Bebonis & Anor v Angelos & Ors; Christopoulos & Anor v Angelos & Ors [2003] NSWCA 13 | Case summary

Judgment 1 HANDLEY JA: The proceedings before the Court comprise an appeal by Mr and Mrs Christopoulos (the purchasers) from final judgments of Balla DCJ of 30 November 1999 and 25 June 2001, and a summons for leave to appeal by Mr and Mrs Bebonis (the vendors) against an interlocutory judgment of Balla DCJ of 14 March 2001. The summons was defensive in nature because final judgment had been entered in favour of the vendors on 25 June 2001. The respondents to the purchasers' appeal were Mr Nicholas Angelos (the solicitor) and the vendors. The solicitors and the purchasers were joined as opponents to the summons. 2 The proceedings have arisen from the failure of the Registrar-General to register an easement on the vendors' title. On 26 May 1976 they contracted to purchase two shops and an attached flat at 341 Condamine Street, Manly Vale (the property) from a Mrs Arnold for $38,850 (blue 63). The contract reserved to Mrs Arnold a right of carriageway over a strip of land 3.658 metres wide at the rear of the property to provide vehicular access from King Street to the rear of the adjacent properties she owned at 339 and 337 Condamine Street (66). At the time the property was occupied by tenants under a two years' lease (67). 3 The transfer from Mrs Arnold to the vendors purported to reserve the right of way in accordance with the contract (70). It was registered in due course but the Registrar-General failed to record the right of way on any of the titles. 4 On 27 May 1979 the vendors contracted to sell the property to the purchasers for $97,000 (78). It was sold subject to a monthly tenancy (86), but not subject to the right of way. The contract annexed a survey report and diagram dated 30 June 1976 (i.e. after the date of the contract with Mrs Arnold) obtained by Messrs Demetrios, Angelos & Co, who had acted for the vendors on the purchase (84-5). The diagram showed an area at the rear of the property "used as access way for properties to south", and the survey report stated "the rear of the subject land is in use as an access to the properties to the south and the Certificate of Title indicates that there is no Right-of-way across the subject property" (84). 5 The 1979 contract contained the following special condition relating to the survey (81): "Annexed hereto is Survey Certificate made by Wicks & Wicks Pty Limited dated 30 June 1976 and the purchasers acknowledge having inspected same and shall not raise any objections or requisitions or make any claim for compensation with respect to contents therein". 6 On 9 April 1979 Mr F J Kavanagh, the solicitor for the purchasers, wrote to Demetrios, Angelos & Co, who were acting for the vendors, enclosing requisitions on title (54). The first of these was "Is the vendor aware of (a) Any easement, right or licence affecting the land and not shown upon the Certificate of Title and not discoverable by search?" (55) On 20 April the solicitor, who was handling the sale on behalf of the vendors at Demetrios, Angelos & Co, answered the requisition 1(a): "We are instructed No". The sale was completed and the purchasers became registered with a title which it appeared was not encumbered by any right of way. 7 On 24 August 1983 the Registrar-General, having discovered the error, amended the register to record the right of way on the purchasers' title, and wrote to advise them that he had taken this action (15). 8 The purchasers obstructed the right-of-way in 1985 and Mr Kells, the owner of 339 Condamine Street, obtained a declaration of right and an order for the removal of the obstruction. An appeal by the purchasers was dismissed. Christopoulos v Kells (1988) 13 NSWLR 541. 9 On 13 November 1987 the purchasers commenced proceedings in the District Court against the solicitor and the vendors. In August 1989 they commenced proceedings in the District Court against the State of New South Wales claiming damages for the error, omission or misdescription of the right of way in the register, pursuant to s 127 of the Real Property Act. The proceedings should have been brought against the Registrar-General as Nominal Defendant in accordance with s 127(1), but although the Crown Solicitor immediately drew the attention of the purchasers' solicitors to the defect and suggested that the statement of claim be amended, this was never done and the purchasers discontinued on 8 October 1998 (138). The purchasers' decision not to proceed against the Registrar-General seems to have been made contrary to legal advice (blue 115, 120, black 41-2). 10 In the meantime in September 1991 the solicitor applied for summary dismissal of the proceedings on the ground that they were statute barred. They had been commenced within 6 years of the register being rectified but more than 10 years after completion. The case for the solicitor was that the purchasers suffered damage when they completed and time then began to run. The vendors appeared in person at the hearing before Bell DCJ (orange 119) and were permitted to file in Court a typed notice of motion for summary dismissal which stated that they were acting for themselves (orange 253-4). 11 On 25 May 1992 Bell DCJ upheld the motions and entered judgment for all defendants. An appeal by the purchasers was allowed (Christopoulos v Angelos (1996) 41 NSWLR 700) and the High Court refused special leave. The vendors did not appear in this Court. The majority judgments in this Court concluded that the purchasers first suffered loss when their latent defect of title was exposed by the Registrar-General on 24 August 1983. 12 The action came on for trial before Balla DCJ on 23 March 1999 shortly after the purchasers had obtained leave to amend their statement of claim. Their motions of 17 and 25 February were heard by Woods DCJ on 26 February and on 1 March he granted leave to file and serve a further amended statement of claim, as sought in the notice of motion of 25 February, except for the paragraphs which propounded causes of action in fraud against the defendants. The vendors were not represented and did not appear. 13 The affidavit of Urania Zafiris of 11 December 2002 shows that the purchasers' notice of motion of 17 February 1999 and the supporting affidavit which annexed a draft of their proposed further amended statement of claim were served on the vendors in time. The amended notice of motion of 25 February and an amended draft of the further amended statement of claim were not served on the vendors in time but they were not affected by the additional amendments sought in the second notice of motion. The vendors were served with the further amended statement of claim filed pursuant to leave granted by Woods DCJ. I do not read page 2 of the memorandum from counsel annexed to the affidavit of Gregory Howlett of 20 December 2002 as directed to the amendments sought by the earlier notice of motion which was served on the vendors in time. In any event the orders of Woods DCJ are clear, and cannot be affected by observations from the bench during argument. 14 The further amended statement of claim filed, pursuant to the leave granted, pleaded a cause of action in negligent misrepresentation against the solicitor, but did not properly plead that cause of action against the vendors. Paras 9 and 10 pleaded a representation by the vendors in the solicitor's answer to requisition 1(a), para 11 pleaded reliance by the purchasers on that representation, and para 13 alleged that as a result the purchasers suffered damage. There were no allegations of duty or negligence. Thus the only case pleaded against the vendors claimed damages for innocent misrepresentation and failed to disclose a cause of action. 15 The previous statement of claim which had been filed on 24 August 1988 pleaded causes of action in contract and negligence against the vendors (red 78-84). For some reason, never explained, the allegations of warranty, breach and negligence were omitted from the further amended statement of claim on which the purchasers went to trial. 16 The trial took 6 days. The solicitor was represented throughout, but the vendors were not. They appeared in person on the first day and took some part in the proceedings (black 1-2, 6-7, 10-12, 16-21, 32). They were told by the Judge that the case would be continuing in the same Court the following day, but they did not again appear, and they informed the solicitor overnight that they did not intend to do so. 17 Balla DCJ gave judgment on 30 November but only on the claim against the solicitor (red 17). She accepted his evidence and found that his partner had acted on the purchase by the vendors in 1976. She held that the solicitor did not owe the purchasers a duty of care, but in any event found that he had not been negligent. She also held that the purchasers' remedy was against the Registrar-General under ss 126 and 127 of the Real Property Act, and having not pursued that remedy their claim against the solicitor could not be sustained and they could not establish loss. She did not deal at that stage with the claim against the vendors. 18 The Judge did not in terms give final judgment for the solicitor, but later proceedings have been conducted on the basis that this was the result. She stated in her interlocutory judgment of 14 March 2001 (red 27) that when she gave judgment on 30 November 1999 counsel for the purchasers was informed that the action against the vendors could not proceed until the Court had heard further argument. 19 It is not necessary to refer to the subsequent history prior to 15 December 2000 when the purchasers applied for leave to call further evidence (red 26). The motion was heard by Balla DCJ on 22 January 2001 and all parties were represented. Counsel for the purchasers read the affidavit of Urania Zafiris, the solicitor for the vendors, of 15 November 2000, which contained statements on information and belief from the vendors about their limited education and poor knowledge of English and about assurances they had received from the solicitor which induced them not to seek legal representation for the trial. The affidavit also offered a hearsay explanation for their conduct at the trial and hearsay evidence that the vendors had no knowledge of any right of way and had not given instructions to the solicitor to answer requisition 1(a) as he did (red 57). Paragraph 8 referred to deficiencies in the purchasers' pleadings and stated that if the submissions of counsel for the vendors were not accepted in that respect they "would wish to apply to the Court for leave to reopen" to call evidence from both vendors. At the hearing on 22 January counsel for the purchasers stated that no such application was made (T 3). 20 Counsel for the vendors stated that he did not wish to call evidence on the purchasers' motion, or cross-examine (T 5). Counsel for the purchasers was permitted to move under the notice of motion, without amendment, for an order under DCR Pt 31 r 12A, setting aside the judgment in favour of the solicitor (red 28). The Judge reserved and directed written submissions from the vendors and the purchasers (T 11). 21 The written submissions from the vendors included an informal application for leave to call further evidence (red 45, para 12; 46 para 7), and foreshadowed applications to file an amended defence and a cross-claim against the solicitor (46). 22 The Judge gave judgment on 14 March 2001 dismissing the applications. She noted that counsel for the purchasers had not sought to have the judgment in favour of the solicitor set aside (red 28). She referred to the letters from Phillips Fox, who acted for the solicitor, to the vendors between 3 October 1991 and 24 November 1999 (orange 162). 23 She found that "the conduct of [the vendors] on the first day of the hearing was consistent with their being unrepresented due to the cost of representation rather than their belief that their interests were being protected by the [solicitor]" and she rejected the submission that the solicitor's entry of an appearance on their behalf in 1988 which remained on the record had any significance in the light of the correspondence. She also said that she did not think much of the hearsay evidence of Urania Zafiris and the verified amended grounds of defence (red 60-4) as evidence. 24 The Judge said that the vendors had an opportunity to give evidence at the trial and it was not in the interests of justice for there to be the possibility of findings of fact in the proceedings against the vendors which differed from those already made. 25 The Judge heard further argument in the action on 4 June 2001 and gave judgment on 25 June finding for the vendors (red 34). She held that the findings in her judgment of 30 November 1999 applied, and noted the submission for the vendors that negligent misrepresentation had not been pleaded. She considered that "the facts and circumstances" had been pleaded, and in "the absence of any submission ... that the [vendors] have been prejudiced" she was satisfied that the statement of claim encompassed a claim of negligent misrepresentation. 26 She rejected submissions that the vendors did not owe a duty of care, that there was no evidence of breach of duty or reliance, and found that they had been negligent in failing to disclose the right of way. She dismissed the action because of the remedies available to the purchasers under ss 126 and 127. 27 The purchasers appealed against the judgments of 30 November 1999 and 25 June 2001 but not from the interlocutory judgment of 14 March 2001. The vendors filed a notice of contention which challenged the adverse findings in the judgment of 25 June and a summons for leave to appeal from the decision of 14 March in so far as it refused their application to call further evidence. 28 Thus it was that this Court came to hear a third appeal arising out of the Registrar-General's failure to register this right of way in 1976 and its belated registration in 1983, 23 years after the sale in 1979. It is most unfortunate that the sale of a modest shop in Manly Vale for $97,000 should have generated so much litigation over such a long time. It is even more unfortunate that the obvious and simple remedy against the Registrar-General under s 127 was not properly pleaded, amended and pursued to judgment. It is highly likely that the Registrar-General would have been willing to settle on a proper basis without a trial. The lawyer who drafted the purchasers' statement of claim could not have read s 127(1) which in terms requires the action to be brought against the Registrar-General. All the reported cases on the section have been against the Registrar-General. 29 The purchasers made an application to adduce further evidence on the appeal which was dismissed during the hearing, without calling on the respondents, for reasons which sufficiently appear from the transcript. Later counsel for the purchasers sought and was granted leave to amend their notice of appeal by adding a new ground 8 in lieu of the ground which had earlier been abandoned. After some vacillation they elected not to apply to amend their notice of appeal to challenge the interlocutory judgment. On the second day of the hearing they applied for leave to amend their statement of claim. This will be dealt with later in these reasons. 30 The purchasers' appeal against the judgments of 30 November 1999 and 25 June 2001 turns in the first instance on the Judge's decision that their failure to pursue the remedy under s 127 barred any causes of action against the defendants. 31 This decision was based on an implication because s 127 says nothing about remedies against third parties. A statutory remedy, in damages or otherwise, may be exclusive, especially where the statute is construed as a code, but in general the remedies excluded will be against the party subjected to the statutory liability. Thus s 127 may well exclude other remedies against the State, the Registrar-General and his officers. 32 It is a different matter altogether when the statute is said to exclude remedies against third persons liable for their own acts or omissions. Counsel for the solicitor and for the vendors were not able to cite any authority in support of this part of the decision. The construction accepted by the trial Judge is contrary to the general principle that a party with remedies against two or more persons for the same loss may pursue any or all of those remedies in whatever order he pleases, subject to giving credit for any recoveries provided that in total they do not exceed his loss. In The Liverpool (No 2) [1963] P. 64 the Court of Appeal rejected an argument that the Harbour Board was bound to resort to a statutory remedy against the owners of a vessel sunk as the result of the defendant's negligence before proceeding against the defendant. Harman LJ said at 82-3: "... this case, in our judgment, has nothing to do with the duty to mitigate damages. It concerns the board's legal rights, and no duty rests on it at the demand of a tortfeasor to satisfy part of the damages by resorting to another tortfeasor; still less by resorting to an innocent party made liable merely by statute".

33 The construction accepted by the trial Judge is also contrary to the practice prior to 19 March 1992, now barred by s 128, when professional indemnity insurers, who had paid claims against their insured, exercised rights of subrogation to bring actions against the Registrar-General. If this construction is correct those insured were not liable, and the insurers should never have paid the claims. 34 In my judgment s 127 did not bar the purchasers' claims against the solicitor and the vendors, and the trial Judge erred in deciding otherwise. 35 Counsel for the purchasers challenged the findings that the solicitor did not owe a duty of care and was not negligent, and the supporting primary findings. The solicitor's evidence was strongly attacked at the trial but the trial Judge accepted it. In particular she accepted his evidence that he had not acted on the purchase from Mrs Arnold, had no knowledge of the right of way, did not look at the original purchase file, and answered requisition 1(a) in accordance with his instructions. 36 The Judge also rejected the particularised allegations of negligence against him. She accepted expert evidence that it was not general practice for solicitors acting on a sale whose firm had acted on the earlier purchase to inspect the purchase file and she found that the solicitor had not been negligent in failing to do this. If he had inspected the 1976 contract he must have learned of the special condition reserving the right of way. 37 In my judgment these findings cannot be disturbed. Her Honour was entitled to accept the evidence of the experts who were in agreement. Her acceptance of the solicitor's evidence is protected by the principles in Abalos v Australian Postal Commission (1990) 171 CLR 167, and there is no basis for holding that any of the recognised exceptions apply. There are difficulties with some of the solicitor's evidence and he did not have a clear recollection of his conversations with the vendors but he was giving evidence 20 years after the events. 38 These conclusions lead inevitably to the further conclusion that the challenges to the findings on negligence must also fail. The allegations particularised were that the solicitor should have realised that his clients' instructions were incorrect, that he should have questioned them, and he failed to check or turned a blind eye to their accuracy. The Court would only be entitled to reverse these findings if it concluded, contrary to the expert evidence, that the solicitor had a duty to inspect the 1976 purchase file. However this is not one of those rare cases where the Court is entitled to find that a general practice in conveyancing transactions was itself negligent. Compare Edward Wong Finance Co Ltd v Johnson Stokes & Master [1984] AC 296. 39 The solicitor held a clean search and had no reason to think that the Registrar-General had failed to register a right of way created on the1976 purchase. Errors such as this are extremely rare, and mere user, such as that disclosed in the 1976 survey, could not create a right of way over land under the Real Property Act. The purchasers' appeal against the judgment in favour of the solicitor must therefore be dismissed. 40 Although it is strictly unnecessary to decide the duty question I will add some brief comments. The standard form of contract for the sale of land does not include an express term entitling the purchaser to make requisitions which the vendor is obliged to answer, but several standard clauses recognise this right (clauses 4, 7 & 15 blue 70 and foll). The contract must therefore contain an implied term to that effect. 41 Until Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 a misrepresentation in an answer to a requisition could only have given the purchaser a cause of action in tort if the vendor or his solicitor had been guilty of fraud. In these circumstances it is arguable that the implied term required the vendor impliedly to warrant that reasonable care had been taken in preparing the answers, in order to give business efficacy to the whole procedure. Since a purchaser would rarely discover the falsity of an answer prior to completion business efficacy would also seem to require that the implied warranty should not merge on completion. Compare Palmer v Johnson (1884) 13 QBD 351 CA. 42 There is no reason why an implied term requiring the exercise of reasonable care should exclude a duty of care in tort (compare Midland Bank Trust Ltd v Hett Stubbs & Kemp [1979] Ch 384). A solicitor acting for one party does not ordinarily owe a duty to another but exceptionally may do so if a responsibility to that party has been assumed. El-Kandari v J R Brown & Co [1988] QB 665 CA; and Connell v Odlum [1993] 2 NZLR 257 CA. However in Gran Gelato Ltd v Richcliff (Group) Ltd [1992] Ch 560 Nicholls VC held that the solicitor for an intending vendor owed no duty of care to the purchaser in answering preliminary enquiries before contract although the vendor owed such a duty. It might be thought anomalous that the lay client should owe a duty which ordinarily will be performed through a solicitor without the solicitor also owing such a duty. It is not necessary to decide this question but reference might usefully be made to Brown v Raphael [1958] Ch 636 CA and William Sindell plc v Cambridgeshire County Council [1994] 1 WLR 1016 CA. 43 The remaining issues arise in the purchasers' appeal against the judgment in favour of the vendors. The trial Judge would have upheld their claim against the vendors but for her erroneous decision that it was barred by s 127. The issues are those raised by the vendors' notice of contention and summons for leave to appeal. 44 It is first necessary to consider the purchasers' application for leave to amend. At the start of the hearing on the second day the Court ruled that the pleading deficiencies were such that the purchasers must fail against the vendors unless they could amend. Apart from those already mentioned there was the additional difficulty created by DCR Pt 5 r 6A(a) (in force since 1985) which requires a statement of claim to contain "a statement of each cause of action in respect of which the action is brought", applied in Kirby v Sanderson Motors Pty Ltd (2001) 54 NSWLR 135 CA. Under the Supreme Court Act s 75A(6)(a) this Court has the same power and duty to allow amendments as the District Court but this Court's power can only be exercised properly where the amendments would not result in procedural unfairness. 45 Mr Connell, appearing for the purchasers, brought in proposed amendments after lunch which were relevantly as follows: "12B The second and third defendants were under a duty in answering the requisitions by the plaintiffs' solicitors, in giving any responsive answer, to take care to give an accurate response, and to make reasonable enquiry before responding. 12C In providing an answer to the plaintiffs' requisitions on title the second and third respondents by themselves and through their agent the first defendant, and in failing to disclose the existence of the easement, ... breached their duty of care. 12D As a result of the negligent misstatement by the defendants the plaintiffs suffered loss and damage. 12E The loss and damage suffered by the plaintiffs was caused by the negligence of the second and third defendants by themselves and their agent the first defendant". 46 Mr Young for the vendors objected to the amendments and claimed that their allowance would result in prejudice to his clients arising from procedural unfairness. Prior to reserving judgment the Court directed further written submissions on issues raised by the application for leave to amend. 47 The purchasers do not seek to call further evidence on the issues raised by the amendments because they succeeded on those issues at the trial. It is the vendors who wish to call further evidence and they were not represented when the relevant evidence was led at the trial, and were not even present. 48 The principles which govern the power and duty of an appellate court to allow amendments when the parties were represented at the trial are well settled. If evidence was led without objection which fell outside the pleadings, and the parties litigated the issues raised by that evidence, the Court will not uphold the belated pleading objection but will allow any amendments needed to accommodate the issues litigated. Water Board v Moustakas (1988) 180 CLR 491, 497-8 per Mason CJ, Wilson, Brennan and Dawson JJ. The party affected is treated as having waived any objections based on the pleadings, and is not entitled to insist on an objection which, if it had been taken when the evidence was tendered, could then have been met by an amendment. 49 These principles cannot apply without modification where the opposite party is neither represented nor present when the evidence was led. A party by absenting himself during the trial waives the right to be heard, but does not waive the right to a trial according to law. Such a trial would be one conducted on the existing pleadings in accordance with the law of evidence, and normally no amendment, other than one which was merely formal or inconsequential, could properly be allowed without prior notice to an absent party. It was the duty of the trial Judge to reject evidence which fell outside the pleadings. 50 Subject to the requirements of DCR Pt 5 r 6A(a) a pleading need only allege the material facts relied upon and need not allege their legal effect. DCR Pt 9 r 3, and Konskier v B Goodman Ltd [1928] 1 KB 421 CA, 427. The further amended statement of claim pleaded facts in paras 3 to 11 which, if proved, would establish the existence of a duty of care owed by the vendors to the purchasers. Apart from DCR Pt 5 r 6A(a) there was no need to allege in terms that such a duty existed. 51 The statement of claim contained no allegation of personal negligence against the vendors, and facts were not pleaded which, if established, could prove such negligence. Vicarious liability for the negligence of the solicitor had been negatived by the judgment of 30 November 1999. 52 There was no evidence or suggestion that the vendors withdrew from the trial in reliance on professional advice, or on some belief of their own based on the deficiencies in the pleading, and it is practically certain that they had no belief at all on that topic. They had been served with the application for leave to amend and with the statement of claim as further amended and they were in possession of all the relevant facts, although ignorant of their legal effect. However, as McHugh J said in Gallo v Dawson (1990) 64 ALJR 458, 459: "lack of legal knowledge is a misfortune, not a privilege", and in my judgment the vendors cannot be in any better position in resisting the amendments than they would have been in if they had received proper legal advice before withdrawing from the trial. 53 If the vendors had received proper advice based on adequate knowledge of the pleadings and their history, they would have been advised that although the further amended statement of claim disclosed no cause of action the pleader must have intended to plead a cause of action in negligent misrepresentation and they would withdraw from the trial at their own risk. 54 Woods DCJ had refused to allow fraud to be pleaded and there was no claim for breach of contract. A cause of action in negligent misrepresentation was properly pleaded against the solicitor and it was obvious that the omission of an allegation of negligence against the vendors was the result of a mistake. This was made perfectly plain by the terms of the previous statement of claim which until 1 March 1999 had properly pleaded a case of negligent misrepresentation against the vendors. 55 If the vendors had been represented before Woods DCJ their counsel would have been bound to take the objection and the defect would have been cured. If objection were not taken until the trial the Court would not have hesitated to cure it by allowing a further amendment or ordering particulars. 56 By November 2000 the vendors had legal representation and the pleading objection was taken in their written submissions. The purchasers could have applied for leave to amend but did not and the vendors could have applied to strike out the statement of claim but did not. The vendors' advisers probably anticipated that this would only provoke an amendment without any lasting benefit to their clients. 57 Counsel for the vendors was able to address Balla DCJ orally and in writing on all the elements of the cause of action for negligent misrepresentation and clearly was not taken by surprise. 58 If the vendors had been legally represented at the trial the tender of evidence to prove their negligence would not have taken their lawyers by surprise. A claim in negligent misrepresentation which had stood against them on the pleadings for 11 years had been withdrawn only a few weeks earlier obviously as a result of some mistake. 59 The evidence was within the clear intent, although not the letter, of the pleadings and the vendors will not be denied procedural fairness if the amendments are now allowed. The situation would be entirely different if the evidence related to a different cause of action which would have taken lawyers for the vendors by surprise if they had been retained. This Court would be unlikely to grant an amendment even if it was supported by evidence led at an ex parte trial if that evidence would have taken lawyers for the defendant by surprise. 60 The vendors' written submissions filed after the Court reserved judgment were accompanied by affidavits of Urania Zafiris of 11 and 12 December, and affidavits by the vendors of 12 December. The purchasers filed an affidavit by Simon Mitchell of 19 December and the solicitor an affidavit by Gregory Howlett of 20 December. 61 The vendors' affidavits, and the affidavit of Urania Zafiris of 12 December, were an attempt to get evidence on the merits of the case before the Court without leave. The evidence was not fresh and must be rejected. 62 The purchasers and the solicitor submitted that when Woods DCJ granted the purchasers leave to amend their statement of claim on 1 March 1999 he did not intend his orders to affect the vendors so that the existing statement of claim filed in 1988 continued unamended as the purchasers' pleading of their case against the vendors. This submission has already been rejected [para 13]. 63 The submissions by the vendors in opposition to the amendments, with one exception, have already been rejected [paragraphs 44-59]. Their remaining submission is that the purchasers' cause of action for negligent misrepresentation is statute barred and the amendments cannot or should not be allowed because they would revive a statute barred cause of action. 64 DCR Pt 17 deals with amendments to pleadings and in r 4 with the effect of statutes of limitation. The general power of amendment is conferred by r 1 in familiar terms. Rule 1(1) provides that the Court may grant leave to amend at any stage of the proceedings and sub r (2), again in familiar terms, provides that: "All necessary amendments shall be made for the purpose of determining the real questions ... depending on the proceedings, or of correcting any defect or error in any proceedings ...". 65 Rule 4(1) provides that where the limitation period has expired after the statement of claim is filed the Court may grant leave to amend in the circumstances mentioned in sub r (3), (4) and (5). The only sub rule presently relevant is sub r (5) which provides: "Where a plaintiff, in his statement of claim, makes a claim for relief on a cause of action arising out of any facts, the Court may order that he have leave to make an amendment having the effect of adding or substituting a new cause of action arising out of the same or substantially the same facts and a claim for relief on that new cause of action". 66 Counsel for the vendors submitted that sub r (5) did not apply because the further amended statement of claim did not "make a claim for relief on a cause of action". Since the statement of claim did not plead a cause of action it could not be amended after the limitation period had expired to overcome the defect. 67 This submission finds some support in the text but if correct would have bizarre results. There is no longer any need to "plead" a cause of action as such and the pleader only has to plead the material facts [para 50]. It might be said that the statement of claim pleaded a cause of action for damages for innocent representation although, as yet, there is no such cause of action. If so an amendment could be allowed to plead a cause of action for negligent misrepresentation arising out of substantially the same facts. Similarly if a statement of claim based on contract failed to plead either a deed or consideration the plaintiff might be allowed to amend, after the expiration of the limitation period, to allege consideration. 68 It is not necessary to decide these questions because of the settled interpretation of r 4(6) which provides: "This rule does not limit the powers of the Court under r 1". 69 This Court considered the effect of the corresponding Supreme Court Rules in McGee v Yeomans [1977] 1 NSWLR 273 where Glass JA, who delivered the leading judgment, after referring to the equivalent of r 4 (3), (4), and (5) of DCR Pt 17 said at 280: "By providing ... that an amendment may be authorised which allows the substitution of a new party, the suing by the plaintiff in a new capacity and the substitution of a new cause of action, the rule [in Weldon v Neal] was, in those circumstances, totally destroyed. I am unable to accept that it continued, nonetheless, to operate in circumstances outside their terms with undiminished vigour. When it is further provided that the abrogation of the settled rule of practice in certain defined situations shall not in any way abridge the width of the general power to amend, there is in my view an implication that other amendments might in the exercise of discretion be properly allowed in situations not expressly dealt with by the rule, notwithstanding that they introduce a cause of action then barred by the expiry of a period of limitation. I am driven to the conclusion that the Supreme Court Rules ... displace the settled rule of practice laid down in Weldon v Neal (1887) 19 QBD 394 and all the fine spun distinctions which it engendered. In its place there has been substituted a general discretion to allow an amendment, notwithstanding that it raises a barred cause of action, whenever justice so requires. The exercise of the discretion is unfettered by any rules of practice. ... The discretion, having been set free, should not again be confined by rigid technicalities. The Court hearing the application will necessarily have regard to the hardship of the plaintiff, if the amendment is refused, and the prejudice to the defendant, if it is granted. It must also consider all other relevant circumstances, such as the fault of the plaintiff or his advisers, the period of time since the limitation has expired, and the defendant's knowledge of the new cause of action ...". 70 This Court has adhered to this construction of the Rules. Minister for Environmental & Planning v San Sebastian Pty Limited [1983] 2 NSWLR 268, 314-5, Proctor v Jetway Aviation Pty Limited [1984] 1 NSWLR 166. 71 The omission, as a result of the amendments allowed on 1 March 1999, of the allegations of negligence against the vendors which had stood in the statement of claim for the previous 11 years was both a defect and an error for the purposes of DCR Pt 17 r 1 (2) [par 64], which can be amended under that Rule, in accordance with r 4 (6), although this will reinstate a statute barred cause of action. 72 In my judgment therefore the amendments sought by the purchasers should be allowed, subject to the addition of a statement of the cause of action, as required by DCR Pt 5 r 6A (a). 73 The vendor's summons for leave to appeal from the Judge's interlocutory decision of 14 March 2000 challenged her dismissal of their informal application for leave to reopen the trial to enable each of them to give evidence. The proposed evidence was not fresh and there was no first hand explanation for their failure to give it at the trial. There was also no first hand evidence of what their evidence would be. The hearsay evidence suggested that the solicitor had induced the vendors by fraud to withdraw from the trial and had obtained judgment in his favour by giving false and possibly fraudulent evidence. 74 Such claims if properly pleaded and proved would have entitled the vendors to have the judgment for the solicitor set aside. Toubia v Schwenke (2002) 54 NSWLR 46. However they made no application to set aside the judgment for fraud or otherwise. 75 The hearsay evidence was quite inconsistent with the vendors' statements in the transcript of the first day of the trial. The suggestion that they believed that the solicitor was still acting for them was implausible. There is no hint of this in the transcript, and the vendors had no such belief in 1992 because, acting in person, they had filed in Court a typed notice of motion to strike out the purchasers' statement of claim (orange 253-4). The reasons for judgment of Bell DCJ of 25 May 1992 refer to the appearance of the vendors and their application for summary judgment (orange 119). It might reasonably be inferred that the vendors' appearance before Bell DCJ was a result of the letter to them from Phillips Fox of 3 October 1991 (orange 164). 76 The Judge's decision of 30 November 1999 created a cause of action estoppel but no issue estoppel against either the purchasers or the vendors. She had dismissed the purchasers' claim against the solicitor on three different grounds, the absence of a duty, no breach, and no cause of action because of s 127. A decision based on these different grounds cannot establish an issue estoppel on any of them because none of them was fundamental to the decision. "Res Judicata", Spencer Bower, Turner and Handley, 3rd ed 1996, p 112. 77 However the general principle in Henderson v Henderson (1843) 3 Hare 100, 115 [67 ER 313, 319] that "the Court requires the parties ... to bring forward their whole case" is still relevant. 78 In my judgment the interlocutory decision of Balla DCJ was correct and there are also sound discretionary reasons, apparent from the foregoing, why leave to appeal should be refused. The summons should be dismissed with costs. 79 The remaining issues are those that arise on the vendors' notice of contention. These relevantly challenged the findings that the vendors owed a duty of care to the purchasers, and that they breached that duty, and that the purchasers relied on the answer. The remaining challenges were without substance. 80 In England it seems that vendors who formally answer requisitions from their purchaser owe a duty of care. Gran Gelato Ltd v Richcliff (Group) Ltd [1992] Ch 560, 569. In Australia the point is covered by the principles stated by Barwick CJ in The Mutual Life & Citizens Assurance Company Ltd v Evatt (1968) 122 CLR 556. The purchasers sought "information" from the vendors by their requisitions (ibid 570). The vendors were entitled to refuse to answer so much of requisition (1)(a) as fell within special condition 1 but, through their solicitor, they elected to answer and by their voluntary act attracted a duty to be careful in preparing their answer (ibid 570). 81 The vendors' solicitor gave the information "willingly and knowingly" being aware of the circumstances and the purchasers were identified (ibid 570). The circumstances were calculated to cause a reasonable person in the position of the vendors to realise that they were being trusted by the purchasers to give information which the vendors were believed to possess or to which they had access (ibid 571). The subject matter was of a serious or business nature (ibid 571), and the circumstances were such that the vendors ought to have realised that the purchasers intended to act on the information in completing their purchase (ibid 571). It was clearly reasonable for the purchasers to seek, accept and rely upon the answer (ibid 571). If the requisition was not excluded by the special condition, and the vendors were contractually bound to answer it there would still be a duty of care in tort arising from the relationship created by the contract [para 42]. I would therefore uphold the Judge's decision that the vendors owed a duty of care. 82 The question of breach is not without difficulty because the vendors did not give evidence and it seems clear that in 1976 and 1979 they were not fluent in English (black 16, 18, 79), were not particularly well educated (79), and would have had little knowledge of the law. Nevertheless the circumstantial evidence is formidable. They purchased the property by private treaty through an estate agent at Dulwich Hill. Their poor knowledge of English, especially then, would make them seek out a Greek-speaking estate agent for their real estate investment, just as they sought out a Greek-speaking solicitor, and it may be inferred that they did so. This inference is supported by other evidence. The agent referred to in the purchase contract (blue 16) may be compared with that referred to in the later sale contract (blue 78). Mr Christopolous gave evidence that he purchased the property through an agent who spoke Greek and was known to him (black 28) and from what he said it seems that the estate agents on the two contracts were the same (black 29). 83 It was most unlikely that Mrs Arnold's requirement for a right of carriageway emerged for the first time when the solicitors were settling the contract. The attempt to impose such a requirement after an informal bargain had been struck would certainly have reopened the negotiations and delayed exchange. The agents who would be interested, as always in a quick sale, would have had no desire to keep back this requirement and waste their time. It is likely therefore that the property was marketed by the agents on the basis that the existing use of the rear for access to 337 and 339 Condamine Street (blue 84-5) would be formalised by the grant of a right of way. 84 The agent would have had to explain the position in Greek to the vendors before they inspected the property and agreed to the purchase. The use of the rear of the property for vehicle access would have been obvious on inspection having regard to the survey report. 85 The special condition about the right of way was on a separate page of the contract which the vendors signed (blue 19). The solicitor was duty bound to satisfy himself that his clients understood that they were buying subject to a right of way and to explain the position in Greek. The property was occupied by tenants with Greek names (blue 20) who may have been a further source of information about the use of the rear of the property for access to the adjoining properties. 86 As a matter of inference therefore the vendors properly understood the general nature of the right of way that Mrs Arnold had bargained for which they had agreed she would have. 87 The contract of sale to the purchasers was dated 27 May 1979 (blue 1) but exchange must have occurred earlier because their solicitor delivered requisitions on 9 April (54). Thus the sale occurred less than three years after the purchase. The contract contained a special condition dealing with the 1976 survey on a separate page which the vendors signed (81). The solicitor said in evidence that before submitting the draft contract he obtained the 1976 survey and asked the vendors whether they had notice of anything happening in relation to the access way referred to in it, if things were as they were in the survey, and if there had been any change in the position and they said they were not aware of anything (black 67, 78, 87). 88 When the requisitions came in the solicitor sought the vendors' instructions. He said he would either have done this over the telephone, or face to face when they came in to sign the transfer (66, 87). He said that he obtained the vendors' instructions for the answer to requisition 1(a), and his answer reflected his instructions (66). 89 In the course of the transaction the solicitor twice discussed the question of access with the vendors and this should have reminded them about the nature of their purchase less than three years before. 90 They purchased the property for $38,500 in May 1976, subject to a two years' lease for an annual rent of $3,900 ($325 per month). They resold it less than three years later for $97,000 subject to a monthly tenancy at a rent of $869.05 per month. The increase of 252% in the sale price reflected in part the increased rental, the monthly tenancy, and a general rise in land values, but a significant part of the increase must have reflected the difference between a purchase subject to a right-of-way, and a sale free from it. Mr Guy, the purchasers' valuer, considered that the difference in value in 1979 was $10,000 (blue 94), an increase of 27% over the purchase price, out of the total increase of 152%. 91 The trial Judge said that: "It is reasonable to infer from the purchase of the property and the terms of the contract that [the vendors] would have been aware of the ... right to pass through their property". In my judgment this finding should not be disturbed, and that the Judge's finding that the vendors had been negligent in the instructions they gave the solicitor must also stand. 92 The submission that there was no evidence of reliance by the purchasers was without substance. Reliance through an agent is an everyday event, not the least in the case of corporate principals. The whole purpose of requisitions is to obtain answers on which the purchasers' solicitor may rely when proceeding to completion. A truthful answer would have provoked a very different response from the purchasers. Reliance on a misrepresentation need not be established by direct evidence but may be proved by inference from the circumstances. "Actionable Misrepresentation", Spencer Bower, Turner & Handley, 4th ed 2000, pp 76-7. This is the position in the present case and the purchasers could not call Mr Kavanagh, who acted for them on the purchase, because he had died (black 83). 93 Accordingly the purchasers' appeal must be allowed and judgment should be entered for them against the vendors. The trial Judge did not assess the purchasers' damages which must be assessed by this Court or the District Court. 94 The purchasers claimed damages for the loss of land value, either when they completed their purchase in June 1979, or when their latent defect of title was exposed in August 1983, together with monies paid for legal and other costs incurred in or in connection with other proceedings and general damages for stress, anxiety and inconvenience. 95 The valuation evidence was in report form, and neither valuer gave oral evidence. The evidence of the purchasers' expenditure of $48,320 (blue 97) on legal and other costs was documentary. This Court is in just as good a position as the District Court to assess damages for loss of value and determine whether any of the expenditure is recoverable as damages. Neither of the purchasers gave oral evidence in support of the claim for general damages and this Court can determine whether they are recoverable and assess the amount. 96 The relevant date for determining the loss of value as a result of the exposure of the purchasers' latent defect in title is August 1983. This follows from Christopoulos v Angelos (1996) 41 NSWLR 700. The purchasers' valuer, Mr Guy, valued this at $25,000 (94). The solicitor's valuer, Mr Gothard, valued it at nil (150). I am unable to accept Mr Gothard's valuation which in my view is contrary to commonsense. The litigation over the right of way with Mr Kells between 1985 and 1988 is evidence that it was valuable and suggests that the neighbours would have been willing to pay an amount for it comparable with what Mr Kells risked in litigation to defend it. The evidence of Mr Christopoulos of his negotiations in 1982 and 1983 with Mr Kells' predecessor in title, for the grant of a right of way (black 37-8), confirms its value to the dominant owners and the opportunity otherwise available to the purchasers to exploit that value. I accept the evidence of Mr Guy and would award $25,000 for the loss of value in 1983. 97 The purchasers did not obstruct the right of way until November 1985 (blue 100, black 38) and acted, not necessarily on, but with the benefit of, legal advice (blue 99). The legal costs they incurred, and the costs they paid pursuant to orders of the court, were the result of their deliberate decision to provoke litigation more than two years after the Registrar-General registered the right of way. They did not act in the agony of the moment or in any sort of emergency. 98 In my judgment their deliberate decision to provoke this litigation broke any causal link with the negligence of the vendors. They did this at their own risk. 99 The purchasers were "bound" to take reasonable steps to mitigate their damage and cannot recover for any loss they should have avoided. However an innocent party is not bound "to embark on a complicated and difficult piece of litigation against a third party". Pilkington v Wood [1953] Ch 770, 777; Walker v Geo H Medlicott & Son [1999] 1 WLR 727 CA, 743. 100 If the innocent party embarks on such litigation and fails he cannot recover the costs from the wrongdoer. This applies with special force to the purchasers' unsuccessful appeal from the decision of McLelland J. 101 In 1985 and subsequently the purchasers acted with the benefit of legal advice but they did not prove what that advice was. They may have been advised that they could lose. For all these reasons I would not award damages for the costs incurred in the litigation with Mr Kells. 102 Some of the costs claimed were incurred in connection with a resumption by Warringah Council (blue 115, 116, 132), possible proceedings against the Registrar-General and the proceedings against the State (115, 116, 127, 135, 137). These claims must also fail. The purchasers also claimed $397 for survey fees incurred in July 1984 (98) and $1,000 for valuation fees payable to another valuer incurred in December 1994 (136). There was no evidence, oral or documentary, explaining why this expenditure was incurred which might establish a basis for allowing it as part of the damages. These claims must also fail. 103 Some of the costs claimed were incurred in connection with the present proceedings (116, 118, 127) and prima facie are not recoverable, but costs which were common to both claims and costs solely referable to the claim against the vendors (127) may be recoverable as costs, but are not recoverable as damages. 104 In my judgment no part of the purchasers' expenditure of $48,320 is recoverable as damages. 105 I would also reject the purchasers' claim for general damages. Their cause of action, although in tort, is for the recovery of economic loss (Christopoulos v Angelos (1996) 41 NSWLR 700) and the general damages claimed are not compensation for economic loss. The property was an investment and the purchasers never lived there (98, 136-7). Any stress, anxiety and general inconvenience were the result of the litigation rather than the exposure of their latent defect in title as such. I would reject their claim for general damages. 106 In the result I would award the purchasers $25,000 and enter judgment for that amount against the vendors, together with interest at Court rates from 24 August 1983. I see no reason why the purchasers' claim for interest should not be allowed in full, despite the long delays that have occurred. 107 The purchasers must pay the costs of their unsuccessful appeal against the judgment in favour of the solicitor. The orders for costs in the proceedings against the vendors in both Courts raise questions of some difficulty. The purchasers would have failed but for their belated amendment in this Court and this must be reflected in the orders. However I have held that the defects in their statement of claim were obvious, the pleader's general intention clear, the amendments did not take the vendors' legal representatives by surprise and their allowance will not result in procedural unfairness. 108 The first three days of the trial were taken up with evidence and the purchasers' principal target was the solicitor. The evidence was also relevant to the claim against the vendors, but would have been led in any event. The addresses which took a further three days were so focussed on the claim against the solicitor that the Judge was not able to give judgment on the claim against the vendors on 30 November 1999. In these circumstances I would make no order for costs against the vendors in respect of the six days' hearing in 1999, but would order them to pay the purchasers' costs of the oral and written submissions incurred thereafter when the action continued. I would make no order against the vendors for the purchasers' costs of the interlocutory proceedings leading to the Judge's decision of 14 March 2001. 109 The argument in this Court on the pleadings and the application for their amendment took up a considerable part of the hearing and gave rise to the need for the further written submissions and affidavits filed after judgment was reserved. These costs were occasioned by the defective pleading and the purchasers should pay these costs in any event, but there is no reason for depriving them of all their costs. 110 Some of the purchasers' costs were common to their appeal against the judgment in favour of the solicitor and their appeal against the judgment in favour of the vendors, but almost the whole of the time taken in argument on the latter appeal, apart from the amendment issues, arose on the vendors' notice of contention on which they failed. The vendors must also pay the purchasers' costs of the summons for leave to appeal. 111 In all the circumstances, setting off the various entitlements, and allowing for the time taken up by the appeal against the judgment in favour of the solicitor, in my view the proper order is that the vendors should pay one quarter of the purchasers' total costs of the proceedings in this Court including the summons for leave to appeal, excluding the costs payable by them to the solicitor. 112 Accordingly the following orders should be made: (1) Leave granted to the appellants to amend their amended notice of appeal by substituting as ground 8 the following: "That the Trial Judged erred in failing to find that the First Respondent was negligent in failing to make adequate enquiry of the Second and Third Respondents and by virtue of his conduct as their agent in issuing the response to requisitions".

Bebonis & Anor v Angelos & Ors; Christopoulos & Anor v Angelos & Ors

At a glance

Court

Decision date

Before

Source

Judgment (35 paragraphs)

Cases Cited (9)

Cited By (11)