Plaintiffs v Defendants

Supreme Court of Victoria|2005-06-30|Before: ASHLEY J

Real property - restrictive covenant - whether plaintiffs established circumstances fitting the second limb of s. 84(1)(a), Property Law Act 1958, or circumstances fitting s. 84(1)(c) - form of modification.

"that no building may be erected .... except one detached dwelling house with the usual outbuildings ... and ... no building erected on the said land may be used at any time as a shop or for trading or manufacturing purposes ... "

3 The property, which is the land described in Certificate of Title Volume 4109 Folio 741 is one of 16 lots comprised in Lodged Plan 7000 ("the Plan"). The Plan was lodged in the Titles Office on or about 23 November 1916. The layout of the 16 lots is set out in a copy of the Plan which I annex to these Reasons.

4 By 21 March 1918 three lots had already been transferred out from the parent title. Subsequently, each of the other lots was transferred out. The burden of the covenant on the plaintiffs' land attached to the benefit of the lots later transferred; and, de facto, though indirectly, to the benefit of the lots which had earlier been transferred.

5 It appears that when each of the other lots was transferred out a covenant in the form of the covenant now under consideration attached to such land and thus to the direct benefit of lots later transferred. Such covenants have subsequently been discharged in the case of lots 3 and 4; and apparently discharged or modified in the case of lots 7 and 9. In the case of lots 3 and 4 - which front Brighton Rd to the south of its intersection with Hennessy Avenue - the covenants were discharged by orders of Masters of this Court.[1] Copies of the orders were put in evidence.[2] It is evident that the applications were unopposed.

6 On the plaintiffs' property there stands a two-storey premises with outbuildings. It faces onto Brighton Rd. The premises was apparently erected in about 1928. It is divided into four self-contained apartments. This has been the situation for a very long time, if not from the outset.

7 The premises, it was common ground, breach the covenant.[3]

8 Lots 3 and 4, in respect of which like covenants have been discharged, have been the subject of development. A medical centre, several storeys in height, fronts Brighton Rd; whilst facing Hennessey Avenue, and to the west of its intersection with Brighton Rd there are now four modern-looking units set in a double story premises.[4]

9 Lots 7 and 9 are lots in respect of which, as I understand it, like covenants have been either discharged or modified. In each instance, it appears, there are now two dwellings on what was originally one lot. The external appearance of the premises on those lots is nonetheless not inconsistent with what would be expected of "one detached dwelling house" on one of the original-sized allotments. That is shown by photographs which were put into evidence.[5]

10 The present nature of the development of land comprised in the Plan can, I think, be summarised this way:

• Four of the lots face Brighton Rd. To the north of its intersection with Hennessy Avenue are lots 1 and 2. The former is a single story residential premises compatible with the generic covenant. The latter is the plaintiffs' property. It does consist of a single detached building; and its height is not proscribed by the covenant. But its use is as multiple dwellings.

• To the south of the intersection of Brighton Rd with Hennessy Avenue, and fronting Brighton Rd, are lots 3 and 4. I have described their use already. To the extent that such lots are occupied by the medical centre, those lots alone in the subdivision are used other than for a residential premises.

• The balance of the lots front Hennessy Avenue. Each - including, at least by appearance, lots 7 and 9 - has on it a dwelling house conforming with the generic covenant. The vista which that part of Hennessy Avenue - by far the larger part - presents is one of suburban houses, each with its garden and driveway.[6]

11 The plaintiffs, as I noted at the outset, seek discharge of the covenant, or else its modification. At trial, what was sought by way of modification - the plaintiffs' non-preferred option - was, in short, that the covenant recognise the status quo; that is, that the covenant be modified to permit the erection (or continued existence) of a single detached premises comprising not more than four dwellings.

12 The plaintiffs' application was opposed by 7 persons: John Merakovsky, the registered proprietor of what was lot 16 on the Plan; Ross and Ka Lai Shaw, registered proprietors of what was lot 5; Anatole Tirkel, registered proprietor of what was lot 15; and the following occupants of units on what was part of lots 3 and 4 - Tamina Liga, Jennifer Webb and Travis Amitrano.

13 The opponents, it can be seen, are persons whose properties are nearby that of the plaintiffs. Closest of all is Mr Merakovsky's property. Part of the length of the side fence of that property is the rear fence of the plaintiffs' property. Somewhat ironically, three of the seven opponents are the occupants of units erected on parts of lots 3 and 4. It was only permissible to erect those units because the generic covenants attaching to that land were discharged.

14 Despite opposition to the plaintiffs' application being, on its face, absolute, the position adopted at trial by Mr Merakovsky, through counsel, was that he did not oppose modification of the covenant in order to reflect the status quo. The only other objectors who appeared at trial - they did so in person - were Mr and Mrs Shaw. They adopted the like position. Another objector, Tamina Liga, did not attend the Court; but her daughter did so. I gave the daughter an opportunity to be heard. Her position, conveyed indirectly, was that she (on behalf of her mother) agreed with what Mr and Mrs Shaw had said.

15 I am not satisfied by the evidence that the restriction imposed by the covenant ought be deemed obsolescent. I note that counsel for the plaintiff did not press such a submission. I am however satisfied, to the contrary, that the plaintiffs have established, by evidence as they must do, the circumstances set out in the second limb of s. 84(1)(a) and in s. 84(1)(c). In each case they have done so to the point of modification but not discharge.

16 I am further satisfied that I should exercise my residual discretion to make an order modifying the covenant; and that no order for compensation should be made.

17 I should begin my explanation for these conclusions by first mentioning some past history concerning the plaintiffs' property. The end point is that the plaintiffs did not come to this Court with any proposal at all as to what they wanted to do with their land if the covenant was discharged. Indeed, Mr Antonio Bevilacqua, who gave short evidence, appeared to know very little about the property.[7]

18 The plaintiffs, however, had earlier applied to the responsible authority under the Planning and Environment Act 1987 ("the Planning Act") to discharge or modify the covenant and for a permit to extensively re-develop the site. The re-development, if permitted, would have extended the footprint of the present premises,[8] increased the number of dwellings from four to six, and so have added to the number of residents and (probably) vehicles.

19 The responsible authority failed to consider the applications within time. So in each instance the plaintiffs sought a review by the Victorian Civil and Administration Tribunal under s. 79 of the Planning Act.

20 The Tribunal dealt with the re-development application. It held that s. 61(4) of the Planning Act prevented it from determining the merits of that application. That was because, as I understand it, the owner of the land burdened by a covenant was required by s. 61(4) - which was introduced by Act 100 of 2000 - to take steps to have the covenant discharged or modified before making a development application.

21 The Tribunal contrasted the situation which had obtained before 2000.[9] At that earlier time applications could be brought in whatever order the landowner chose.[10]

22 Against that background three points may be made. First, there is plain authority that town planning principles are not to be taken into account in determining whether an application has been made out under s. 84(1).[11] That remains the position despite there now being, in some cases, alternative avenues for removal or variation of a restriction which will call planning principles into play[12]. Second, there is some authority that planning principles may be relevant to the exercise of the residual discretion under s. 84(1). Third, there is authority for the proposition that "the lack of specific plans makes it more difficult for [an applicant] to discharge the onus of showing that a modification of a restriction will not substantially injure persons entitled to the benefit of the restriction".[13]

23 Turning now to the second limb of s. 84(1)(a), I take the law to be that it is for an applicant to show that the continuance of the unmodified 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".[14]

"there must be some reliable evidence that the restriction is no longer necessary for any reasonable purpose of the person who is enjoying the benefit of it".[15]

24 I next refer to my understanding of what an applicant must show in order to satisfy s. 84(1)(c). It is, as has been pointed out, an obligation to establish a negative.[16] In Stani, the Full Court said that:

"In the long run the test to be applied is similar to that to be applied in determining under paragraph (a) whether the continued existence of the restriction would secure practical benefits to other persons."

25 That observation was, I think, compatible with what had earlier been said by Gillard J in Re Cook.[17] Thus:

"It should be noted that in paragraph (c) the emphasis is on the injury suffered by the persons entitled to the benefit. 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. Such injury can only be properly assessed by a comparison between the benefits intended to be conferred and actually conferred by the covenant initially on the persons entitled thereto and the resultant benefits, if any, remaining to such persons after the covenant has been modified. If from the evidence it appears that the difference between the two will not be substantial, then the applicant will have established a case for the exercise of the Court's discretion under paragraph (c). In order to make this comparison it is proposed to consider what benefits the covenant over the subject land may have conferred upon the persons entitled thereto, then to assess whether the modification of such covenant would not substantially diminish the benefits so discovered."

26 I turn to the circumstances of the case in the context of the second limb of s. 84(1)(a). I think it is clear that the purpose of the covenant, in language common to covenants which attached to other lots in the subdivision, was to produce an ordered, low density (as it would now be called) residential development; one accompanied, very probably, by lawns and gardens.

27 It may be said to be incompatible with such a purpose that one lot in the subdivision should have erected upon it a premises comprising four dwellings (or more). Particularly that would be so if the footprint of the premises extended over the great part of the lot, and if the height of the premises dominated the subdivision.

28 On the other hand, it is the fact that three of the four lots fronting Brighton Rd - including the plaintiffs' property - already have erected upon them premises the nature of which departs from the purpose; and yet the balance of the subdivision retains, in large part, a character consistent with that purpose.[18]

29 Again, it may be said that the use to which the plaintiffs' property has been put over a period of nearly 80 years is some evidence of the reasonable user of that particular lot in the subdivision; a lot having the particular characteristic of fronting Brighton Rd. If an order was made in this proceeding which, at least theoretically, denied the plaintiffs a right to continue such use, the same might be said to hinder their sensible use of the land having regard to its particular situation in the subdivision, and to the purpose of the subdivision as modified, in effect, by orders of this Court in respect of other lots similarly positioned.

30 I consider, further, that there is reliable evidence that the restriction imposed by the covenant in its current form is no longer necessary for any reasonable purpose by the persons whose properties have the benefit of the covenant. That is particularly because of the location of the plaintiffs' property, the re-development of lots 3 and 4, the fact that modification (but not discharge) of the covenant on the plaintiffs' land would have very limited, if any, potential flow-on effect, and the absence of any demonstrated adverse effect of de facto modification of the covenant over a period of very many years.

31 Most of those matters require no explanation. As to potential flow-on, this should be said. Sometimes it will be perceived that to discharge or modify a covenant such as the present might "open the floodgates" for similar successful applications. In the present case that is not so provided that modification is appropriate. The plaintiffs' property has a particular geographical location which distinguishes it from the bulk of the lots in the subdivision - that is, those which front Hennessy Avenue. It is also physically close-by the only other lots, themselves distinguished by fronting Brighton Rd, where like covenants have been discharged. The fact that the units which have been erected on what was the rear section of lots 3 and 4 now front Hennessy Avenue does not detract from that observation.

32 I go to circumstances pertaining to s. 84(1)(c). What I have said concerning the second aspect of the second limb of s. 84(1)(a) is in point. Recognising that the plaintiffs are put to give a negative, they have done so - to the point of modification, but not discharge, of the covenant.

33 Specifically, the plaintiffs have satisfied me that it would not cause substantial injury to the beneficiaries of the covenant if the same was modified so as to permit, in substance, the continued erection of the present premises, or the erection of a new premises within the same footprint, of no greater apex height, and containing no more than four dwellings. But the plaintiffs have not satisfied me that it would not cause relevant injury to discharge the covenant, or to modify it so as to permit (for example) the erection of a single premises extending the present footprint and containing six dwellings. I do not accept that it would be compatible with the onus cast upon the plaintiff by s. 84(1)(c) to conclude that the covenant should be discharged, that confiding the substantive decision as to the future use of the premises to the responsible authority, for determination on town planning principles. The same may be said of modification of the covenant in a way which confided a great deal to determination by the responsible authority.

34 I turn to the residual discretion. I see no discretionary considerations why the covenant should not be modified in the manner which I have mentioned. So far as I can see, none were suggested by counsel for Mr Merakovsky. Counsel did not call in aid, for instance, planning principles, which have been said to be relevant to the discretionary aspect of s. 84(1).[19] I add that I have dealt elsewhere in these Reasons with another possible discretionary consideration - that is, the "floodgates" arguments.

35 I mention, finally but briefly, the compensation aspect of s. 84(1). No claim for compensation was raised. No attempt was made by any beneficiary of the covenant to show (prospective) loss in consequence either of its discharge or modification. No compensation, in short, was shown to be payable by the plaintiffs to any person in consequence of an order modifying the covenant.

Orders

36 In anticipation of the outcome at which I have arrived I asked counsel to prepare a draft of the covenant in appropriately modified form. They prepared an agreed document. I consider that it fits the needs of the situation. I will, therefore, order that

The restrictive covenant contained in Instrument of Transfer No. 848589 in the register book affecting the land described in Certificate of Title, Volume 4109, Folio 741 be modified pursuant to section 84(1) of the Property Law Act, 1958 so as to delete the restriction limited to "one detached dwelling house with the usual outbuildings" and to amend the Instrument to include a restriction limited to "one detached building containing up to four dwellings within the footprint and an apex height of the detached building containing four dwellings (excluding the outbuildings thereon) presently on the land described in the said Certificate of Title as at the date of this order, together with the usual outbuildings" but to not otherwise affect the said restrictive covenant.

[1] In the case of lot 3, by Master Collie's order made 29 March 1976. In the case of lot 4, by Master Barker's order made 7 March 1984.

[2] The order of Master Collie is part of exhibit 3. The order of Master Barker is part of exhibit A4 to the plaintiffs' affidavit sworn 6 June 2005.

[3] As to the meaning of "dwelling house", see the useful discussion by Osborn J in Re an application by Longo Investments Pty Ltd [2003] VSC 37 at [7]- [12].

[4] They can be seen in the background of photograph 5, part of exhibit JM4 to the affidavit of John Merakovsky affirmed 10 June 2005.

[5] See photographs numbered 12 and 13, part of exhibit JM4.

[6] See paragraphs 7, 8 , 9 and 10 being part of exhibit JM4.

[7] See, for example, T 12 lines 7-12, T 13 lines 13-18, T 14 lines 23-30.

[8] See exhibit A3 at paragraphs 8 and 28.

[9] See paragraph 49 of its Reasons, exhibit A3.

[10] In addition to the jurisdiction created by s. 84(1), 1991 amendments to the Subdivision Act 1988, and the Planning Act provided alternative avenues whereby a restriction might be varied or removed. See the discussion in Greenwood and anor v Burrows and ors (1992) V Conv R 54-444 at 65,202-65,203. The impact of s. 60(2) of the Planning Act was reduced by s. 60(4), inserted by Act 128 of 1993.

[11] See the authorities noted in Greenwood at 65,201.

[12] See Greenwood at 65,203

[13] Stanhill Pty Ltd v Jackson [2005] VSC 169 at [69].

[14] Re Ghey and Galtons application [1957] 2 QB 650 at 663 per Lord Evershed MR, cited in Re an application by Stani, Full Court, 7 December 1976, unreported, and often thereafter.

[15] Re Henderson's Conveyance [1940] Ch 835 at 846, cited with approval in Stani; see also the observations of Menhennitt J in Re Alexandra [1980] VicRp 7; [1980] VR 55 at 59. The passage has often been cited subsequently.

[16] Greenwood at 65,199.

[17] [1964] VicRp 106; [1964] VR 808 at 810-811.

[18] It seems to have been common ground also that if Brighton Rd in the near vicinity - but beyond the periphery of the subdivision - should be considered part of "the neighbourhood" or "the surrounding property", then the premises on the plaintiffs' land is not incompatible with the streetscape to the north of Hennessy Avenue; whilst the premises on lots 3 and 4 fronting Brighton Rd are not incompatible with the streetscape to the south of Hennessy Avenue.

[19] Though compare, perhaps, the observations of Eames J in Greenwood at 65,200.

At a glance

Court

Decision date

Before

Source

Judgment (17 paragraphs)

Parties