Justice Matthews has reaffirmed the principle established in Randell v Uhl [2019] VSC 668 that an assessment of substantial injury for the purposes of section 84(1)(c) in the Property Law Act 1958, must be seen through the prism of the covenant’s purpose.

At issue in Viva Energy Refining Pty Ltd v Sumervale Pty Ltd & Anor (No 2) [2023] VSC 396 was whether one service station could object to the establishment of another in the same network of covenants, where the financial impacts of that approval were not in dispute.

Read literally, the covenants restricted “any trade or business whatsoever” from being carried out on the Land, but the court held that the benefit enjoyed by the Defendants from having no commercial competitor on the Land is not a benefit initially intended to or actually conferred by the Covenants:

181 The essential difference between the parties as to the approach that the Court should take, when considering whether the Plaintiff has satisfied the requirements of s 84(1)(c) of the PLA, boils down to this: is the Court to look at the Covenants as a whole to discern their purpose, as part of assessing the benefits initially intended to be conferred and actually conferred by the Covenants (the Plaintiff’s approach); or does the Court look solely at the restrictions contained in the Covenants themselves to elucidate the benefits (the Defendants’ approach)? In effect, the Defendants would have it that the Court should focus on whether the Defendants were intended to be conferred, and were actually conferred, a benefit by the ‘no trade or business’ restriction on the Land, without reference to the purpose of the Covenants. If so, the question then is whether the removal or modification of the Covenant would substantially injure the Defendants if the benefit did not remain or was adversely affected.

182 In my view, it is clear that the Plaintiff’s approach is to be preferred. It is consistent with the authorities, whereas the Defendants’ approach is not.315 I accept the Plaintiff’s submission set out at paragraph 90 above. In Randell v Uhl, Derham AsJ clearly assessed substantial injury by reference to the purpose of the covenant.316 For example, it is not a single dwelling restriction per se which is the benefit, but a low density neighbourhood as a consequence of that restriction which is to be assessed against the proposed modification.

183 Taking an individual restriction, without reference to other restrictions and the purpose of the covenant, as discerned from the terms of the covenant itself, is not the correct approach

This underscores the need for a holistic and purposive approach to the construction of covenants (as distinct from a literal reading), quite possibly the most common failing of practitioners and decision makers alike.