Lettice & Anor v Scarcella S284/2000 [2001] HCATrans 507 (12 October 2001)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S284 of 2000

B e t w e e n -

FREDERICK MICHAEL LETTICE

EVELYNE MARIE LETTICE

Applicants

and

PETER J. SCARCELLA

Respondent

Application for special leave to appeal

GAUDRON J

CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 12 OCTOBER 2001, AT 12.22 PM

Copyright in the High Court of Australia

MR M.F. HOLMES, QC: May it please the Court, I appear for the applicants, and with me is MR T.J. BOYD. (instructed by Calwell Martin & Cox)

MR S.D. RARES, QC: May it please the Court, I appear with MR M. DEMPSEY for the respondent. (instructed by Mallesons Stephen Jaques)

GAUDRON J: Yes, Mr Holmes.

MR HOLMES: This matter raises two questions. The first question is the nature and standing of the principle enunciated by Justice Deane in Hawkins v Clayton, that is, the unconscionable reliance on the Limitation Act. Before I go to that question could I just take your Honours to two findings of fact which are at page 11 of the application book. At line 6 there was a finding that the solicitor:

did inform the Plaintiffs that they had a legal right of way over both Lot 55 and Lot 61.

The rear part of the property was effectively inaccessible without the right of way and they specifically raised an assertion that they sought a representation and an assurance. The solicitors testimony was found not to be credible and the plaintiffs' finding was accepted. The second finding is on the same page at line 15:

the Plaintiffs would not have purchased the property, unless they were satisfied that they had a right of way over Lot 61.

We couple that with the fact that the purchase was in 1982 but it was not until 1994 when the owners of lot 61, on learning that their land was not burdened by a covenant, asserted their freehold rights and put a padlock across the right of way which had been used. As to the principle of Justice Deane, the reasons why it was called in aid are that, as a result of the representation, the applicant - - -

GAUDRON J: I can see why in the circumstances of this case there might be a case to say unconscientious closure, existence on legal rights in closing the right of way, the owner of the servient tenement having apparently entered into some right of way agreement which was never registered, is that right?

MR HOLMES: Yes, there was a subdivision of a number of blocks and - - -

GAUDRON J: And something went amiss in the conveyancing.

MR HOLMES: And lot 61 got a windfall.

GAUDRON J: Yes, and he thereafter did nothing to let anybody believe that he did not have a right - that the position was as he later asserted. So I can understand how you might an unconscientious claim of exercising legal rights against the owner of the servient tenement. But how can you possibly make out unconscientious assertion of legal rights merely from negligence?

MR HOLMES: Because there was a positive representation by the solicitor to the prospective purchaser, "You are acquiring and will, as a result of the transaction, have a legal right of way".

GAUDRON J: That was a mistaken assertion, I take it?

MR HOLMES: That is right. They then acted on that assumption and were not - - -

GAUDRON J: Let me as you this. Am I right in thinking that the benefit of the right of way was shown on the title of the dominant tenement?

MR HOLMES: That appears to be the finding, yes.

GAUDRON J: And not of the servient tenement?

MR HOLMES: That is right.

GAUDRON J: I can understand negligence. I cannot understand unconscientious behaviour on the part of the solicitor any more than I can see it on the part of the Registrar-General.

MR HOLMES: On the part of the solicitor it manifests itself in this way. The purchaser goes to the solicitor to inquire as to what they are acquiring by entering into the transaction. They thereafter rely upon that and the solicitors then take advantage of their client acting on their advice, and by acting on their advice they suffer a second loss, namely, the passage of time under the Limitation Act, and by relying on the solicitor's advice as correct, time passes and the limitation period expires.

GAUDRON J: Certainly, unconscientious assertion of legal rights is the foundation of the general principles with respect to limitation periods in an action in fraud. But you have really somehow got to equate the negligent assertion of a positive fact, in circumstances where the solicitor was merely repeating what was to be observed on the register, with fraud, do you not?

MR HOLMES: No, we do not need to go as far as fraud.

GAUDRON J: No, but you have to find something common in it, do you not?

MR HOLMES: In the case of Gorton there was not a finding of fraud or something common to it. There was just a negligent advice at a time that your rights were of a particular nature, and that was wrong, but the plaintiff - - -

GAUDRON J: The damage in Gorton was identified differently. The premise on which you make this argument, Mr Holmes, is it not, is that the damage was suffered on completion?

MR HOLMES: That is the second point. We make our argument, yes, on the assumption that damage was suffered on completion. The alternative proposition is that damage was only suffered when the subservient tenement, or the proposed subservient tenement, insisted on their rights. On that second basis we do not suffer the loss until the time that the servient tenement insists on their freehold rights and excludes - - -

GAUDRON J: What is the loss you suffer at that point?

MR HOLMES: At that point we suffer the loss of an absence of a legal right to insist - - -

GAUDRON J: You have already had the absence of a legal right. It has to be some other loss.

MR HOLMES: All we can put it on is on the basis that there was no loss until the other freehold owner asserted rights inconsistent with ours and the applicants had no legal right to insist upon a right of way over their property. Does that answer your Honour's question?

So that the question raises the nature and standing of the principle enunciated by Justice Deane. In our authorities we have referred to the different views of the Court of Appeal in New South Wales in Sampson v Zucker and the Queensland case of Gorton and the establishment of the principle in Cheney v Duncan, which has come out more recently.

As to the second point, in our authorities we make the submission that the loss was not suffered until the insistence of the rights inconsistent with the applicants' rights. In the Court of Appeal the error that we rely upon is at page 52 of the application book where Justice Handley refers to the two cases in the Court of Appeal, Christopoulos and Registrar-General v Cleaver. If we go to page 53, Justice Handley refers to the same principle that was applied in Cleaver's Case, where:

The benefit of a restrictive covenant was recorded on the plaintiffs' certificate of title -

the benefit of the right of way was recorded on the applicants' title -

but the burden had not been recorded on a certificate of title of the land burdened by the covenant. The error occurred in 1967 but lots changed hands without incident until 1988. The plaintiffs acquired the property with the benefit of the restrictive covenant in 1978 but did not discover the defect in their title until 1988 when the other proprietor -

that is, the owner of lot 61 -

threatened to breach the covenant.

The plaintiffs were unable to enforce the restrictive covenant and they sued the Registrar-General . . . The Registrar-General contended that the action was statute-barred -

your Honour, this is, with respect, the error -

This Court held that the plaintiffs' cause of action was not complete until the omission in the register was discovered because that was when they first suffered economic loss.

The authority, could I hand up, your Honours - this was omitted from our bundle. Justice Handley was in the minority in that case and the majority, Justices Clarke and Abadee, held that there was no loss suffered until the owner of lot 1 insisted that they were free of the covenant, the same as lot 61 in our present case. If your Honour goes to just the head note:

Held: (Dismissing the appeal) (1) The action was not statute barred, as the actual damage was suffered when (by Clarke JA and Abadee A-JA) the owners of lot 1 insisted on their rights of indefeasibility and secured removal of endorsement from their title -

Justice Handley, however, referred to the fact that omission in the register could not have been discovered beforehand. So, with respect, there has been a misstatement as to when is the damage suffered.

GAUDRON J: That was a somewhat different case, was it not? It was a covenant, a building covenant?

MR HOLMES: With respect, it was on all fours. That was lot 1 - - -

GAUDRON J: I am not too sure. It is a very interesting question that.

MR HOLMES: A building covenant where the - - -

GAUDRON J: It is very interesting as to whether the absence of a covenant constitutes a defect in title in quite the same way that absence of a right of way does when that is necessary for access.

MR HOLMES: Is the giving of a right of way anything more than the giving of a covenant?

GAUDRON J: Yes. In one respect, yes.

MR HOLMES: One is an agreement, in Cleaver's Case, not to build a house more than one storey high. There was a single-storey house there and so everybody presumed that the covenant would be enforced. In this case there was a right of way and everybody thought that they had agreed to give the right of way and they continued to use it. It was not until the insistence, namely, "We can build an extra storey", namely, "We can not give you the right of way; we are not bound by it", and the court there found that it was on the insistence of the rights that they suffer the damage. So that is the second question which we raise on the special leave application.

The other matter which we - perhaps I am going back to the first issue. Your Honour Justice Gaudron, we bring ourselves within the principle enunciated by Justice Deane, because whereas Justice Giles, who appears to have been the only judge who considered this question - the other two judges, even though the point was specifically before them, did not refer to it at all. Justice Giles said:

in the present case, nothing the solicitor did precluded the plaintiffs from independently discovering the incomplete right of way -

If a solicitor gives advice and a client relies upon that, then the client has a right for damages. It is the reliance. So that is what effectively precluded the applicants from discovering it before.

CALLINAN J: That would apply in practically all cases of negligent advice, would it not? You are really suggesting a special category, for at least all negligent advice cases and perhaps some other category of cases, which would be different from cases generally in tort. You say that might be a consequence, but it certainly would be a consequence, would it not, to single them out?

MR HOLMES: It would depend upon the circumstances. If a person buys a house to live in, they are not expecting to go away and get a second opinion.

CALLINAN J: Exactly. If you get advice, you act on it and you continue to act upon it, until somebody else acts in some way as to draw your attention to the fact that the advice is negligent.

MR HOLMES: That is correct.

CALLINAN J: So that all negligent advice cases would form part of a special category to which, effectively, the limitations legislation would not apply.

MR HOLMES: Taken literally, that is the effect of what Justice Deane was saying. That is why there is, in our submission, two special leave points. One is the timing of the damage, and the first one is the nature and the standing of that ruling by Justice Deane, because it is cropping up in all of the cases and the one, Cheney and Wilson, which has cropped up since this case occurred.

GAUDRON J: Are they all Registrar-General cases? No, there is two such - - -

CALLINAN J: Mr Holmes, nobody has ever amended the Act since Justice Deane was in the minority on this point. There was legislation very early in England, was there not, after Cartledge v Jopling, is that right?

MR HOLMES: There was legislation in England. There have been numerous inquiries by the Law Reform Commission. There has not been any amendment. Can I just correct one matter? Your Honour Justice Callinan has adopted what one might call "the Justice Gleeson approach", that Justice Deane was in the minority, but as it is shown in Gorton's Case - - -

CALLINAN J: A single Justice decision.

MR HOLMES: Yes, but he - if your Honour - - -

CALLINAN J: It is interesting because his Honour - - -

MR HOLMES: Justice Deane on this point, if I could finish - - -

CALLINAN J: Yes, certainly.

MR HOLMES: - - - Justice Deane's reasons on this point were agreed with by Justices Mason and Wilson. So he was not in the minority. They agreed with what he said. They had a different conclusion in Clayton because they found that there was no duty of care. But as to this point, they expressly endorsed his rule.

GAUDRON J: It was quite a different duty in that case. It was a continuing duty - and I suppose in a sense this is too - but the damage was in not exercising legal rights. It was a continuing damage too, in a sense. Every day he did not know, he did not exercise his legal rights.

MR HOLMES: They had a positive duty to disclose.

CALLINAN J: And you had the complication that the executor did not have the title to sue until the executor became executor, is that not right?

MR HOLMES: Yes, but the point I was making was taking issue with what you said about Justice Deane being in a minority in this point. That is what Justice Gleeson has stated, with respect - - -

CALLINAN J: Hawkins was a case that was not received with universal approbation at the time either, I might say.

MR HOLMES: I appreciate that.

CALLINAN J: Or without a degree of astonishment.

MR HOLMES: Yes, but on this particular point it is clear on a reading of Hawkins v Clayton that Justice Deane did carry with him Justices - - -

CALLINAN J: Two others.

MR HOLMES: Two others, yes. They are my submissions, if the Court please.

GAUDRON J: Yes, thank you. We need not trouble you, Mr Rares.

We are of the view that the proposed appeal does not enjoy sufficient prospects of success to justify the grant of special leave. Accordingly, the application is refused with costs.

The Court will adjourn briefly and reconstitute.

AT 12.41 PM THE MATTER WAS CONCLUDED