Re Young [2019] VSC 755 (13 November 2019)

2 The plaintiffs are the owners of the land at 24 Argyle Way, Wantirna South, which is presently improved by a single storey brick dwelling. The land is burdened by a covenant made on 24 May 1979 which prevents the construction of more than one dwelling on the land. The covenant also requires the exterior walls of any dwelling to be constructed 'substantially of brick or brick veneer or stone'. Subject to planning approval, they propose to retain the existing dwelling and build a new three bedroom double-storey dwelling behind it with a double garage. The concept plans show ground floor construction of brick veneer and upper storey walls of lightweight cladding.

3 A previous town planning application to construct a second dwelling and vary the covenant was refused by the responsible municipal Council in 2013. The Court is told there were four objectors to that application, three of whom were beneficiaries of the covenant. The facts or considerations for that refusal are not known to the Court, and not truly relevant for this application which is assessed according to distinct statutory considerations under s 84 of the Property Law Act which have to be satisfied even in the absence of objectors, a subject I will return to later in these reasons.

4 The application is supported by a planning report prepared by Mr Robert Easton, a town planning consultant and principal of Easton Consulting. There is no doubting Mr Easton's credentials and experience. And the Court will adopt his careful exposure of the history of the land titles, the subdivision, the transfers of land, and the building features of the neighbourhood. He may state an opinion about the merits of the application with which the Court may agree, but of course in a lawsuit such as this, it is for the Court to make the judgment according to the applicable legal principles on the ultimate question whether the proposed modification 'will not substantially injure the persons entitled to the benefit of the covenant' as is stated in s 84(1)(c) of the Property Law Act.

5 Very early in Mr Easton's report he identifies the conspicuous and I think decisive issue in this application: will the proposal create a precedent? This is a recognition that the 'thin edge of the wedge' or 'real risk of a precedent' argument is relevant to these applications because, if the application is allowed, it naturally enables later applicants to seize on that permissive Court judgment to contend that the benefits of a single dwelling covenant in an area has become eroded and that removal of the same covenant over other land in the same area would cause no substantial injury. Such submissions are, in my experience, frequently made, and they can be difficult to resist in the interests of avoiding apparent inconsistency. Indeed, it may be surmised that in contemporary times one reason applications such as this do not meet with objections (when they might be otherwise be expected) is that affected beneficiaries may be stimulated to contemplate the same advantageous development idea for the future.

6 The submissions of Mr Lloyd of counsel for the plaintiffs accepted, as they had to, 'that the potential precedential effect of a successful application cannot be denied'. The issue is acute in this case because there are no other examples of more than one dwelling on any of the lots in the subdivision, and every lot is burdened by a single dwelling covenant thus creating a homogenous residential condition in this part of Wantirna.

7 Mr Lloyd looked essentially to three grounds to say that the risk of a precedential effect was reduced here. First, that the absence of objectors was particularly significant especially as there had previously been objectors to the plaintiffs' planning application. Although accepting that it was speculative to assert why there no objectors, the submission really was an invitation to make an inference that the absence of objectors meant that beneficiaries were unconcerned about the prospect of a departure from a single dwelling covenant. Secondly, the location of the plaintiffs land and the nearby public reserve area on one side and behind the plaintiffs land made the plaintiffs' land unique and therefore distinguishable should any future applications be made. Thirdly, the development proposal here was 'modest' and, as a matter of build form, be no more aesthetically domineering or creative of adverse direct or intangible effect than some substantial double storey houses in the area.

8 The third of those arguments was really the foundation of Mr Easton's opinion. His report concentrates heavily on exposing numerous instances of substantial single storey and double storey homes in the subdivision. In all those cases, such homes have been built on land burdened by the single dwelling covenant. This is done to make the contention that such single dwellings with a substantial build form do not require a planning permit and would have a potentially greater impact on the neighbouring property than a modest additional dwelling at the rear of the plaintiff's land.

9 None of these arguments were untenable, but in my judgment, even in the aggregate, they were of insufficient weight to overcome the real and sensible likelihood that to grant this application would, in an age of urban development and intensification, create a precedential effect repugnant to the single dwelling character of this neighbourhood. The Court does not accept the proposition that the presence of large or imposing double storey or single storey dwellings in the area is a valid comparison for justifying a departure from a single dwelling covenant on the grounds that two dwellings on the one piece of land may be no more imposing that some existing double storey dwellings. A single dwelling built on land burdened with a single dwelling covenant can be as large and imposing as the planning laws will allow. It is not logical, in my view, to make a favourable comparison and say two dwellings on one piece of land burdened by a single dwelling covenant will be no worse, or will be 'modest'. It may well be modest but there will be two dwellings. The argument to my mind is really revealing a challenge to the utility of a single dwelling covenant as a matter of modern urban housing needs or modern maximum economic use of land. These are matters of policy for the governing law makers or law reformers.

10 The barrier for the plaintiffs is that their land is burdened with this single dwelling covenant under which they have covenanted that they will build no more than one dwelling. It is of no significance in my view that there are large and imposing single dwellings elsewhere in the neighbourhood.

11 Nor does it matter that there was an absence of any objectors to the application. In this matter, I feel bound to adhere to a very similar case in Bayswater cited as Re Jensen [2012] VSC 638. In that case, I described the considerations to be applied in applications of this type, that is, where there are no objectors but the area in question is characterized by homogenous residential conditions of single dwelling covenants. I take leave to repeat what was said in that case (omitting footnotes) as it is equally applicable here:

I think the pertinent question in this case is whether under s 84(1)(c) the proposed discharge of modification 'will not substantially injure the persons entitled to the benefit of the restriction.' In that regard, Ms Harrison submitted I should place great weight on the fact that there are no objectors; not even probing enquiries have been made. But, in my view, unless there is express or implied consent under s 84(1)(b), the absence of any objections does not somehow relieve or lessen the onus on the applicants to meet the requirements of the statute, nor derogate from the need of the Court to consider the interests of the beneficiaries. Both Vrakas and Prowse affirm that the absence of objectors will not, in itself, necessarily satisfy the onus of proof. Allied to this is the significance of the precedential value of allowing the application. The test of 'no substantial injury' has been described as somewhat nebulous. What has to be applied is really a differential test. The Court compares the benefits intended to be conferred under the covenant and actually conferred, and the benefits, if any, which would remain after the covenant is discharged or modified. If the evidence establishes that the difference between the two will not be substantial, then the ground in s 84(1)(c) is made out: see Prowse. Bradbrook and MacCallum put it this way:

However, in the context of restrictive covenants there may also be cases where, although the particular development proposed may not cause substantial injury, the extinguishment or modification of the covenants burdening a particular piece of land may encourage further applications in respect of similar covenants imposed on other pieces of land in the same area. It is in this context that the Court must face the argument that the granting of the application would threaten the integrity of the scheme of covenants covering the larger area and would thus substantially injure the persons benefitted by those covenants. This 'thin edge of the wedge' argument was accepted by the Lands Tribunal in Re Teagle's and Sparkes' application and would also have been applied by Jacobs J in Re Gross and the Conveyancing Act [1965] NSWR 886 at 889 if the case had not been decided on other grounds. It has been accepted as a relevant factor in several recent cases.

Likewise, in Vrakas, Kyrou J said:

The prospect that, if the application for the discharge or modification of a covenant were granted, that might be used to support further applications in a similar vein, may be relevant. Such 'precedent value' may, in an appropriate case, of itself be a factor demonstrating that an applicant fails to establish the requirements in s 84(1)(c).

Counsel acknowledges, as she must, that this will be the first instance in this subdivision of a multi-unit development. But, she says, it has to start somewhere. And, she urges the absence of any objectors. Weighing up all factors, I have to keep steadily in mind that benefits from covenants on land are significant property rights and solid grounds need to be present before discarding them. I have come to the view that the absence of any objectors is not of sufficient strength to justify a removal or modification of this covenant. This is, as I said at the outset, an enclave in Bayswater. I am not concerned with remarks that Bayswater may now be regarded as part of the urban sprawl. What shapes my thinking is that there is no solid ground on the evidence to demonstrate why it is there should now be an alteration to the manifest intention that the land in this subdivision should have the amenity of a density of housing that does not exceed one dwelling per lot. ... The injury as I perceive it is the threat to the integrity of the scheme of the covenants covering this plan of subdivision. The plan was to have one dwelling per allotment. It is not for the Court to assess these applications by having regard to trends in land occupation as may occur elsewhere or the need to provide for greater housing in metropolitan Melbourne. These are all matters outside the legal parameters of s 84. Nor is it enough to relax the statutory requirements, alter property rights, all in the expectation that the planning process will take care of any possible injury to other landowners if the proposed development is allowed to go ahead.

12 These principles I think undermine Mr Lloyd's emphasis that the plaintiff's land in this case backed on to a public reserve known as the Knox Gardens Reserves which includes two football ovals, and there is no adjoining dwelling on the eastern boundary of the plaintiff's land. Thus, so the submission went, to allow the application in this case would have a reduced precedential effect because of the unique position of the plaintiff's land. This was a tenable argument but, in my judgment, was of insufficient weight to overcome nevertheless the real prospect of a precedential effect. The precedential effect is, in my view, certainly heightened for other identical lots on Argyle Way with the same locational feature of having back yards that look over the Knox Gardens Reserves. It is a short step from there to the erosion of the single dwelling quality of the rest of the subdivision.

13 It was for those reasons that I found that the plaintiffs have not discharged the onus of showing that their proposed modification of the covenant would not impose a substantial injury to all of the beneficiaries.