have considered it below in the event that I am wrong on that point.

The parties' submissions on s 84(1)

323 FAL relied primarily on its application under s 84(1)(c), and addressed that aspect of its application first. I take the same approach here. As s 84(1)(c) involves comparing the benefits which the restriction is intended to confer, and does in fact confer, with the situation which would arise if the restriction was modified to assess whether there is serious injury, the discussion of benefits in this context will inform the consideration of the application under s 84(1)(a).

Section 84(1)(c) - no substantial injury if restriction modified

324 Although FAL retained in its pleadings four alternative modifications to the Restrictive Covenant of the five identified in its Counterclaim, it focussed in submissions on the Fourth and Fifth Proposed Modifications which referred to two or three occupancies for the existing Warehouse and for the Freezer. It submitted that the evidence established that those proposed modifications would be consistent with Merrifield's urban design strategy for the Merrifield Business Park, and would have no effect constituting substantial injury to the registered proprietor of Lot P.

325 FAL contended that the modifications it proposed were 'limited and modest' and would not substantially injure Merrifield within the meaning of s 84(1)(c), 'especially if the additional one or two occupancies are limited to within the existing buildings on the site'.[408] The modifications which would involve limitation to the existing buildings were the Fourth Proposed Modification and the Fifth Proposed Modification, both of which limit any further occupancies to the Warehouse and the Freezer already on the site.

326 FAL submitted that the purpose of the Restrictive Covenant must be objectively construed, based on the authorities on construction of restrictive covenants discussed above. FAL submitted that the proper identification of purpose was important as it is the lens through which s 84(1)(c) and (a) are to be considered.[409] It submitted that the purpose was to 'promote large industrial use which was not of an offensive nature in an amenity sense'.[410] As addressed above, FAL rejected any purpose of preventing competition in the sale or leasing of land, and submitted that any such subjective purpose was irrelevant for the purposes of s 84(1)(c).

327 FAL submitted that the proposed modifications would not have an adverse impact with respect to the amenity of Lot P. It relied on the expert evidence of Mr Crowder to the effect that:

(a) Lot 301 could accommodate up to three occupancies without any negative effects on the enjoyment, mode of occupation, amenity or future development of Lot P, and without challenging the strategic intent of the Merrifield Business Park; and

(b) There would not be substantial differences between the benefits conferred by the Occupancy Restriction and those which would remain to an owner of Lot P in terms of the enjoyment, mode of occupation, amenity or future development of Lot P if two or three occupancies, instead of one, are permitted on Lot 301.[411]

328 FAL relied also on the evidence of Mr Bowman which it contended was to similar effect.[412]

329 FAL relied specifically on the evidence of Ms Dunstan, the expert traffic engineer, to the effect that having multiple occupancies on Lot 301 would not have any impact on Lot P, because the design of the road network was based on the volume and composition of traffic typical of an industrial/warehouse precinct, and not on the number of tenancies. The level of traffic due to two or more tenancies using the Warehouse and Freezer, compared to one tenancy as would have been the case with Kaufland, would not be materially different, and in fact the current usage involves lower traffic rates than would have occurred if Kaufland was using the whole of the site at its designed capacity.[413]

330 FAL also submitted that the proposed modifications involving occupancies of the existing buildings would not affect amenity because the Warehouse and Freezer were purpose built to accommodate Australia's largest supermarket distribution warehouse[414] which was intended to be used with 24 hours a day, 7 days a week access, and with a minimum of 300 truck movements per day.[415]

331 FAL also addressed the arguments of Merrifield based on the Restrictive Covenant having an anti-competitive purpose. FAL submitted that even if, contrary to its submissions, the purpose of the Restrictive Covenant was to limit competition from Lot 301 in sales and leasing, the Covenant did not provide that benefit in practice.[416]

332 The evidence of Mr Bowman was to the effect that the Occupancy Restriction in the Restrictive Covenant does not enhance the value of Lot P, and its removal or modification would not negatively affect the value of Lot P. FAL referred to the evidence of Mr Bowman relating to the 'product' that could be offered by Lot 301, being a shared tenancy within the existing Warehouse and Freezer, as compared with the 'product' being offered by Merrifield from Lot P which is a vacant and greenfield site. Merrifield's plans with respect to the Merrifield Business Park and Lot P as disclosed on the evidence were limited to selling vacant land; turnkey solutions involving a purchaser buying land subject to the seller agreeing to build a bespoke facility; or pre-lease solutions, involving an agreement to build a bespoke facility if a customer agrees to enter into a long term lease of the facility. As those were different offerings to Lot 301 with its existing buildings, any modification of the Occupancy Restriction to permit more than one tenancy would not result in Lot 301 competing with Lot P for the same potential occupiers.[417] FAL contended that the evidence of Mr Martin, that Merrifield may speculatively build a building and lease it, must be rejected, or that possibility given little weight.[418]

333 FAL also relied on conclusions by Mr Bowman that because demand for industrial land in Melbourne outstrips supply, any perceived benefit to be derived from the Occupancy Restriction in reducing available land supply in the Merrifield Business Park, or the wider industrial zones of Melbourne, is illusory. Any small increase in supply resulting from modification of the Occupancy Restriction on Lot 301 would create such a minor increase in supply (particularly if the market is, as pleaded by Merrifield, Australia or Victoria wide) as to have no impact on the value of Lot P.[419]

334 FAL submitted that the evidence of Mr Blakely supported these conclusions. It submitted his evidence was to the effect that even if the Occupancy Restriction was removed in its entirety, it would not negatively impact on the ability of the owner of Lot P to lease some or all of it at a reasonable commercial rate and so would not impact the value of Lot P.[420]

335 Relying on the evidence of Mr Crowder, FAL submitted that because the uses to which the Warehouse and Freezer on Lot 301 could be put before and after modification would be controlled by the relevant planning permit, the only difference after modification would be the number of users of the Warehouse and Freezer, and 'whether a warehouse was used by one operator or two operators does not matter'.[421]

336 Finally, FAL submitted that any modification of the Occupancy Restriction would also not have a detrimental precedential effect because many other large lots in the Merrifield Business Park do not have an occupancy restriction, which is a matter which may be considered in determining whether the covenantee would be substantially injured if the restrictions were removed or modified.[422]

337 Merrifield addressed s 84(1)(a) first in its submissions. In response to FAL's arguments with respect to s 84(1)(c), it observed that the test for substantial injury was similar to that under s 84(1)(a). FAL had to prove a negative, 'namely, that the proposed modification or removal of the covenant will not substantially injure those persons entitled to the benefit of the restriction'.[423] Merrifield did not make specific written submissions as to how the legal principles applied to the evidence on substantial injury for the purposes of s 84(1)(c), but relied on its submission as to the practical benefits to Merrifield of the restriction identified for the purposes of s 84(1)(a). It submitted that the evidence of the practical benefits to Merrifield was 'substantial' and included that the restriction:[424]

(a) assists Merrifield implementing the 'develop to hold strategy',[425]

(b) allows Merrifield flexibility in how it develops the MBP;[426]

(c) protects Merrifield against competition from Lot 301;[427]

(d) promotes the urban design and strategy objectives of Merrifield;[428]

(e) assists Merrifield to fulfil the masterplan for development of the MBP;

(f) mitigates the prospects of increased supply within the MBP;

(g) preserves the value of Merrifield's land;

(h) safeguards Merrifield against competition;[429]

(i) assists Merrifield [to] control the market in the MBP via controlling the timing of the release of land.[430]

338 In oral submissions, counsel for Merrifield emphasised the practical benefit of flexibility for Merrifield, in being able to keep all options open with respect to its use of Lot P.[431] It was said that a benefit of the Restrictive Covenant was that 'all of the options are in the hands of Lot P. It can do anything'.[432]

339 Merrifield also submitted that having regard to the anti-competitive purpose that it attributed to the Restrictive Covenant, there was also a substantial injury arising from the precedential or 'flood gates' effect that a modification of the Restrictive Covenant may have. It was said that because there are 'at least 20 substantial lots in the vicinity that could be subdivided or subject to multiple occupancies', if the owners see this modification they would then apply for modification.[433] It was submitted that it was unnecessary to prove that a detriment would be suffered now:

because it's the prospect of the future similar application that is sufficient injury to warrant a refusal of a modification application.[434]

Section 84(1)(a) - impeding reasonable user without securing practical benefits

340 FAL submitted with respect to the first element of the second limb of s 84(1)(a), being that the restriction impedes the reasonable user of the land, that the reasoning of Morris J in Stanhill to the effect that it is sufficient if the restriction impedes a particular reasonable use of the land, rather than all reasonable uses, is sound and should be applied. I have identified the recent authorities which are to the effect that the restriction must impede all reasonable uses at [227]-[231] above. The view expressed in Stanhill, although the [435]ject of some support,435 does not reflect the prevailing state of authority and I approach the issue on the basis that it is necessary for FAL to establish that all reasonable uses of the land are impeded.

341 FAL submits that even applying that test, the evidence is that the Occupancy Restriction will impede all reasonable uses of Lot 301. It contends that the test for impeding reasonable user 'is not necessarily a high bar',[436] in that, in the words used in Re Stani, it requires that the continuance of the unmodified covenants hinders, to a real, sensible degree, the land being reasonably used, having regard to the situation it occupies, to the surrounding property, and to the purpose of the covenant'.[437]

342 Merrifield submitted that FAL had not discharged the evidentiary burden of establishing that the continued existence of the restriction imposed by the Restrictive Covenant would impede the reasonable user of the land, and that it would not secure practical benefits to Merrifield as owner of Lot P.

343 Merrifield emphasised that FAL was required to establish that the restriction will impede all reasonable uses of the land. It noted that the evidence established that FAL was using the land as a landlord, and was at one time leasing the entirety of Lot 301 including the Warehouse and the Freezer to DHL, a single major tenant. It observed that FAL had not led evidence to explain why DHL ceased to lease the Freezer in September 2021.[438] In these circumstances, it was submitted that FAL's reasonable use of Lot 301 was not prevented or hindered by the Restrictive Covenant in any way. Merrifield submitted that FAL's evidence as to matters said to affect use of the land, such as the evidence that DHL was not using the Freezer nor utilising the temperature control infrastructure in the Warehouse, did not relate to restrictions imposed by the Restrictive Covenant.[439] It was not sufficient to establish that a reasonable use that is more profitable is prohibited by the Restrictive Covenant if other reasonable uses remain available.

344 Merrifield then submitted that FAL has also failed to establish the second requirement, namely that the Restrictive Covenant provides Merrifield with no practical benefits. Merrifield submitted that the evidence established the practical benefits of the restriction referred to at [337] above, and that these were consistent with Merrifield's serious intentions with respect to the property.[440]

345 Merrifield says that the MAB Board papers confirm a 'develop to hold strategy', and that in assessing the practical benefits to Merrifield it is important to have regard to the long-term benefits 'with 30 year horizon, of the development of the [Merrifield Business Park]'.[441]

The restrictive covenant does not impede the reasonable user of FAL's Land as the land can be used as a single industrial warehousing and/or logistics estate as evidenced by the proposed use by Kaufland and DHL. It conveys real benefits to Merrifield in that it prevents competition for development, sale and leasing with the Merrifield Land.[442]

Conclusions on modification of the Restrictive Covenant

Modification under s 84(1)(c)

347 FAL must prove, to satisfy the conditions of s 84(1)(c), the negative proposition that one or more of the alternative proposed modifications of the Occupancy Restriction will not substantially injure Merrifield, as the registered proprietor currently entitled to the benefit of the Restrictive Covenant.

348 In accordance with the principles discussed by the Court of Appeal in Sumervale, the starting point in that analysis is to understand the purpose of the Occupancy Restriction, because the injury to which s 84(1)(c) is directed is related to that purpose. The injury must be one against which the restriction was intended to protect.[443]

349 Plainly, the parties' position on that first step of the analysis is materially different. Although both take the position that the Restrictive Covenant has a broadly amenity related purpose of ensuring that Lot 301 remains in appearance and usage consistent with an industrial/business park, Merrifield contends that the Restrictive Covenant also has the purpose of limiting competition from Lot 301 in sales and leasing of land. I have rejected that submission in the context of considering whether the Restrictive Covenant touches and concerns the land.

350 I have concluded instead that the Restrictive Covenant, including the Occupancy Restriction, has the objective of protecting the amenity of Lot P by promoting the use of Lot 301 by a major occupant, using the site compatibly with its situation in a commercial and light industrial business park.[444]

351 I commence the analysis, therefore, with that understanding of the purpose of the Restrictive Covenant, and the principle explained in Sumervale that the type of injury relevant to the application of s 84(1)(c) is injury related to that intended benefit.

352 The analysis on s 84(1)(c), after identification of the object of the restriction, then requires a comparison between the benefits initially intended to be conferred and actually conferred by the restriction, and a consideration of the benefits that would remain after the modification of the restriction.[445]

353 FAL's expert evidence went both to addressing practical benefits and substantial injury related to the amenity or development strategy objectives of the Restrictive Covenant. It was also relied on to refute Merrifield's position that the benefit secured by the Occupancy Restriction was to limit competition from Lot 301 in sales and leasing. The latter evidence is not relevant in assessing whether there is substantial injury of the kind against which the restriction was intended to protect, being the amenity related purpose, which is consistent with key elements of the design strategy. I do, however, consider further below the evidence on whether the Restrictive Covenant did in practice have the effect of limiting competition in sales and leasing of land for the benefit of Lot P, on the premise that it would be relevant if I am wrong in my conclusion as to its purpose.

354 It is necessary therefore to commence with a consideration of whether the evidence establishes that there will not be a substantial injury to Merrifield arising from the loss of the amenity and design strategy related benefits secured by the Occupancy Restriction occasioned by the proposed modifications.

355 FAL's evidence and submissions were directed to proving the negative proposition that modification of the Occupancy Restriction would not result in substantial injury to Merrifield as registered proprietor of Lot P in any of several broad ways:

(a) the modification, particularly if involving the existing buildings, would not result in adverse impact on the visual amenity or mode of use of Lot P, or to Lot 301 remaining consistent with the design strategy for that lot as a site for a major anchor tenant within the Merrifield Business Park (relying on the evidence of Mr Crowder, Ms Dunstan, Mr Blakely and to some extent Mr Bowman);

(b) a modification would not result in a loss of value of Lot P (relying on the evidence of Mr Bowman); and

(c) the proposed modifications to the Occupancy Restriction would not have a detrimental precedential effect (based primarily on the evidence as to the nature of restrictive covenants on other lots in the Merrifield Business Park, and the absence of occupancy restrictions on several other major sites).

Amenity and design strategy related benefits if occupancy in existing buildings preserved

356 The expert evidence relied on by FAL proceeded from an acceptance that at least one of the objectives of the Occupancy Restriction was to benefit the owner or occupier of Lot P by protecting amenity, having regard to the condition and use of Lot 301 and its consistency with use in a modern business park, and also with the objective that Lot 301 as a large site was intended for a major tenant or tenant which would attract other occupiers of the Merrifield Business Park. In that sense the expert evidence addressed the question of benefits and substantial injury as required by s 84(1), in connection with the benefits which were intended to be conferred and the purpose of the Occupancy Restriction, as I have found above.[446]

357 Mr Crowder's evidence focussed on modifications which would use the Warehouse and the Freezer, and in particular on the impacts of having 'two occupancies on Lot 301, with one occupancy in each of the two existing buildings on this site'.[447]

358 Mr Crowder's observations of the planning scheme including that the CDZ2, and the MAB strategy documents including the Structure Plan and the Polaris Precinct Concept Plan were consistent in identifying an objective of a subdivision layout that provides opportunities for large scale and large footprint developments to be located centrally.[448]

359 This is plainly consistent with the content of those documents, in particular, for example, and the following urban design objectives identified in CDZ2:

• 'Encourage major strategic sites with larger building footprints to locate centrally within Precinct 1, (i.e. with the size of lots and built form footprints generally reducing towards the more visible edges)'

• 'Encourage a comprehensive landscape and urban design theme that provides diversity in treatments to break up the large expanses of land and a degree of consistency to contribute to a defined character to the Precinct'

360 Mr Crowder did not, however, accept that the Occupancy Restriction, even if intended to ensure that Lot 301 would remain a large strategic site (consistent with the design objectives) did of itself procure that result in practice. He noted that '[f]rom a town planning perspective':

the potential benefits to Lot P in having large lots ('major strategic sites') containing large single occupancies (potentially comprising 'anchor' industries / employers) would be to enable large businesses to establish in the estate, with the potential for flow-on / down-stream economic (agglomeration or multiplier) benefits. Whether these assumed benefits would actually be conferred to an owner of Lot P is less clear to me, because a large lot that cannot be subdivided or contain more than one occupancy does not of itself necessarily (inter alia):

a) Determine the nature / size of buildings / works on the site.

b) Influence what type of land use may establish on the site (e.g.- industrial, or otherwise).

c) Influence the quality or nature of the business using the site (e.g. - a large employer, a business that generates economic multipliers etc).[449]

361 Mr Crowder expressed the view that these benefits 'could still be achieved on smaller lots or on a larger lot with more than one occupancy'.[450] However he also accepted that an unlimited number of occupancies on Lot 301 'could change the character and/or amenity of the locale, and start to undermine the strategic planning intent for middle/centre of the host precinct.'[451] He was unable to identify at what point the number of occupancies on Lot 301 would begin to have negative effects, as this would depend on a wide range of variables including the number, type and configuration of occupancies on Lot 301. He concluded that any more than three occupancies could begin to undermine 'the strategic intent for the middle/centre of the host precinct'.[452]

362 Mr Bowman gave evidence to similar effect, that in practice the Occupancy Restriction did not result in any benefits in terms of amenity, mode of occupation or future development. This was because matters such as operating times, noise limits and use of Lot 301 and of Lot P were all controlled by 'Environment Protection Regulations' and planning controls.[453] He did not express any specific view as to whether the Occupancy Restriction and its effect on amenity and mode of occupation for Lot P created any increased value of Lot P.

Impact of the modification on amenity and design strategy benefits

363 As to the impact or effect of a modification of the Occupancy Restriction, for the purposes of comparison with the position absent modification, the expert evidence supported the view that a modification which would permit two or three occupancies in the existing buildings on Lot 301 would have no adverse impact on amenity or consistency of use of Lot 301 with the design strategy.

364 Based on his review of relevant elements of the planning framework, Mr Crowder stated that (emphasis added):

In a town planning sense, I note the level of activity on the site, (including car parking) is often based on gross floor area, and not the number of occupancies. I also note the current planning permit for the site does not limit the number of occupancies. Providing no buildings or works were constructed, and there was not change in land use, I do not believe the planning scheme or the planning permit for Lot 301 would prevent multiple occupancies on Lot 301.[454]

Lot 301 could accommodate up to 3 occupancies without having negative effects upon the enjoyment, mode of occupation, amenity and / or future development of Lot P, and / or without challenging the strategic intent for the central portion of the host employment precinct (as outlined in the planning scheme).[455]

366 He acknowledged that there would be a point at which multiple occupancies may compromise the intent of having large lots and larger footprint buildings in the Merrifield Business Park.[456] He also acknowledged that unlimited tenancies would have an adverse amenity effect, and that a material issue which would affect the impact on amenity of multiple tenancies was whether there would be a change of use. If the buildings were used by multiple tenants for storage or warehousing it might be expected to have less impact than if there was a changed use.[457]

367 Mr Crowder considered that having one occupancy in each of the two existing buildings on Lot 301 would have no negative effects on the enjoyment, mode of occupation, amenity or future development of Lot P.[458] He concluded that the existence of a separate tenancy for the Freezer would not affect the mode of occupation or amenity of Lot P because the Freezer is existing, purpose built and the nature of its use will not change whether it is used by a separate tenant or the occupier of the Warehouse.[459] This opinion was consistent with the evidence of Mr Blakely, the leasing specialist, that the existence of a separate tenancy for the Freezer does not impact upon the ability of the owner of Lot P to lease some or all of that lot at a reasonable commercial rate.[460] Mr Moore agreed with Mr Blakely's evidence to that effect.[461]

368 I accept the evidence of Mr Blakely on that limited issue, particularly in light of Mr Moore's agreement. I also accept the evidence and conclusions of Mr Crowder referred to above. His evidence was reasonably expressed and acknowledged the limitations of what opinions could properly be formed as to potential future occupancies in circumstances where no information was provided about the nature of any additional or alternative occupancy than the existing occupants of the Warehouse and the Freezer. Mr Crowder's evidence examined the context of the planning scheme and the documents evidencing the design strategy for the Merrifield Employment Precinct, and acknowledged the importance of Lot 301 being a major site capable of attracting a major tenant. Taking into account that context, his view remains that separate occupancies for the two major buildings on Lot 301 would be consistent with the overall design strategy in place for the Merrifield Business Park. It also supports the proposition that there is no impairment of amenity for Lot P if there are separate occupancies for the Freezer and the Warehouse.

369 A matter that reinforces my view that the condition in s 84(1)(c) is satisfied arises from the comparison between the existing amenity related benefits arising from the Occupancy Restriction and the position with respect to those benefits if the Occupancy Restriction was modified to permit two tenancies. In my view, factual circumstances specifically relevant to Lot 301 which are separate to the Occupancy Restriction make an important contribution to protecting the amenity of the site as it was first established at the time of sale of the site by Merrifield to Kaufland. Kaufland, in the context of its acquisition of Lot 301, constructed the two unusually large buildings on the property, the Warehouse and the Freezer, which are clearly suited to major occupants of the site. That configuration of the land, provided for in the original Kaufland Contract which also imposed the Restrictive Covenant, has of itself some significant effect in giving the land the character of a major site; one suitable for an anchor or significant tenant using the land for commercial or industrial related purposes appropriate for a business park. The major buildings on Lot 301 will not be changed by modification of the Occupancy Restriction to permit separate occupancies of each of those buildings. Those features are probably more significant in terms of enhancing amenity and consistency with the development strategy than the Occupancy Restriction alone. This consideration supports a conclusion that modification of the Occupancy Restriction to permit two occupancies in the existing buildings is unlikely to cause any injury, and certainly not a substantial one.

370 The evidence which focussed most directly and practically on the question of whether there would be a loss of practical benefit, or substantial injury to the proprietor of Lot P in terms of amenity and mode of use of that property if the Restrictive Covenant was modified, was that of the traffic engineer, Charmaine Dunstan. Ms Dunstan was called by FAL to respond to the evidence of Mr Martin about his concerns about potential adverse effects on traffic volumes in the road network around Merrifield Business Park if there was a modification of the Occupancy Restriction.

371 Mr Martin described his concerns 'if the Covenant were not in place'. He stated:

[T]he road network infrastructure has been designed to cater for one large occupier. If Lot 301 were able to be leased to multiple tenants or subdivided and sold to multiple occupiers, this could have a detrimental impact on the road network infrastructure. It would add a significant volume of traffic to the road network and would therefore adversely affect the network's ability to appropriately service the MBP as a premier industrial estate. MAB would have designed the road network differently if it had known that there would be multiple tenants or occupiers on Lot 301. At this stage of the MBP, after developments have already progressed in accordance with MAB's intentions regarding lot size, permeability and built form within the MBP, there are limited steps which MAB would be able to take to address the detrimental impact which would be caused to road network infrastructure....[462]

372 The basis for these concerns was not explained further in his witness statement nor in his oral evidence at the hearing. He accepted that he was not involved in the traffic engineering assessment relating to the development of the Merrifield Business Park by consultant engineers TTM Consulting in 2007.[463]

373 Ms Dunstan expressed her opinion as a road traffic expert that:

(a) the road network infrastructure at the Merrifield Business Park had not been designed to cater for one large occupier at Lot 301 but had been designed for the volume and composition of traffic that is typical of an industrial and warehouse precinct;

(b) the permitted usage of Lot 301 as a distribution centre for a chain of large supermarkets is at the high end of traffic generating development, and that if the existing buildings were used by two, three or more tenants for distribution uses, the traffic generation profile would be similar to the planned use and there would be no greater level of traffic than the road usage anticipated to be generated by Kaufland;

(c) warehousing or light industrial usages by tenants operating within the existing buildings would be likely to generate less traffic than the planned use by Kaufland; and

(d) if Lot 301 was broken down into smaller components with tenancies involving a high office component, the lot may generate a higher level of traffic than planned for, but would involve less heavy vehicle traffic. [464]

374 Ms Dunstan observed that Lot 301 has two vehicle access points and excellent internal circulation, with internal roadways extending around all sides of both buildings. She would not have designed the road network of the Merrifield Business Park or internal roadways any differently whether there were two, three or more tenancies within the existing building footprint, if there was no change of use.[465]

375 Ms Dunstan also made observations of the usage of Lot 301 as at 27 October 2023, when DHL and Laverton Cold Storage were in occupancy and using the site. She concluded from those observations:

In my opinion, the car parking occupancy and traffic generation rate of the current usage of the site which is occupied by DHL and LCS is significantly lower than what would have occurred if Kaufland was using the whole of the site under a single occupation at its designed capacity.[466]

376 Ms Dunstan was cross-examined. She affirmed her view that there would be no material impact on the internal traffic arrangements on Lot 301 if it was to be leased to two or more tenants.[467]

377 Mr Martin was questioned about Ms Dunstan's conclusions. He accepted that he had no expertise in traffic engineering, and that evidence on that subject matter was provided by consultants to Merrifield.[468] Mr Martin also accepted that he had not done any analysis of the impact of the traffic usage of the two occupants of Lot 301, DHL and Laverton Cold Storage.[469] He was asked whether his concerns about traffic would be reduced if the restriction on subdivision remains in the Restrictive Covenant (which would be the case even if the Occupancy Restriction was modified). His evidence was that it was 'difficult to know'.[470] He said that it was difficult to know whether more than one tenant in the existing buildings would generate additional traffic without knowing who the tenants would be.[471] He did not disagree with Ms Dunstan's conclusions that the intended use for Lot 301 of being a distribution centre for Kaufland was at the high end of traffic generating developments.[472]

378 Ms Dunstan's evidence, as outlined above, was strong evidence that a modification of the Occupancy Restriction to permit two, three or more tenants would not have any adverse impact with respect to traffic flow and usage on or around Lot 301, or for Lot P. The traffic usage as intended when the Occupancy Restriction was imposed allowed for what was described by Ms Dunstan as being at the high end of traffic generating developments. Moreover, a study of traffic during the current unauthorised occupancy of two tenants DHL and Laverton Cold Storage showed a more moderate level of usage than would have been expected by Kaufland. The evidence was to the effect that there would need to be a significant change of usage and volume of tenants (for example a change to a high office component) for there to be a material change in volume of traffic but even then it may not be an adverse change overall as it would be a change from heavy vehicles to cars. There was no material challenge to any of this evidence by Merrifield.

379 I am satisfied that there would be minimal, if any, adverse effect on amenity benefits, including considerations of consistency with design strategy, if the Occupancy Restriction was modified to permit a tenancy in each of the buildings on Lot 301. I reach this conclusion having regard to the evidence of Mr Crowder and Ms Dunstan that there would not be an adverse effect on amenity or usage of Lot P if the Occupancy Restriction was modified, the limited relevant and admissible evidence of Mr Blakely on this issue, and taking into account the evidence of Mr Martin

380 I have considered the evidence of Mr Martin that the main purpose of the Restrictive Covenant was to protect the integrity of the design and planning framework,[473] and that if the Restrictive Covenant was 'not in place', there could be adverse effects on the road network infrastructure and the urban design and strategy objectives of the 'egg yolk' model could be jeopardised.[474] Mr Martin did not identify any clear reason why a modification of the Occupancy Restriction component only, to permit more than one occupancy, would have that effect. Mr Martin accepted that the proposal to simply have two or three tenancies within the existing buildings would be of lesser impact than permitting subdivision of the land,[475] and acknowledged that having two tenancies in the one building is quite common in the industrial market.[476]

381 Merrifield's expert, Mr Moore, did not address questions of amenity benefits conferred by the Occupancy Restriction, as it was his view that the Occupancy Restriction was imposed to protect future development prospects of Lot P by directing tenant and/or purchaser demand to Lot P,[477] and his report was premised on that purpose.

382 In my view, the evidence as a whole establishes that the amenity related benefits of the Occupancy Restriction, and the benefit in protection of that element of the design strategy for the Merrifield Business Park which involves securing major tenants in large properties in the centre of the Park, would remain even if the Occupancy Restriction was modified to permit one occupancy in the Warehouse and one occupancy in the Freezer. I accept for that reason that there would be no substantial injury to Merrifield as owner of Lot P, if the Occupancy Restriction was modified to permit two occupancies, one in the Freezer and one in the Warehouse.

Second and Third Proposed Modifications not limited to the existing buildings, and Fourth Modification (three occupancies in existing buildings).

383 The evidence discussed above of Mr Crowder, and that of Mr Blakely (with which Mr Moore relevantly expressed partial agreement), was unequivocally to the effect that modification of the Occupancy Restriction to permit two occupancies, one for the Freezer, and one for the Warehouse, would not result in substantial injury to the owners of Lot P. The situation with respect to any more than two occupancies was more nuanced.

384 The evidence did not, in my view, establish on the balance of probabilities that the Second Proposed Modification or the Third Proposed Modification (which involved modification to permit further occupancies but not limited to the existing buildings) will not substantially injure the proprietor of Lot P. There was little evidence addressed to the question of what injury might arise if occupancies could be created which were not restricted to the existing buildings. No evidence was given on behalf of FAL as to what any future occupancy may be, including what use or whether it would involve any additional infrastructure on Lot 301. The expert evidence also did not address these scenarios with any specificity or clarity.

385 Mr Crowder's evidence addressed the First to Third Proposed Modifications which were then identified in FAL's Counterclaim. Those modifications did not stipulate that further occupancies would be in existing buildings on Lot 301. However, it was implicit in Mr Crowder's first report that his opinion as to the absence of effect on amenity if there were up to three tenancies on Lot 301 was based on there being no change to the buildings on the land or the usage of the property. This was in part because the planning permit was premised on the existing buildings and usages.[478] He also placed significant weight, in expressing the view that there would be no negative impacts of two tenancies in the Freezer and Warehouse, on the fact that the buildings are existing.[479] He stated that the mode of occupancy on Lot P will not be negatively affected by up to three occupancies on Lot 301, because '[t]he uses for which Lot P could be put will not alter or be influenced if there are up to 3 occupancies on Lot 301' and the 'level of activity' on Lot 301 would not be altered, '[p]articularly if they are within the existing or approved buildings on Lot 301'.[480] Considering the entirety of his evidence, I consider that it provides support only for modifications which are limited to occupancies in the existing buildings on the property, as proposed in the Fourth and Fifth Modifications.

386 The planning framework may create some limitations on the nature of any further buildings or infrastructure which would be approved on Lot 301. The planning permit given when Kaufland was seeking approval to build the Warehouse and the Freezer was subject to the condition that:

The layout of the use and buildings and works shown on the endorsed plans must not be altered without the prior written consent of the responsible authority.[481]

387 The possibility remains that approval could be given for changed use of the land and buildings. However, it is relevant that this was regarded as an appropriate limitation under the planning scheme at the time the permit was granted which is close in time to when the Restrictive Covenant was imposed. It indicates an aspect of the amenity that the Restrictive Covenant intended to preserve.

388 As to whether the evidence supports two or three occupancies, in existing buildings, Mr Crowder's views that up to three occupancies would not affect amenity or the character of the location were somewhat qualified. He expressed the view that three occupancies 'may - or may not - alter the level of activity on Lot 301' but that any changes to amenity were unlikely to be material. His views on the impact on amenity and consistency with design strategy of three occupancies were not expressed with the same degree of confidence as his views that two occupancies in the existing buildings would not have any impact on amenity.

389 The identified basis for Mr Crowder's view that three occupancies would not impact amenity was simply that '[t]he uses for which Lot P could be put will not alter or be influenced if there are up to 3 occupancies on Lot 301' and the 'level of activity' on Lot 301 would not be altered'.[482] The conclusion as to there being no change of use or level of activity was not further explained but appeared to be based on his earlier observations as to the planning permit use restrictions. Although not specifically identified by Mr Crowder, the conclusions as to no alteration of use would be supported to some degree by the restrictions on use in the Restrictive Covenant, for which no modifications are proposed. However it was not apparent why uses other than the existing use, and which were not prevented by the Restrictive Covenant, would be prevented. The configuration of the Warehouse and the Freezer would be likely to entail some limitations to potential uses. However potential future changes to the internal structure of the Warehouse, or some change in use, would not be precluded even if future occupancies were limited to those buildings.

390 Mr Crowder's evidence was that to accommodate more than one occupancy on Lot 301, the road network would have to be laid out in a manner that achieved efficient and safe outcomes.[483] Having regard to Ms Dunstan's evidence that three or more occupancies could safely be accommodated, it is possible to accept that there would not be an adverse impact on the road network infrastructure if there were up to three occupancies on Lot 301.

391 Ms Dunstan's report was less conclusive on the issue of whether car parking on Lot 301 itself could accommodate additional occupancies across a range of uses.[484] She concluded on the basis of a sample of vehicle movement in October 2023 that the car parking occupancy of DHL and Laverton Cold Storage was significantly less than would have occurred if Kaufland was using the site,[485] but this did not address the issue of other occupancies involving different usages, or having more than the two occupancies in place at the time of her sample. The report observed that the car parking provision of 341 car spaces corresponded to 0.37 spaces per 100m2 of warehouse floor area, or one space per 272m2, which is lower than the statutory car parking requirement for warehouses in the Hume Planning Scheme, of 2 spaces for each premises plus 1.5 spaces to each 100m2 of net floor area. A permit had been granted to limit the statutory car parking requirement in this case.[486] Nevertheless, it remained the case that car parking provision was significantly under that which was generally required by the statutory scheme.

392 It was therefore a realistic possibility that parking on Lot 301 would be inadequate for more than two tenancies, or tenancies involving alternative uses. If the necessary parking could not be provided on site, the need for workers or visitors at the site to find alternative parking in the vicinity could create some adverse impacts for surrounding properties, including Lot P.

393 FAL's evidence as a whole provided some support for the conclusion that three occupancies on Lot 301 would not adversely affect amenity for Lot P. However, I do not accept that FAL has established on the balance of probabilities that three or more occupancies would not cause some material, non-fanciful injury to Lot P.[487]

394 The relevant practical benefit which I accept is conferred by the Restrictive Covenant generally, and the Occupancy Restriction more specifically, relates to the amenity of Lot P in ensuring that Lot 301 is used for uses compatible with occupation by a large tenant using the land for commercial or light industrial uses, consistent with a business park. The evidence as to the development strategy for the Merrifield Business Park, endorsed in the CDZ2 and related strategic planning documents, which forms part of the context in which the practical effect of the Occupancy Restriction is to be considered, established that it was important that Lot 301 is to be occupied by significant tenants who can act as anchor tenants in the Business Park. The evidence of Mr Crowder that this benefit was procured by the planning framework and restrictions, and not a practical benefit also secured by the Occupancy Restriction, was not fully explained. I accept that this benefit is contributed to by the planning framework but I have concluded that the Occupancy Restriction does also in practice contribute to securing that benefit of consistency with the design strategy.

395 The potential that more than one tenant of the Warehouse or Freezer may have an adverse impact on amenity remained open, in my view, on the evidence. The possibility of two tenants of the Warehouse giving rise to multiple signages and potential for visual inconsistencies, with the loss of the appearance of an anchor tenant, was not addressed. The potential for existing car parking to be inadequate to meet the needs of more than two occupancies, which would depend on the nature of the proposed uses in occupancies, also leaves open the potential for adverse impacts on amenity for Lot P.

396 There being no specific proposals as to how a dual occupancy of either building would look or operate in practice, the expert evidence did not address these amenity related issues with any real specificity. It may be that any impact would be minimal, and that the injury would not constitute substantial injury within the meaning of s 84(1)(c). However the evidence did not, in my view, establish on the balance of probabilities that the impact of three occupancies across the Freezer and Warehouse would not cause substantial injury to the proprietor of Lot P, the neighbouring lot.

Whether modification would result in loss of value to Lot P

397 It is necessary before expressing any final conclusion on s 84(1)(c) to address two other ways in which Merrifield submitted it would incur substantial injury if the Occupancy Restriction was modified. One was that it was a practical benefit of the Occupancy Restriction that it increased the value of Lot P.

398 FAL's valuation expert Mr Bowman gave evidence that modification of the Occupancy Restriction would not have any impact on the value of Lot P. His analysis of the impact on value of the Occupancy Restriction proceeded from a consideration of whether the Occupancy Restriction added value arising from any effect on limiting competition on sales and leasing from Lot 301. He observed:

In my opinion a covenant restricting occupancy is only potentially beneficial when there is an excess of supply over demand, which is not the current situation. The perceived potential benefit of a covenant which restricts occupancy on the burdened land is to reduce available land supply and therefore reduce market competition in an attempt to increase the price of the property favoured by the covenant.[488]

399 As the substantial injury or practical benefit to which s 84(1) is directed is related to the intended objects of the Restrictive Covenant, and I have found that the objects of the Restrictive Covenant do not include, properly construed, a purpose of limiting competition in sales or leasing, this evidence is of limited relevance. I do revisit it below where I consider the position if I am wrong as to my conclusion as to the object of the Restrictive Covenant.

400 Mr Bowman was asked whether there were substantial differences between benefits conferred by the Occupancy Restriction and those which would remain after the proposed modifications. He expressed the view that the Occupancy Restriction did not in practice achieve benefits relating to amenity or consistency with development strategy which were not already secured by the planning framework, nor by limiting sales competition within the Merrifield Business Park or increasing the value of Lot P. There would therefore be no differences from a valuation perspective between benefits conferred by the Occupancy Restriction and those which would follow after modification.[489]

401 Merrifield submitted that the evidence was that the practical benefits of the Occupancy Restriction included that it 'preserves the value of Merrifield's land', citing the expert report of its valuation expert Nicholas Moore. Mr Moore's evidence did not, however, express any view as to whether the Restrictive Covenant or the Occupancy Restriction had the practical effect of preserving the value of Lot P. He was not asked to express any view as to the effect on the Restrictive Covenant or the Occupancy Restriction on the value of Lot P. As discussed above, he was asked questions directed to why a covenant of the kind of the Restrictive Covenant would be placed on lots in a business park such as the Merrifield Business Park; and why MAB would have created a lot in the size and location of Lot P. The evidence relied on by Merrifield as establishing that the Occupancy Restriction preserves the value of Merrifield's land did not in fact establish that. Rather, in Mr Moore's opinion, the restrictive covenants, including the Covenant on Lot 301, had been placed on the lots in the Merrifield Business Park 'for the following broad reasons:

• To assist [Merrifield] in delivering their masterplan for the Merrifield Business Park;
• To mitigate the prospect of increased supply (land and built-form) which could compete with the sell down of the remaining Estate; and
• To preserve the value of their remaining asset.'[490]

402 The opinion was only as to what was likely to have been intended, and no opinion was ventured as to whether any such objective of preserving value had in practice been achieved.

403 In the absence of any evidence to contradict the evidence of Mr Crowder that the Occupancy Restriction does not in practice create any value that would not remain after modification, I accept that there is no substantial injury arising by reason of any reduction in value or loss of ability to preserve value.

404 It was also submitted by Merrifield that the Occupancy Restriction enhances the value of Lot P because it 'allows Merrifield flexibility in how it develops the MBP',[491] based on the evidence of Mr Martin that:

Merrifield's strategy of developing other parts of the precinct maximises the value of the future development which may be undertaken on Lot P. The value of Lot P will be greater if there are mature, large scale anchor occupiers in other parts of the precinct.

405 Putting aside the difficulty that Mr Martin is not a valuer so that his opinion on property valuation does not proceed from the requisite expertise, this evidence does not go far in establishing that a modification of the Occupancy Restriction to allow more than one occupancy will decrease the value of Lot P by impacting the objective of having an anchor occupier on Lot 301, or even decrease the development options on that Lot. There are already large scale anchor occupancies in the Merrifield Business Park (including Ford, Dulux, Bunnings and DHL). Modification of the Occupancy Restriction to permit two tenancies on Lot 301 would not materially alter that position.

406 It was also submitted for Merrifield that the Occupancy Restriction protected Merrifield's range of options, and the ability to use it for the 'highest and best use', which was 'part of the flexibility issue, being a value in itself'.[492] There was no evidence as to how that flexibility created a difference in value of Lot P; nor how in effect the Occupancy Restriction protects that flexibility in any practical way; nor that it would cease to offer some practical protection if it was modified to permit two occupancies. Importantly, even if it was accepted that in some way the restrictions on Lot 301 provide a benefit to the owner of Lot P simply by enhancing flexibility as the range of potential uses for that land, this would be a benefit of the Occupancy Restriction. It does not follow that loss of that freedom and complete flexibility would also constitute an injury for the purposes of s 84(1)(c). The Court of Appeal in Sumervale observed that s 84(1)(c):

hinges on the existence of a substantial injury and not merely the loss of the benefit of the restriction. The concept of injury connotes some harm or detriment and its use in the subsection suggests that it is not the same thing as the loss of the benefit of the restriction itself. Rather it is something that arises as a consequence of the loss of the benefit of the covenant.[493]

407 Here, if the Occupancy Restriction, of its own force, were to enhance the options the owner of Lot P has for that land (a matter not supported by the evidence in this case), this would be a benefit enjoyed by the owner. A reduction in that benefit by limiting in some way that full range of options would not necessarily constitute injury (or substantial injury). I am satisfied that there is in fact no substantial injury arising from the modification of the Occupancy Restriction for any reason relating to a loss of flexibility to the owner of Lot P.

Whether any precedential effect of granting the modification sought would create substantial injury

408 Finally, it is necessary to consider Merrifield's submission that substantial injury, which would be caused to it if the modification were to be granted, by reason of the precedent it would set for the proprietors of other lots in the Merrifield Business Park to seek modifications.

409 FAL submitted that the evidence as to the conditions on which other lots were held (which is admissible on the question of whether a covenantee would be substantially injured if a restriction was removed or modified)[494] was to the effect that there could not be any detrimental precedential effect if the Occupancy Restriction was modified.

410 The evidence as to existing restrictive covenants and occupancy restrictions on lots within the Merrifield Business Park, consisting of title documents from Register searches, was as follows.

(a) Of the large lots in Merrifield Business Park which had already been sold by Merrifield, several had no occupancy restriction. These included the following (the first three of which Mr Martin expressly accepted were major strategic sites in the park):[495]

(i) The Ford site at 8.764 ha, which had no occupancy restriction and prohibits subdivision only prior to 31 December 2040.[496]

(ii) The Dulux site at 17 ha, which has a restrictive covenant which prohibits applications for development of the land which 'will or will have a reasonable likelihood of resulting in a materially adverse impact on use and development' of Lot P. That covenant is expressed to expire on the date that the Dulux lot is no longer used for or in conjunction with the manufacturing, processing or distribution of paint and paint products and their related constituents (so would not apply to a subsequent purchaser not in the business of manufacturing paint products). [497]

(iii) The RMA site at 3.44 ha, which has no occupancy restriction but prohibits subdivision prior to 31 December 2040.[498]

(iv) The Bunnings site at 3.68 ha, which does not contain an occupancy restriction but does prohibit subdivision without consent until 30 June 2031.[499]

(v) Other sites contained covenants including Occupancy Restrictions which were expressed to benefit land other than Lot P.[500]

(vi) One site, the Aeroklas site of 1.46 ha, has an Occupancy Restriction, but that restriction is subject to the proviso that the land may be used as 'shared occupancy by the occupier' of that lot from time to time, and its 'Related Entities and or Related Body Corporates'.[501]

(b) The lots in the Merrifield Business Park which did have Occupancy Restrictions in favour of Lot P were smaller in size than Lot 301. They included Lot 603 of 4.57 ha; the Lincraft site of 3.02 ha on which a large building had already been constructed; and Lot 706 occupied by Orley Nominees Pty Ltd at 1.39 ha. Most were not the central lots designed for large anchor occupancies but were smaller lots around the perimeter of the Merrifield Business Park.

411 David Crowder, the town planner, gave evidence that the unique size and circumstances of Lot 301 at 27.99 ha, including the two large buildings already on site, and the specialist nature of the Freezer building, had the consequence that allowing two occupancies would not create any precedential outcomes.[502] He was not cross-examined on that opinion.

412 An important factor in considering the potential injury that may be caused by any precedential effect is the significance in the development strategy of the large central sites attracting anchor tenants. Merrifield's position was that the Occupancy Restriction protected against use of the land which would depart from that strategy. However it is difficult to attribute real significance to the protective effect of the Occupancy Restriction with respect to securing anchor tenancies when several of the other major sites having that same central location and occupied by anchor tenants that were not burdened with an occupancy restriction, notably the Ford, Dulux and RMA sites. Multiple anchor tenants have now been attracted, and smaller lots are now also being sold and occupied.

413 More importantly, in considering precedential effect, in circumstances where multiple large sites which have been sold in the Merrifield Business Park are not burdened by an occupancy restriction, there is no potential for further applications for modification to be made based on a precedent in this case. There are no occupancy restrictions on those large lots to be modified.

414 There are occupancy restrictions on other, smaller sites. However the extent of any precedential effect established by a modified occupancy restriction in this case would plainly depend on the extent of any modification and the nature of the subject property. A modification to permit two occupancies in the existing buildings on Lot 301 would, on the land the size of Lot 301, create occupancies of very significant size still in excess of the size of the other lots in the Merrifield Business Park which do have Occupancy Restrictions. The modification application on this unique site in the Business Park is unlikely to be regarded as creating any precedent which would suggest to owners of burdened land, or a Court which would be responsible for granting any modification, that more than one occupancy must also be permitted on the smaller sites with different features.

Effect of the totality of evidence - the Fifth Proposed Modification will not substantially injure Merrifield

415 Taking into account all of the evidence tendered by FAL, and the evidence tendered in response by Merrifield, I find that FAL has discharged the burden of establishing that modification of the Occupancy Restriction to permit two occupancies, one in each of the existing buildings on Lot 301 (the Fifth Proposed Modification) would not substantially injure Merrifield, which, as proprietor of Lot P, is entitled to the benefit of the restriction. To the extent that the related Merrifield companies, as purchasers of that land, are or will be entitled to the benefit of the restriction, I also find that they will not be substantially injured by the modification.

No substantial injury even if (contrary to the primary conclusion) the purpose is understood as being to limit competition

416 I observed above that I did not regard as admissible the evidence based on an opinion or an assumption that the purpose of the Restrictive Covenant or Occupancy Restriction was to protect against competition. I considered, based on the observation in Sumervale that the substantial injury must be related to the benefits that the restriction was intended to procure, that evidence that the restriction provided benefits of protecting against competition was not relevant to the s 184(1)(c) analysis, as those were not intended benefits of the Occupancy Restriction. I consider that it is consistent with Sumervale that the practical benefits relevant to s 84(1)(a) must also have that relationship to the purpose of the restriction. I have found, applying the relevant principles of construction, that the Occupancy Restriction did not have the purpose of protecting Merrifield against competition or limiting any increase in supply from Lot 301. However, as Merrifield's submissions were substantially premised on the proposition that this was one of the important objectives of the Occupancy Restriction, and that the practical benefits secured by it included protection against competition, I will address those submissions here in the event that I was wrong in either of the above conclusions.

417 I have concluded that even if, properly construed, the purpose and intended benefits of the Occupancy Clause included protecting the owners of Lot P from competition from Lot 301 in sales and leasing:

(a) those benefits were not conferred in practice; and

(b) modification of the Occupancy Restriction to permit two occupancies on Lot 301, in the existing configurations of the Warehouse and the Freezer, would not have any material impact on any benefit relating to restricting competition that is conferred by the Occupancy Restriction.

The practical benefits intended to be conferred by the Occupancy Restriction

418 Merrifield submitted that the intended object of the Occupancy Restriction was to limit competition in sales and leasing from Lot 301 and in the Merrifield Business Park generally. The evidence is, however, entirely contradictory as to whether this was in fact a purpose or intended benefit of the Occupancy Restriction. Even if, contrary to my conclusions above, it was possible to look at the subjective intentions of the parties, or third party opinion, as to the purpose of the Restrictive Covenant or more specifically the practical benefits which were intended to be conferred by it, the evidence is inconsistent as to what in fact the purpose and intended benefits were.

419 The only lay witness to give evidence with respect to the benefits that Merrifield intended to procure by the Restrictive Covenant was Michael Martin, a former officer of MAB (the development manager for Merrifield's operations). Mr Martin's evidence in his witness statement was that when Merrifield contracted with Kaufland to sell Lot 301:

In circumstances in which Kaufland is a foreign entity with no history of conducting business in Australia, Merrifield requested the sale provide for the registration of a restrictive covenant on title (Covenant). Kaufland agreed without any objection and the Covenant was included in the contract of sale.[503]

420 Mr Martin also gave evidence at trial of the purposes that MAB had with respect to placing the Restrictive Covenant. He did not give evidence as to whether Merrifield adopted those purposes, nor how MAB's objectives should be attributed to Merrifield as the covenantee and proprietor of Lot P. He gave evidence that MAB:

introduced restrictive covenants on all of our business parks that I've ever been involved with at MAB Corporation, and we do that for a number of reasons. One is to protect the values of all of the purchasers that are coming in and any land that we retain and the other is to... protect and deliver on the urban design frameworks that are established in all the planning documentation.[504]

421 He did not refer in that evidence to a desire to restrict competition as being one of the reasons that the Restrictive Covenant was placed on Lot 301. In cross-examination, he expressly rejected the proposition that the purpose of the Restrictive Covenant was to stop developers acquiring Lot 301 and releasing tenancies in competition with the land Merrifield still held in Lot P.[505] He said that this may be 'a consequence of the covenants but the main purpose of it was to protect the integrity of the design and planning framework'.[506]

422 Secondly, insofar as Mr Martin relied on Merrifield's development strategy as background to why the Restrictive Covenant was introduced (which could potentially be relevant to the practical benefits that the restriction was intended to secure), Mr Martin acknowledged that this was a strategy that had been developed before he joined MAB. He also accepted that he had not been involved in advising on inclusion of the Restrictive Covenant in the contract of sale of Lot 301.[507] In fact, no officer of Merrifield or person who was involved in advising Merrifield on the introduction of the Restrictive Covenant on the sale of Lot 301 to Kaufland gave evidence.

423 Finally, it was not possible to give significant weight to Mr Martin's limited evidence about the Merrifield development strategy and the purpose or intended benefits of the Restrictive Covenant.

424 First, he had never been an employee of Merrifield (which was the party to the Kaufland Contract in which the Restrictive Covenant was imposed), and had not been involved in that transaction. There was minimal evidence about the role of MAB and the extent to which Merrifield was implementing any MAB directions, advice or strategy.

425 Secondly, Mr Martin's original evidence was not consistent with the documentary evidence. He gave evidence in his witness statement that Merrifield 'introduced the use of restrictive covenants across all lots in [the Merrifield Business Park] (including Lot 301) in order to protect and deliver on the urban design and development outcomes articulated in the Planning Framework and [Merrifield Business Parks'] adopted urban design approach and ultimate development plan', and that this also 'served the purpose of maximising the value of Lot P'.[508] He gave evidence that the terms and effect of the restrictive covenants on the lots were the same in each case.[509] However, in cross-examination Mr Martin accepted that some sites within the Merrifield Business Park had been sold without any restrictive covenant in place, and that some of the restrictive covenants which were in place did not contain any restriction to the effect of the Occupancy Restriction, so that the terms were not in fact the same. He accepted specifically that not all of the lots contained a restriction on the creation of more than one occupancy.[510]

426 The evidence was in fact that the restrictive covenants on several other large sites within the Merrifield Business Park, sites occupied by Dulux, Ford, RMA and Bunnings, were not subject to any restriction on the number of occupancies which could be created on the site. The Dulux and Bunnings sites also did not prohibit subdivision. Mr Martin accepted that the absence of any occupancy restrictions on other major sites in the Merrifield Business Park 'sat satisfactorily within the Merrifield development strategy for the Merrifield Business Park',[511] which was not consistent with his original evidence that restrictive covenants on all major sites were a material requirement necessary to 'protect and deliver on the urban design and development outcomes'.[512]

427 The other source of evidence as to the purpose of the Restrictive Covenant was the expert evidence of Mr Moore which addressed questions as to why a developer would have created a lot in the size and location of Lot P, and for what reasons or purposes a developer would place a covenant like the Restrictive Covenant over lots in a development like the Merrifield Business Park. Mr Moore's evidence to the purpose of a covenant 'of the type' of the Restrictive Covenant is inadmissible. The question was apparently worded with an intention to elicit an answer which did not directly involve the expert (who obviously had no involvement in the making of the contract which imposed the Restrictive Covenant) giving his opinion as to the Covenant's purpose. Such evidence would plainly be inadmissible having regard to the principles of interpretation of a restrictive covenant on Torrens land. It would also be inadmissible by reference to the ordinary principles of interpretation of commercial contracts. Those principles, which countenance extrinsic evidence of surrounding circumstances, would not permit recourse to a third party's ex post facto views of what a contract was intended to achieve. That is not evidence of surrounding circumstances. Although the questions were worded in such a way as to elicit views of what the purpose of this type of covenant would be, or would be intended to achieve in like circumstances (the relevance of which is doubtful), the evidence Mr Moore actually gave was directed to why, in his opinion, the Restrictive Covenant was placed on Lot 301.[513] He gave his opinion on the purpose of introducing the Restrictive Covenant.[514] That evidence is inadmissible.

428 Mr Moore's evidence as to why covenants over land in the Merrifield Business Park were 'likely' introduced - being to 'prevent another developer from entering the business park and creating competing supply' - could arguably be regarded as of a somewhat different character, and as intended to be evidence of the practical benefit of the covenants.[515] If (contrary to the view I have expressed above) practical benefits, to be relevant for the purposes of s 84(1)(a), do not need to be of the kind which were intended to be conferred by the restrictive covenant, that evidence would be admissible and relevant. It would also be broadly consistent with Mr Martin's evidence that although the Restrictive Covenant was not intended to stop developers acquiring Lot 301 and releasing tenancies in competition with Lot P, the Covenant did have that consequence. [516] The next issue would then be if the Restrictive Covenant did in practice have that effect.

No practical anti-competitive benefit in effect

429 Even if it could be accepted that the Occupancy Restriction was intended or designed to confer a benefit of limiting competition from Lot 301 in the sale and leasing of land, there is no evidence that it actually conferred that benefit in practice. That is the effect of the expert evidence, to which I will come. There is first an issue as to whether the factual premises underlying the opinions were established on the evidence.

The limited evidence on Merrifield's 'develop to hold' strategy

430 Merrifield submitted that the practical benefit of the Restrictive Covenant included that it 'assists Merrifield implementing the develop to hold strategy'; 'allows Merrifield flexibility in how it develops the [Merrifield Business Park]', 'safeguards Merrifield against competition', 'preserves the value of Merrifield's land', and 'assists Merrifield to control the market in the [Merrifield Business Park] via controlling the timing and release of land'.[517] It relied on the evidence of Mr Martin and the expert valuer Mr Moore in this respect.

431 Mr Martin's evidence was that the Restrictive Covenant gave rise to the benefit of preventing another developer from entering the Merrifield Business Park and creating competing supply, 'particularly in the context of Lot P being reserved for future redevelopment'.[518] However, the evidence as to Merrifield's intentions for Lot P, whether it was reserved for future development, and for how long, was limited. It did not address Merrifield's current intention with respect to Lot P. As previously noted, Mr Martin, who gave the only evidence on the issue, was not at any time an officer of Merrifield. He was no longer an employee of MAB at the time of giving evidence in September 2024, and it was not clear at what point after his witness statement, dated 1 September 2023, he had left MAB.

432 Mr Martin relied in his evidence on the MAB Board papers[519] and the Merrifield Development Strategy of September 2015.[520] They both predated by some years the June 2018 Kaufland Contract in which the Restrictive Covenant was introduced. The documents refer to a hold strategy in fairly general terms, including noting that there was discussion of the 'concept of "holding" a part of the Merrifield Business Park'.[521] However there was no identification of which part of the Park would be subject to that strategy. The relevant document also made clear that it was not a fixed strategy by saying:

Noting that a decision to implement the strategy could be reviewed at any time. That is, the shareholders could review and change the strategy at any time in the future.[522]

433 There was no evidence given of a hold strategy for Lot P being maintained at the time of the Restrictive Covenant being imposed in June 2018, nor at times after that.

434 The limited evidence as to actual planning for future uses for the land comprising Lot P was evidence given by Mr Martin and Mr Perry. Mr Martin gave evidence as to Lot P having been identified 'as the preferred location for the develop to hold strategy', on the basis that it was one of the largest lots in the [Merrifield Business Park], would be 'the last logical development front... with the Eastern and Northern parts of the [Merrifield Business Park] being developed first, leveraging existing and planned servicing infrastructure', and located on the border with the Merrifield City Centre.[523] The evidence did not identify how or by whom Lot P had been identified for that purpose, other than by the general reference to the MAB Board papers (which did not refer to Lot P), nor whether it remained the current proposal.

435 The limited evidence as to planning for the Lot P land was that the land comprising Lot S, which was a significant part of the Lot P land, had been sold to the holding companies, subject to a Memorandum of Understanding which was not in evidence. The only evidence as to the Memorandum of Understanding was Mr Perry and Mr Martin's broad description of it as providing for the holding companies to enter into a partitioning agreement and then subdivide the land.[524] There was also evidence given by Mr Martin (whose role with respect to the holding companies was not made clear) that they intended to develop the land comprising the former Lot P in accordance with a masterplan in which, according to a concept plan referred to in his witness statement, the land was divided into around 20 lots.[525] He said:

Lot P was always intended to be held by the owners of Merrifield, so we wouldn't sell land in Lot P to a business. It was intended that we would build buildings and retain the tenants so we would retain the ownership of all of Lot P and retain all the buildings within it as a sort of managed portfolio.[526]

436 The documentary evidence did not record such intention and there was no evidence that this was a continuing intention with respect to the land in Lot P at the time of the hearing.

437 Merrifield's intentions for future development of Lot P were said to underpin the practical anti-competitive benefits of the Occupancy Restriction. Given that s 84(1)(c) requires 'an up-to-date practical inquiry about injury',[527] it was relevant to have contemporary evidence to enable up-to-date conclusions on that issue. The lack of such evidence makes it difficult to accept the proposition that the Restrictive Covenant was in its effect providing any practical benefit based on an interaction with a policy of holding Lot P for future development.

The expert witness opinion that the Restrictive Covenant did not materially protect Lot P from competition

438 FAL submitted that the Restrictive Covenant did not in practice provide any benefit to the owner of Lot P against development. This was primarily because Lot 301 was a specific site with uniquely built infrastructure on the land which would not compete with the offering on Lot P. The evidence it tendered supported that submission.

439 Mr Blakely's evidence, based on his experience in commercial lease and freehold acquisitions, was that there was limited supply of industrial land in the Melbourne metropolitan area, so that there was strong occupier demand. Mr Moore agreed that this was correct.[528] In Mr Bowman's opinion, the Occupancy Restriction did not in practice enhance the value of Lot Pas a covenant restricting occupancy would only provide a benefit where there was an excess of supply over demand, which was not the current situation in the market. Further, given that the land available for tenants for land comparable Lot P extended well beyond Lot 301, any assumed benefit of the Occupancy Restriction which was restricted to Lot 301 would not have the effect of enhancing the value of Lot P.[529]

440 Mr Moore, Merrifield's expert, expressed the opinion during his evidence at the hearing that removing the Occupancy Restriction on Lot 301 would have a substantial impact on Lot P.[530] The basis for that view appeared to be that permitting additional occupancies on Lot 301 would restrict the potential purchasers or lessors of land in Lot P. It was accepted by Mr Moore that the benefit of Lot P was that in its undeveloped state it could be sold or leased in a way specific to the needs of a purchaser or tenant, whereas Lot 301 was constrained by the existing built forms on that land which had been constructed for specific uses.[531] However even though Lot 301 was a specific site with existing major infrastructure on it, which would attract particular tenants, and Lot P was vacant land, his evidence was that it was possible that Merrifield could speculatively build similar infrastructure on Lot P to attract such tenants.[532]

441 Mr Blakely had, however, given evidence that it was unlikely that Merrifield would build a freezer storage building of the same kind as that found on Lot 301 speculatively in the hope of attracting an occupant,[533] and with which a separate leasing of the Lot 301 Freezer would compete. Mr Moore had accepted this in his second expert report and accepted it again in cross-examination.[534]

442 Further, there was no evidence to support any intention on behalf of Merrifield to build facilities speculatively to attract tenants. A brochure for the Merrifield Business Park from 2021 referred to the offerings from Merrifield, which referred to 'premium land for sale, turnkey packages and prelease acquisitions'.[535] Mr Moore noted that 'turnkey' meant that Merrifield would deliver a facility, usually bespoke,[536] which was not the same as speculatively building a freezer to attract a tenant who may want a readymade facility. He also accepted that it was unlikely that a landowner would speculatively construct a large industrial freezer.[537]

443 There was also no evidence that Merrifield had any intention (or financial capacity) to build major facilities on Lot P (or elsewhere in the Merrifield Business Park) on a speculative basis to attract tenants. Mr Martin gave evidence that Merrifield did engage in providing 'vacant speculative product' which involved constructing a building tentatively and then leasing it.[538] He acknowledged that this was not an offering that was referred to in a promotional brochure for Merrifield Business Park, nor was it an offering advertised to potential tenants, although it may be raised in conversations with agents.[539] He acknowledged that there had not been any vacant speculative product built in the Merrifield Business Park.

444 Mr Moore focussed on the fact that the Restrictive Covenant contributed to Merrifield having complete flexibility as to how it used Lot P.[540] However he accepted in cross-examination that in circumstances where other large lot owners within the Merrifield Business Park such as Dulux, Ford, RMA and Bunnings had the ability to create further tenancies on their land, Merrifield did not have an ability to control the supply of tenancies in the Business Park, nor rents and sale prices paid within the Park.[541]

445 I conclude, having regard to the lay and expert evidence, that the Restrictive Covenant did not have the effect of limiting competition in the sale or leasing of land from Lot 301, nor did it confer any other material practical benefit relating to restricting competition.

446 I emphasise that in assessing these limitations of Merrifield's evidence I have borne in mind that it did not have the onus of proving any particular plans for the land (nor any other onus) for the purposes of the s 84(1) application. However FAL had tendered evidence to the effect that the Occupancy Restriction was not effective to limit competition in sales and land within the Merrifield Business Park. Merrifield's case was that the Occupancy Restriction was intended to and did provide that benefit which necessitated an assessment of the evidence available to support that position. FAL established its position on the balance of probabilities.

No substantial prejudice relating to competition if the Occupancy Restriction was modified

447 FAL tendered evidence to the effect that modification of the Occupancy Restriction would not cause injury to Merrifield's ability to sell or lease Lot P.

(a) Mr Blakely expressed the view that the existence of a separate tenancy for the Freezer would not have any impact on the ability of the owner of Lot P to lease some or all of its land at a reasonable commercial rate.[542] Mr Moore agreed with that opinion.[543] Mr Moore agreed that it was unlikely that a developer would speculatively build a highly specialised and costly asset such as a freezer facility to attract a tenant, so it was unlikely that a separate tenancy for the Freezer would impact Lot P.[544]

(b) Mr Bowman's opinion was that a separate tenancy for the Freezer would not negatively impact the value of Lot P. That very large facility was such a specialised asset that it had a limited market demand. Merrifield retained a strategic advantage with respect to Lot P in that it could build to specific tenant requirements, whilst Lot 301 could only offer what was already built.[545]

(c) Mr Bowman also expressed the opinion that modification of the Occupancy Restriction to permit multiple occupancies[546] would not negatively affect the value of Lot P because the modification would not in his view alter the supply and demand equilibrium in Melbourne's industrial market to the extent that it would alter the value of Lot P.[547]

448 Merrifield submitted that modification of the Occupancy Restriction to permit two or more tenancies on Lot 301 would substantially injure Lot P. It did not in its closing written submissions identify exactly why this would be the case. It emphasised the 'real benefits to Merrifield by protecting it from competition in relation to the ongoing development of the Merrifield land'[548] but did not articulate why a modification of the Occupancy Restriction to permit two or more tenancies would impair that benefit or cause substantial injury in that context.

449 Merrifield's expert Mr Moore was not asked to express an opinion as to whether one or more of the proposed modifications to the Occupancy Permit would cause injury to Merrifield's interests as proprietor of Lot P. However, he did express the opinion that the Restrictive Covenant on Lot 301 and covenants on other lots in the Merrifield Business Park had likely been introduced to protect against another developer creating competing supply of land in the Park, that:

Whilst it is difficult to quantify the likely or precise reduction in value or lost revenues to the first plaintiff if the Covenant(s) were removed, it is clear, in my view, that the removal of any such covenant could cause rise to an increase in supply within the Estate.[549]

450 This opinion is limited in relevance and utility, in that it did not quantify, even in any approximate way, loss of value or lost revenue arising out of removal of the covenants on land in the Merrifield Business Park. It is also expressed to be related to the effect if the 'Covenant(s)' on land in the Merrifield Business Park were removed, rather than being directed at the effect of removal or modification of one aspect (the Occupancy Restriction) of one restrictive covenant, the Restrictive Covenant on Lot 301. For these reasons, Mr Moore's opinion does not constitute evidence to support the proposition that modification of the Occupancy Restriction to permit two or more occupancies on Lot 301 would cause substantial injury to Merrifield as proprietor of Lot P.

451 Mr Martin accepted that permitting multiple occupancies would not take away Merrifield's ability to develop Lot P and attract a buyer or a tenant. He said it would make it a 'little bit harder' to do so and would be 'taking away our ability to do it as we would choose and as our preference'.[550] Mr Martin referred to the example of Merrifield having sought to service a '40,000m2 requirement' for the company Regent Caravans, which FAL 'were also submitting on'. Mr Martin gave evidence that Merrifield was still able to pursue that opportunity but having 'two landowners that are next door to each other chasing the same tenant' made it a little bit more difficult.[551]

452 I do not regard this evidence as supporting the proposition that modification of the Occupancy Restriction to permit an additional tenant on Lot 301 would substantially injure Merrifield as proprietors of Lot P. The evidence was inconclusive as to why Regent Caravans did not pursue any occupancy on Lot P. The evidence may suggest existence of a potential alternative source of land in Lot 301. However the absence of evidence as to whether Regent Caravans had any interest in Lot 301, and Mr Martin's acceptance that the existence of Lot 301 as a potential competitor made the process only a 'little bit more difficult', means that that the available evidence does not establish that Merrifield would be substantially injured if the proprietors of Lot 301 were able to offer an additional occupancy on the land.

453 FAL has in my view established not only that the Occupancy Restriction does not have in effect any practical benefit of limiting competition for Lot P in sale or leasing or land, but also that there would be no adverse change in that respect if the Occupancy Restriction was altered to permit two (or more) tenancies. In those circumstances, if it was permissible to take into account any benefit involving protection against competition in sales and leasing of land arising from the Occupancy Restriction, I conclude that the modification of the Restriction to permit two occupancies would not substantially injure Merrifield as proprietor of Lot P.

Section 84(1)(a) - restriction impedes all reasonable user without practical benefit

454 I have concluded that the modification of the Occupancy Restriction to permit one occupancy in each of the existing buildings on Lot 301 (the Fifth Proposed Modification) will not substantially injure Merrifield, so that the conditions for the exercise of the discretion to modify the Restrictive Covenant under s 84(1)(c) are satisfied. There is utility in considering whether the conditions of s 84(1)(a), also relied on by FAL, are satisfied. The first basis is in the event that I am wrong in my conclusions as to the application of s 84(1)(c). The second is in the event that any of the alternative more extensive modifications to the Restrictive Covenant, which I have found do not meet the requirements of s 84(1)(c) could be authorised pursuant to the s 84(1)(a) power.

455 Section 84(1)(a) requires FAL to establish that:

(a) all reasonable uses of Lot 301 are impeded by the continuance of the restriction without modification, in the sense that the restriction hinders, retards or obstructs to a real sensible degree the reasonable use of the land; and

(b) the restriction does not secure practical benefits to other persons, in particular the proprietor of Lot P.[552]

456 FAL contends that the Occupancy Restriction will impede all reasonable uses of Lot 301 because it impedes being able to use all of the infrastructure on the site fully and reasonably.[553] It emphasises that the requirement of s 84(1)(a) is not that the restriction prevents the reasonable user, rather that it impedes or makes harder that reasonable use.[554]

457 Merrifield submitted that the very fact that Lot 301 had been leased to DHL without initial contravention of the Occupancy Restriction established that it did not impede the reasonable user of the land.[555]

458 Mr Blakely's evidence, relied on by FAL, was that leasing both the Warehouse and the Freezer to a single tenant at a commercially viable rate is and will be extremely difficult because:

(a) The current tenant of Lot 301 is the largest third party logistics company in the world and was not using the Freezer, and also was not using significant parts of the Warehouse, including a temperature controlled component, at all.[556]

(b) The main occupiers of temperature controlled warehouses who would also require a large scale ambient warehouse are the major grocery retailers being Woolworths, Coles, Aldi and Metcash. Those users typically have specialised requirements and specifically design sites to accommodate their specific storage, handling and transport profiles. Upgrading or retrofitting a site such as Lot 301 would be costly and inefficient for a major occupier who has not been involved in the design and construction.

(c) Neither Mr Blakely nor his colleagues at the firm Resolve XO had ever been tasked with sourcing on behalf of a tenant an existing 70,000sqm warehouse with additional temperature controlled facilities.[557]

459 Mr Martin gave evidence in his second witness statement that, in his view, there were other major grocery retailers which were potential occupiers for Lot 301, Woolworths, Coles, Aldi and Metcash.[558] However he accepted, when it was put to him in cross-examination, that Metcash was in the process of building a new 115,000 m2 distribution centre, Woolworths had recently opened a new 38,000 m2 distribution centre and Coles was currently constructing a 30,000 m2 centre (all in Truganina). Nevertheless he maintained the position that the companies may be a potential occupier of Lot 301.[559] He also accepted that he had not discussed with the companies he named whether they would or would not be interested in an occupancy of Lot 301.[560] He also gave evidence that large supermarket retailers had multiple distribution centres.[561]

460 Mr Martin gave evidence that in his view there would be other potential sole occupant tenants for the warehouse structure, being logistics occupants such as Australia Post, Fed-Ex and TSL Australia; e-commerce occupants such as Amazon, Kogan or Catch, and retail occupants such as Big-W, K-mart, Target or Bunnings. He did not identify any basis on which he held those views or any evidence as to whether any of those entities were in fact seeking to lease a large warehouse.[562]

461 Noting the extreme generality of Mr Martin's observation that other major grocery retailers might be potential occupiers for Lot 301 or Lot P, and his acknowledgement that most of the identified retailers had recently opened or were constructing warehousing and distribution facilities, his evidence does not enable a conclusion that any of the major grocery retailers would realistically be tenants for Lot 301 at any time in the foreseeable future. His other evidence is of his view that there are other potential occupants in the market for the Warehouse only, rather than the Freezer and Warehouse.

462 I find that there is no reasonable likelihood in the near future of a single entity seeking to rent a site with both a large warehouse of the size of the Warehouse, and large industrial freezer facility. The only identified potential occupants were the large retail grocery retailers and it was accepted in the evidence of Mr Martin that three of those four identified retailers had recently constructed or were in the process of constructing large warehouse facilities. There was no evidence that any of the four retailers were seeking new warehouse premises.

463 The fact that Kaufland had intended to occupy the site and use both the Freezer and the Warehouse is not evidence that the land was capable of being used to its full potential, as it ultimately did not enter the Australian retail grocery market and did not ever occupy the site. Although FAL was able to lease the entirety of the site to DHL, the evidence is that DHL did not use the Freezer and so was not able to use the entirety of the site. The evidence as to the circumstances of that lease, and the subsequent Freezer Lease, were limited. However it is clear that the lease of Lot 301 to DHL as a single occupant was of relatively short duration (from April to September 2021).

464 I accept Merrifield's submission that 'reasonable user' of the land does not mean optimal use, nor use at the best commercially available profit. However I also consider that reasonable use on a site such as this (the features of this land being an essential aspect of the consideration of what is reasonable use)[563] would entail some use of both major pieces of infrastructure on the site, the Freezer and the Warehouse. To have occupancy of the Lot (whether as an owner or a lessee) but be unable to use the Freezer for any commercial use, is not a commercial use of the lot as a whole. It is not a reasonable use for the commercial landlord of the property to be able to lease the large property with two significant pieces of infrastructure to an entity that can only make use of one of those pieces of infrastructure, and thus only part of the land. It is not likely to result in a sensible rental reflective of the scale and original cost of the property.

465 The evidence is that there is an extremely limited market for one user to use both the Warehouse and the Freezer. I accept that there is in fact no current demand in the market for land featuring facilities of both of those kinds. Taking into account that the relevant question is whether the reasonable user is impeded, I accept that the Occupancy Restriction, the effect of which is to prevent any more than one occupant of the land, does impede the reasonable user of Lot 301 to a material extent.

466 The question is then whether the continuance of the unmodified Occupancy Restriction, in impeding the reasonable user of Lot 301, does so without securing practical benefits to the proprietor of Lot P, or other persons.

467 I have found above that the Occupancy Restriction secures practical benefits in terms of amenity to Lot P, and other users of Merrifield Business Park, and consistency of use of Lot 301 with the design strategy for the Park.[564] Those practical benefits would remain available to Merrifield, in my view, if there are two separate occupancies of Lot 301 - one occupancy for the Warehouse, and one for the Freezer. However that is not the question. The issue is whether the continued existence of the unmodified Occupancy Restriction would impede the reasonable user without securing any practical benefit to Merrifield. As it does secure some practical benefit, it follows that s 84(1)(a) does not provide a secondary basis in addition to s 84(1)(c) on which the Occupancy Restriction may be modified.

468 I have also found that it is not established by FAL that there would be no adverse effect on amenity if more than two occupancies were permitted on Lot 301.[565] More particularly, I accept that it has not been established by FAL, which bears the burden of proof, that no practical benefit is secured to the proprietor of Lot P (and other users of the Merrifield Business Park) from the Occupancy Restriction to the extent that it prevents more than two occupancies on Lot 301. Section 84(1)(a) does not, therefore, support the modifications of the Occupancy Restriction sought by FAL.

469 If the Court is satisfied of the matters identified in one of the subparagraphs of s 84(1), the discretion to grant a modification or to discharge a restrictive covenant is enlivened. The Court retains discretion to decline to modify a restrictive covenant even if satisfied of the relevant matters.[566] The discretion is to be exercised having regard to the terms of s 84, and the broader statutory context in the Property Law Act.

470 Merrifield submits that even if the grounds for the exercise of the discretion in s 84(1) are made out, the Court should refuse to exercise the discretion on the basis of FAL's conduct prior to making the application. The key features of FAL's conduct relied on by Merrifield are:[567]

(a) It purchased the property with full knowledge of the Restrictive Covenant by operation of the Torrens system, with the Covenant having been recorded on title, and effectively took a calculated commercial risk. It is said that they are effectively authors of their own misfortune.[568]

(b) On the eve of trial FAL sought and was granted leave to amend its pleading to seek what FAL described as an 'extremely modest' modification,[569] and then abandoned its First Proposed Modification which would have removed the Occupancy Restriction in its entirety.

(c) It pressed its claim for modification without any plans identifying what future uses were proposed, relying on the observation of Kyrou J in Vrakas that a lack of specific plans makes it more difficult for an applicant to show that there will be no substantial injury to persons entitled to the benefit of a covenant.[570]

(d) It entered into the lease for the second occupancy without any disclosure to Merrifield, and without first seeking consent, thereby breaching the Restrictive Covenant. FAL has also not remedied the breach.

(e) FAL did not supply any information, explanation or proposed lease to Merrifield when it did seek consent.

471 Merrifield also submits that it is relevant to the Court's discretion that FAL had been 'misleading' in its dealings with Merrifield.[571] It refers to Mr Martin's evidence that Marty Bourke, an officer of FAL, had told him on 19 October 2021, in response to Mr Martin's query as to whether FAL was separately leasing the Freezer, that it was not doing so.[572] Merrifield also relies on a discussion at a subsequent meeting on 25 November 2021 between Mr Martin and Ben Perry MAB's general counsel, with Ben Fife of FAL. In that conversation, according to Mr Perry:

Mr Fife said that FAL had no intention of competing with MAB and just wanted to lease the site to a single tenant (even though FAL was not doing that).[573]

472 FAL submits that there is no basis for a finding of dishonesty or similar conduct. It says it was not competing with Merrifield and that in any case the issue is irrelevant to the exercise of the discretion to modify the Restrictive Covenant.[574] It also submits that there is no other discretionary reason to refuse the relief sought. FAL acknowledges that if a proposal was inconsistent with planning considerations, this may be a factor weighing against the exercise of the discretion. However there is no submission that the proposed change would be inconsistent with the planning scheme, and Mr Crowder's evidence was that two or three occupancies would be consistent with the scheme, even if there was some redevelopment to the site.[575]

Purchase of Lot 301 with knowledge of the Covenant

473 It is submitted by Merrifield that the fact of FAL having made the application notwithstanding its awareness of the Restrictive Covenant shows it was simply taking a calculated commercial risk, and that this is a reason why the Court should not grant the proposed modification, notwithstanding that it has established a factual basis under s 84(1) for a modification to be granted.

474 In most cases involving an application under s 84(1) of the Property Law Act, the owner of the burdened property would be aware of a restrictive covenant, either having agreed to it as a condition of sale (as Kaufland did in this case) or having been put on notice of it when purchasing (which is a matter fundamental to the principles of enforceability of covenants against successors in title). In the case of applications to modify or discharge covenants over Torrens system land, the restrictive covenant must be registered on title so will be readily able to be ascertained. Taking into account the principles of construction of restrictive covenants on Torrens system land, the scope and effect of the covenant should also be able to be ascertained.

475 In these circumstances it could be assumed that most if not all applicants for a modification are aware of a registered restrictive covenant when purchasing the relevant property. If awareness of the existence of a restrictive covenant was a factor in favour of declining to exercise the discretion to modify or discharge, it could limit the operation of s 84(1) in a way that would significantly restrict its utility. For that reason I do not regard it as a material factor against the exercise of the discretion to modify the Occupancy Restriction.

Late amendment to case to include modest alternative proposed modification and abandon extensive modification

476 As set out at [18] to [20] above, FAL made an application on the Friday prior to the trial to amend its pleadings to add two further alternative proposed modifications sought under s 84(1), the Fourth and Fifth Proposed Modifications. Both of these limited the effect of the alternative modifications to providing for occupancies in the existing building footprint on Lot 301. Further, on the first day of trial, FAL abandoned the First Proposed Modification by which it sought removal in full of the Occupancy Restriction.[576] Merrifield submits these matters favour refusing to exercise the discretion.

477 In an application under s 84(1) for modification or discharge of a restrictive covenant, it is appropriate that the Court be directed to the most appropriate modification having regard to the conditions for any modification to be made. It is also appropriate that the modification sought be consistent with any evidence provided in support of it. Here, expert evidence was provided which in many respects favoured only a very limited modification and it was appropriate for FAL's application to reflect this.

478 The timing of the addition of the alternative modification and the abandonment of the broader proposed modification is a matter that may be relevant to costs. I do not regard it as a matter which weighs against the exercise of my discretion under s 84(1).

Failure to provide plans for future intended use if modification granted

479 Merrifield relies on FAL's failure to provide details of the proposed plans for a burdened property if the Restrictive Covenant is modified. The authorities dealing with s 84(1) applications are to the effect that such a failure would go to whether or not the grounds in s 84(1) are made out, rather than being a discretionary factor. That is apparent from the comments of Justice Kyrou in Vrakas, in which his Honour observed that if plaintiffs 'do not produce to the Court any specific plans but base their case on a general desire to optimise their options in relation to their property... [they] face the risk the Court will not be satisfied, on the evidence, that they have made out their case'.[577] Although Justice Kyrou made that observation in the context of the relevance of the plaintiffs' conduct to the discretion,[578] his Honour considered that the failure to provide plans was primarily relevant to whether the basis for relief under s 84(1) had been established. His Honour had in that case already determined that the discretion had never been enlivened.[579]

480 In this case, the absence of plans or clear information as to how three occupancies would be accommodated in the two buildings on Lot 301, or how those occupants would use the land, was a matter which was relevant to my determination that the Fourth Proposed Modification was not supported by s 84(1)(c). It was not possible, without that information, to discount the real potential for substantial injury. I do not regard it as appropriate to take that matter into account again as a reason to refuse the more limited modification constituted by the Fifth Proposed Modification.

Entry into the second lease without seeking consent, and failure to provide information when seeking consent

481 FAL's conduct in entering into the Freezer Lease without first seeking Merrifield's consent showed a disregard of the obligations imposed by the Restrictive Covenant, and of Merrifield's rights arising from it.

482 Those facts have been material to my conclusion that FAL breached the Restrictive Covenant. It could have given rise to an order for payment of damages, but Merrifield did not seek any such order and had not put on any evidence of any loss or damage it incurred by reason of the breach. I do not consider it a reason why the modification of the Occupancy Restriction sought by FAL, the grounds for which it has established by its evidence, should be refused.

483 FAL's failure to provide information when seeking consent after the Freezer Lease was entered into is also not in my view a reason to decline to exercise the discretion to modify the Occupancy Restriction. It may have been something that would be regarded as relevant to the gravity of the breach of the Restrictive Covenant but it does not in my view weigh against the exercise of the s 84(1) discretion to modify the Occupancy Restriction.

FAL's conduct in response to Merrifield's queries about whether the Freezer was leased

484 I have considered the evidence that Merrifield relies on to suggest that FAL had been misleading in its response to Merrifield's inquiries as to whether the Freezer was being separately leased. Mr Martin's evidence was that a representative of FAL, Marty Bourke, had told him that FAL was not leasing the Freezer in October 2021. The following month, in a meeting between Mr Marin, Mr Perry of MAB and Mr Fife of FAL, Mr Fife explained that the Freezer had been leased to Laverton Cold Storage since 13 September 2021[580]

485 No evidence was called from Mr Bourke with respect to the conversation about whether FAL was leasing the Freezer, as referred to in Mr Martin's statement. However, this may have been because Merrifield had not pleaded that it would rely on any allegation of misleading conduct, nor identified that it would rely on Mr Martin's evidence as a discretionary reason to refuse orders under s 84(1). Its intention to do so was first raised in closing submissions at the end of the trial, after evidence had concluded.

486 This would be a sufficient reason to decline to take this issue into account in the exercise of the discretion. However, even if Mr Martin's account is correct, and there was an incorrect and misleading initial response to Merrifield's queries about whether the Freezer was being leased, I would not regard it as a reason to decline to modify the Restrictive Covenant. As with the other matters relating to FAL having failed to seek consent to lease the Freezer prior to it being leased, it is relevant to the claim that the Restrictive Covenant was breached. It has little relevance to the application to modify the Restrictive Covenant.

No discretionary reason to refuse to modify the Restrictive Covenant

487 There is in my view no reason why the Court should refuse, in its discretion, to modify the Restrictive Covenant in the manner proposed in the Fifth Proposed Modification.

(a) The Restrictive Covenant touches and concerns the land by restricting uses, configurations or development of Lot 301 that are incompatible with a business park and thereby providing an amenity benefit to the adjacent benefitted land, Lot P.

(b) The Restrictive Covenant is not void or unenforceable by reason of s 45 of the Competition and Consumer Act.

(c) FAL breached the Restrictive Covenant by failing to seek consent prior to entering into a second lease.

(d) The conditions for modifying the Restrictive Covenant in the manner proposed in the Fifth Proposed Modification under s 84(1)(c) are satisfied.

(e) It is appropriate to exercise the discretion of the Court to modify the Restrictive Covenant in the manner proposed in the Fifth Proposed Modification.

489 I will hear the parties on the appropriate orders to give effect to these reasons, and on costs.

[1] Witness Statement of Michael Martin dated 1 September 2023 (Exhibit P4),[11]-[12] (First Martin Statement).

[2] First Martin Statement, [13]. The Land is identified as Lot 301 on Plan of Subdivision PS 810904M, in Volume 12191, Folio 001 of the Register.

[3] First Martin Statement, [29]-[31].

[4] Revised Statement of Agreed Facts filed 11 September 2024, [6]; CB 4133-4135.

[6] Contract of Sale of Real Estate from Merrifield to Kaufland dated 4 June 2018 (CB 3860) (Contract of Sale to Kaufland), Special Condition cl 23 (CB 3875).

[7] Certificate of Title Volume 12191 Folio 001; Revised Statement of Agreed Facts, [7].

[8] First Martin Statement, [34]-[36].

[9] Revised Statement of Agreed Facts, [8]-[9].

[10] Amended Statement of Claim filed 2 February 2023, [19] and prayer for relief B. It was pleaded at [19] that full particulars of loss and damage would be provided prior to trial, however no further particulars were filed.

[11] Transcript 26/09/24, T494.27-T498.16.

[12] Amended Defence to Amended Statement of Claim and Second Further Amended Counterclaim filed 18 September 2024, [7(b)].

[13] Amended Defence to Amended Statement of Claim and Second Further Amended Counterclaim, [14].

[14] Reply to Amended Defence and Defence to Further Amended Counterclaim filed 27 November 2023, [3.2].

[15] Reply to Amended Defence and Defence to Further Amended Counterclaim, [9]; Plaintiffs' Outline of Argument filed 26 August 2024, [34]-[35].

[16] Amended Reply to Defence to Further Amended Counterclaim filed 18 September 2024, [2]; Amended Rejoinder filed 18 September 2024, [2].

[17] Joint Statement of Issues filed 11 September 2024.

[18] Defence to Amended Statement of Claim and Amended Counterclaim filed 16 March 2023, [21].

[19] Amended Defence to Amended Statement of Claim and Second Further Amended Counterclaim, [21]-[23].

[20] Ruling on 17/09/24 (Transcript 17/09/2024, T18-T19); Orders of Harris J dated 17 September 2024, Other Matters.

[21] Transcript 17/09/24, T10.21-T11.20, T15.31-T16.09.

[23] Email from chambers 'Jurisdiction with respect to s 45 of the Competition and Consumer Act 2010 (Cth)' dated 2 October 2024. The email sought submissions in particular with respect to s 86 of the Competition and Consumer Act, which deals with 'Jurisdiction of Courts'.

[24] Nor did it propose that the notices specifying the nature of the special federal matter be given to the Attorney-General of the Commonwealth or the Attorney-General of Victoria, which is a precondition to the making of an order under the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth), ss 6(3)-(4).

[25] Plaintiffs' Submission on section 86 of the Competition and Consumer Act 2010 (Cth) filed 15 October 2024, [3].

[26] Submissions of the Defendant/Plaintiff by Counterclaim on Jurisdiction filed 17 April 2025, [6].

[27] And the Jurisdiction of Courts (Cross-vesting) Act 1987 (Vic), s 6(3), which is in the same terms.

[28] Affidavit of Peter Andrew Yeldham affirmed 17 April 2025.

[29] Plaintiffs' Submissions on Jurisdiction filed 28 April 2025.

[30] After the Commonwealth Attorney-General confirmed that no submissions would be made and the Victorian Attorney-General did not make submissions after having been given notice.

[31] Merrifield Corporation Pty Ltd v FAL Mickleham (No 1) [2025] VSC 253.

[32] Revised Statement of Agreed Facts filed 11 September 2024.

[33] Witness Statement of Ben Perry dated 4 September 2023 (Exhibit P3), [3].

[34] Witness Statement of Ben Perry, [7].

[35] First Martin Statement, [3], [7].

[37] Expert Report of David Crowder dated 2 June 2023 (Exhibit D3) (First Crowder Report).

[38] Second Expert Report of David Crowder dated 24 November 2023 (Exhibit D4) (Second Crowder Report).

[39] Export Report of Nicholas Blakely dated 12 July 2023 (Exhibit D7), [3.2] (Blakely Report).

[40] Expert Report of Richard Bowman dated 12 July 2023 (Exhibit D8) (Bowman Report).

[41] Expert Report of Charmaine Dunstan dated 22 November 2023 (Exhibit D10) (Dunstan Report).

[42] Expert Report of Dr Luke Wainscoat dated 22 November 2023 (Exhibit D9) (Wainscoat Report).

[43] Expert Report of Nicolas Moore dated 31 August 2023, [32] (First Moore Report).

[44] Supplementary Report of Nicolas Moore dated 27 November 2023 (Exhibit P7) (Second Moore Report).

[45] I recorded my observations and provided them to the parties for any comment, with none received; see Memorandum of Observations on View dated 19 September 2024 (MFI-A).

[46] CB 843 (Merrifield Business Park Polaris Release Flyer 3.0); Transcript 20/06/24, T166.03-10.

[47] Revised Statement of Agreed Facts.

[48] Witness Statement of Ben Perry, [9]. That plan of subdivision was PS 810904M (CB 766).

[49] Contract of Sale to Kaufland (CB 3860), Special Condition cl 17 (CB 3871).

[50] Contract of Sale to Kaufland (CB 3860), Special Condition cl 22 (CB 3874-3875).

[51] Contract of Sale to Kaufland (CB 3860), Annexure A, Draft Building Outline (CB 3887).

[52] Contract of Sale to Kaufland (CB 3860), Special Condition cl 4 (CB 3866).

[53] First Martin Statement, [33]-[35].

[54] Memorandum of Common Provisions AA6062 (CB 4184). It is also referred to in the Instrument of Transfer, Dealing Number AT115636A (CB 4186); First Martin Statement, [31]-[32].

[55] Contract of Sale to Kaufland (CB 3860), Special Condition clause 23, (CB 3875). Clause 23 refers to the registration of the covenant by way of registration of a memorandum of common provisions. The registered Memorandum of Common Provisions is AA6062 (CB 4184-4185).

[56] Title search of Lot 301 on Plan of Subdivision 810904M (Volume 12191 Folio 001) (CB 4519); Witness Statement of Ben Perry, [13].

[57] Plan of subdivision PS 827435C (CB 4744); see evidence of Mr Perry Transcript 20/09/24, T139.28-T141. In a later plan of subdivision, PS835682N, some of the land which was formerly Lot S became Lot W; see evidence of Mr Perry Transcript 20/09/24, T141.19-T142.12.

[58] Witness Statement of Ben Perry, [14].

[59] Witness Statement of Ben Perry, [16(b)]; The memorandum referred to in the witness statement was not in evidence as a separate document involving a heads of agreement relating to different land was included in error (CB 4110-4128); Transcript 20/09/24, T143.07-T144.04.

[60] Contact of Sale from Kaufland to FAL (CB 774); Revised Statement of Agreed Facts, [8].

[61] Instrument of Transfer AT867891L, CB 4400; Witness Statement of Ben Perry, [13].

[62] Register Search Statement, Volume 12191 Folio 001 (CB 4519), referring to the Covenant in Instrument of Transfer AT115636A, the transfer from Merrifield to Kaufland, which refers to the Memorandum of Common Provisions AA6062 which sets out the Restrictive Covenant; see also Revised Statement of Agreed Facts, [9].

[63] Lease Agreement between FAL and Laverton Cold Storage undated (CB 4424).

[64] Revised Statement of Agreed Facts, [12]-[15].

[68] Map Annotated by Ben Perry (Exhibit D2).

[69] Instrument of Transfer AM405394S dated 8 December 2015 (CB 3648-3649).

[70] CB 3649; see also evidence of Michael Martin, Transcript 20/09/24, T171-172.

[71] Evidence of Michael Martin, Transcript 20/09/24, T172.11-T173.03.

[72] Instrument of Transfer AT513506U dated 14 August 2020, Supplementary Court Book (SCB) 5271-5273; see also evidence of Michael Martin, Transcript 20/09/24, T173.5-6.

[73] Memorandum of Common Provisions AA6485 (SCB 5274).

[74] Instrument of Transfer AU123117W dated 10 March 2021 (SCB 5365-5367).

[75] Evidence of Michael Martin, Transcript 20/09/24, T165.31-T166.02.

[76] Evidence of Michael Martin, Transcript 20/09/24, T181.18-T181.29.

[77] Instrument of Transfer AX164157B dated 17 August 2023 (SCB 5513-5515).

[78] Memorandum of Common Provisions AA9412 (SCB 5516-5517).

[79] Instrument of Transfer AV546884G (SCB 5463-5465); Memorandum of Common Provisions AA7457 (CB 4517-4518).

[80] Instrument of Transfer AR808594T dated 31 December 2018 (CB 4129-4130).

[81] Memorandum of Common Provisions AA4687 (CB 4049-4050).

[82] These included the following: Lot 105, 2.024 ha, sold to Sterilassets Pty Ltd and subject to a restrictive covenant for the land in PS818702G other than Lot 105, which prohibits subdivision and two or more occupancies without written consent. Lot 302, 1.46 ha, transferred to McAndrew Vic Investments Pty Ltd and registered 17 December 2021, and occupied by Tasman KB, with a restrictive covenant expressed to be for the benefit of Lot P and which prohibits subdivision or two or more separate occupancies without written consent. Lot 303A, 1.46 ha, was sold to VTH Australia Pty Ltd and occupied by Aeroklas, and had a restrictive covenant for the benefit of Lot P which prohibits subdivision or two or more separate occupancies without written consent, subject to the proviso 'that the Burdened Land may be used as shared occupancy by the occupier of the Burdened Land from time to time and its Related Entities and or Related Body Corporates (as those terms are defined in the Corporations Act 2001)'. Lot 602A, 2.13 ha, was sold to Pearson Enterprises Pty Ltd on 29 June 2022, subject to a restrictive covenant for the benefit of Lot P, which prohibits subdivision or two or more separate occupancies without written consent. Lot 603, 4.57 ha, was registered as transferred to CMV 1 Pty Ltd on 23 August 2024, subject to a restrictive covenant for the benefit of Lot P, which prohibits subdivision or two or more separate occupancies without written consent. See Polaris Release in Merrifield Business Park **(**MF1-D2) and transfer instruments from Court Book referred to therein.

[85] Tulk v Moxhay (1848) 41 ER 1143 (Lord Cottenham LC).

[86] Rogers v Hosegood [1900] UKLawRpCh 134; [1900] 2 Ch 388, 395 (Farwell J); Clem Smith Nominees Pty Ltd v Farelly (1978) 20 SASR 227, 235 (Bray CJ); McGuigan Investments Pty Ltd v Dalwood Vineyards Pty Ltd [1970] 1 NSWR 686, 690-691 (Hope J); Deguisa v Lynn [2020] HCA 39; (2020) 268 CLR 638, 647 [13], 663 [72], 665 [78] (Kiefel CJ, Gageler, Keane, Gordon and Edelman JJ).

[87] Westfield Management Ltd v Perpetual Trustee Company Ltd [2007] HCA 45; (2007) 233 CLR 528, 539 [38]-[39] (Gleeson CJ, Gummow, Kirby, Hayne and Heydon JJ); Deguisa v Lynn, 646 [9], 663-664, [73]-[74]; Langdale Pty Ltd v Sollas [1959] VicRp 83; [1959] VR 634, 638 (Adam J); Re Dennerstein [1963] VicRp 93; [1963] VR 688, 696 (Hudson J); Clem Smith, 237; Adrian Bradbrook and Susan MacCallum, Easements and Restrictive Covenants, (LexisNexis_,_ 3rd ed, 2010_)_ [14.19].

[89] Amended Defence to Amended Statement of Claim and Second Further Amended Counterclaim, [5].

[90] Forestview Nominees Pty Ltd v Perpetual Trustees WA Ltd [1998] HCA 15; (1998) 193 CLR 154, 170 [32] (Gaudron, McHugh, Gummow, Kirby and Hayne JJ).

[91] Rogers v Hosegood, 395 (Farwell J).

[92] Forestview Nominees 170-171, [34]-[35], referring with apparent approval to the assessment of the primary judge Carr in the Federal Court that a covenant preventing use of the burdened land for retail use touched and concerned the benefitted land because it enhanced its value (see Forestview Nominees Pty Ltd v Perpetual Trustees WA Ltd (1995) 133 ALR 465, 497-498); McGuigan, 690 (Hope J).

[93] [1988] UKHL 3; [1989] AC 632.

[94] [1988] UKHL 3; [1989] AC 632, 642 (the other Lords agreeing: Lords Keith, Roskill, Templeman and Ackner), cited with approval in Pendal Nominees Pty Ltd v Lednez Industries (Australia) Pty Ltd (1996) 40 NSWLR 282, 293-294 (Cohen J).

[95] [1952] Ch 286, 293-294.

[96] [1976] HCA 10; (1976) 133 CLR 390, 411-414. Justice Jacobs was in dissent, but not on this issue. The majority determined the case without consideration of Newton Abbot or the question of whether the relevant covenant touched and concerned the land.

[97] [1970] 1 NSWR 686.

[98] [1970] 1 NSWR 686, 689.

[99] [1970] 1 NSWR 686, 690-691.

[100] [1970] 1 NSWR 686, 691.

[101] [2007] HCA 45; (2007) 233 CLR 528.

[102] [2007] HCA 45; (2007) 233 CLR 528, 539 [39].

[103] [2020] HCA 39; (2020) 268 CLR 638.

[104] [2020] HCA 39; (2020) 268 CLR 638, 662-663 [71].

[105] [2023] VSCA 185, [63] (Niall, Osborn and Hargrave JJA). See also, as to the limitation on the uses of extrinsic materials external to the title and the register in construction of easements and restrictive covenants, Sertari Pty Ltd v Nirimba Developments Pty Ltd [2007] NSWCA 324 (Handley AJA, with whom Tobias and McColl JJA agree); Prowse v Johnstone [2012] VSC 4, [57]-[58] (Cavanough J).

[106] [2024] VSCA 140, [53] (Niall JA, Richards and J Forrest AJJA).

[108] [2010] NSWCA 64, [158].

[109] [2019] VSCA 167, [68].

[110] Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104.

[111] Mount Bruce Mining, 116 [46].

[112] Mount Bruce Mining, 116 [47].

[113] Mount Bruce Mining, 117 [51].

[114] [2023] VSCA 185, [1]-[4].

[115] [2023] VSCA 185, [14]-[15].

[116] [2024] VSCA 140.

[117] Sumervale, [52], [62], [65] (Niall JA, Richards and J Forrest AJJA).

[118] Sumervale, [52], citing Deguisa at 644, [2] and Westfield at 531 [5]; 539 [39].

[121] [2000] VSC 258.

[122] [2000] VSC 258, [94].

[123] [2000] VSC 258, [93], [95].

[124] [2000] VSC 258, [124].

[125] Marten v Flight Refuelling Ltd [1962] Ch 115, 136-137.

[126] Doyle v Phillips (No 1) (1997) 8 BPR 15,523, 15,525 (Young J, Supreme Court of New South Wales).

[127] Outline of Argument of the Defendant/Plaintiff by Counterclaim dated 26 August 2024, [39]; Closing Outline of Argument of the Defendant/Plaintiff by Counterclaim dated 25 September 2024, [123]; Transcript 26/09/24, T398.23-25. The Plaintiff sought to rely on expert evidence of Nicholas Moore in respect of the purpose of, and the value and benefit the Covenant confers to the benefitted land but made no clear submission on the admissibility of expert evidence in this context.

[128] Marten, 138-139 (Wilberforce J) (Evidence from surveyors and land agents, as to the value of a restrictive covenant that no part of the land should be used for non-agricultural use); Wrotham Park Estate v Parkside Homes Ltd [1974] 2 All ER 321, 333-334 (Brightman LJ) (Evidence from fellow of Royal Institution of Chartered Surveyors as to the value of a restrictive covenant requiring that land in the Estate not be developed 'for building purposes except in strict accordance with a lay out plan' approved by the vendor, and whether that covenant would perform a service which would benefit the properties in the Estate); Baramon Sales Pty Ltd v Goodman Fielder Mills Limited [2001] FCA 1672, [17] (Finkelstein J).

[132] I have, therefore, not had regard in this context to the expert evidence of Mr Moore, the valuer relied upon by the plaintiff. This is because first, his evidence primarily went to the issue of the purpose of the Restrictive Covenant (and that extrinsic evidence is inadmissible by reason of the rules of construction discussed above). Mr Moore, in addition to positing a purpose of limiting competition in sales and leasing, gave general evidence that, '[i]t is my experience that developers implement these restrictions so as to control the development outcomes including built form, design, occupancy mix, uses and supply' (First Moore Report, [213]), which could be said to be close to the amenity focussed purpose I have identified. However he did not give any opinion as to whether any protection to amenity increased the value of the land. Thus even if his expert evidence was admissible on the question of touching and concerning the land, it did not in my view contain any relevant opinion on the issue.