Property Law Update - The Court sounds a note of caution to ambitious developers

Public Law Property Law
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The Supreme Court has refused an application to modify a single dwelling covenant to allow a 21 apartment development over two lots (~1,400sqm) in 9 Highlands Road in Thomastown – notwithstanding the absence of objectors in Court to oppose the application.

The decision of Re Morihovitis[2016] VSC 684 is somewhat different to the decision of Re Jensen[2012] VSC 638 where the Court refused a relatively modest unopposed application because it was proposed amongst a relatively intact network of single dwellings. Rather, the application in Re Morihovitis was found to be simply too great a departure from what the covenant originally contemplated:

The absence of a single dwelling covenant on no. 11 immediately exposes the peculiar and testing feature of this application.  Subject to planning laws and considerations, there is nothing on title to prevent the plaintiff as owner of no. 11 from building an apartment block, or at the least, there is no restrictive covenant getting in the way of a planning application to do so.  But the presence of the restrictive covenant on no. 9 Highlands Road obliges the responsible authority under the Planning and Environment Act to refuse to grant a planning permit unless the covenant over that land is removed or varied.  Thus, by this application Mr Morihovitis seeks under s 84(1) of the Property Law Act to modify the single dwelling covenant on no. 9 by deleting and adding words as shown in this way −

… not at any time hereafter excavate carry away or remove or permit to be excavated carried away or removed any earth clay stone gravel or sand from the said land hereby transferred except for the purpose of excavating for the foundations construction of any building and basement to be erected thereon and that not more than one dwelling house and outhouses shall be erected on the said lot hereby transferred 


The Court therefore found it would alter the character of the neighbourhood:

The judgment to be made about ‘substantial injury’ turns on the nature and degree of the injury to those benefits.  Here, in my judgment, the location of the proposed development is not so removed from the residential area of the neighbourhood that it can be regarded as being sufficiently far away from it to say that such changes will not be seen and felt.  It will be a conspicuous part of the neighbourhood.  It will be the only apartment block in the neighbourhood.  The scale of the project and its departure from the scale of any existing residential developments in the neighbourhood, means that if it does not of itself create the sort of notorious problems of higher density living as I have identified them, it will in my judgment be the beginnings of altering the character of the neighbourhood.

Although the Plaintiff endeavoured to make the most of the absence of objectors, the Court pushed back on any suggestion it would give the Plaintiff a free rein:

No objectors have attended Court.  However, it is established in the legal authorities on these applications that the absence of objectors does not necessarily satisfy the onus of proof, and it certainly does not amount to implied assent. But as is commonly submitted in these applications, the absence of objectors ought go some way to overcome a court’s caution.  In this case, it was submitted that the absence of objectors willing to advance their objection to a substantial development such as this was especially significant, meaning to say I think the Court should not be overly cautious or assailed by the scale of the development in the assessment of substantial injury.  The submission went a little further.  It was submitted that known cases where such applications were refused were, or tended to be, opposed applications on which the Court could act on grounds of resistance from a beneficiaries according to evidence adduced by them.  In this case, although it was said that the Court has to play devil’s advocate, it was submitted the Court should, in the absence of objectors or any other evidence, act on the plaintiff’s evidence.     

I do not accept the amplitude of that submission.

Ultimately, the Plaintiff was held to the contract he struck when he purchased his land, at least insofar as the present development was concerned:

To put it in plain terms, Mr Morihovitis has bought land knowing of a negative covenant on it which binds him as if he made it by private contract.  He cannot use the land in defiance of that contract.  By statute this Court might discharge that obligation or modify it if doing so will not cause substantial injury to those to whom the promise was made.  That cannot be done by saying or assuming that the planning authority will ensure that the apartment development is in accordance with planning laws and regulations.  The question for the Court is whether the landowner should be relieved of his promise and allowed to build an apartment block in the first place, before it is subjected to planning scrutiny.  For the reasons I have given, in my judgment the plaintiff has not shown that the proposed modification will not cause substantial injury to those to whom the covenant was given.

*To view Matt Townsend's blog, Restrictive Covenants in Victoria, or to sign up for to receive email notifications each time a new post is published, please click here

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Matthew Townsend has more than 20 years' experience as a barrister and practises almost exclusively in planning and environmental law and the modification and removal of restrictive covenants

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