(1) a declaration that the plaintiffs are entitled to compensation under s 120 of the Real Property Act 1900 (NSW);
(2) an order for compensation in favour of the plaintiffs against the Registrar-General and/or against the 22nd defendant (Mr Davidson) under s 120 of the Real Property Act;
(3) damages;
(4) interest in accordance with s 100 of the Civil Procedure Act 2005 (NSW);
(5) costs.
3 The present judgment addresses the plaintiffs' claims for this relief.
Facts
4 No 149 Old South Head Road, Bondi Junction is a 3-storey residential flat building. In 2003 the owner of the building, Dimepark Pty Ltd, made an application for registration of a strata plan of subdivision to convert the property into 12 strata units plus common property. Prior to registration of the strata plan, Dimepark entered into separate contracts for the sale of each of the 12 lots to Oates Properties Pty Ltd. The contracts were dated 10 November 2003. Oates Properties then set about on-selling the strata units. At about that time Mr Davidson, a solicitor (the 22nd defendant), began to act for Oates Properties.
5 The contracts between Dimepark and Oates Properties were for the sale of the units "off-the-plan": that is, each contract annexed the draft strata plan which specified the strata lot that was the subject of the sale, and was conditional upon Dimepark registering the strata plan of subdivision with respect to the lot prior to completion. The first four on-sales by Oak Properties were also sales "off-the-plan". They were sales of Lots 2, 4, 10 and 12 shown in the draft plan, to purchasers named Tsoukarellis, Doorey, Mifsud and Strasser. For convenience I shall refer to the lots in the draft strata plan annexed to the "off-the-plan" contracts as "Mark 1" lots.
6 The strata plan was registered as Strata Plan No 71211 on 14 January 2004. But the plan as registered was not identical with the draft plan annexed to the "off-the-plan" contracts. The numbers of the strata units had been changed for all except three of the lots. For example, the unit in the north-eastern corner of the first floor, which had been Lot 6 in the draft strata plan, became Lot 8 in the strata plan as registered; the unit in the south-western corner of the first floor, which had been Lot 7 in the draft strata plan, became Lot 6 in the strata plan as registered; and the unit in the south-eastern corner of the first floor, which had been Lot 8 in the draft strata plan, became Lot 7 in the strata plan as registered. Lots 2, 4, 10 and 12 (the units sold by Oates Properties "off-the-plan") became Lots 4, 3, 12 and 11 respectively. There were also changes in the unit entitlements attached to some of the lots. The evidence does not reveal why the changes occurred. I shall refer to the lots in the strata plan as registered as the "Mark 2" lots.
7 Oates Properties settled its sales of Lots 2, 4, 10 and 12 (Mark 1) after the registration of the strata plan, in January and February 2004. Apparently at that time Mr Davidson's firm, acting for Oates Properties, was not aware of the changes to the lot numbers. Whereas, for example, the purchaser of Lot 2 (Mark 1) had contracted with Oates Properties to buy a unit identified in the draft plan and called Lot 2 in the draft plan, the purchaser acquired on settlement a memorandum of transfer relating to a different lot, namely Lot 2 (Mark 2).
8 According to Mr Davidson, he identified the variation in lot numbers in about February 2004. Steps were then taken by his firm, with the cooperation of Dimepark, to correct what Mr Davidson referred to in his affidavit as "the mistake". Someone in Mr Davidson's office contacted the Department of Lands, which in April 2004 sent back some information about the Registrar-General's practice in dealing with applications to correct lot numbers shown in a deposited or strata plan, under s 12(1)(d1) of the Real Property Act. Eric Scerri, the surveyor who prepared the draft strata plan that had been annexed to the "off-the-plan" contracts and also the strata plan as registered, made a statutory declaration on 19 April 2004 identifying the differences in lot numbers between the draft plan and the Registered plan and attaching a fresh plan amended so as to re-number the lots back to their original numbering. He did not purport to explain why the variance had occurred in the first place.
9 Mr Davidson's firm did not promptly make a request to the Registrar-General under s 12(1)(d1) in April 2004, after Mr Scerri made his statutory declaration. Instead, to satisfy the requirements of s 12(1)(d1), the firm approached registered proprietors and mortgagees of strata units to obtain their consents to an application to amend the registered strata plan so as to re-number the lots back to their original numbers. It was only on 23 December 2004 that Mr Davidson's firm lodged a form of Request to correct the lot numbers, as dealing No AB 183103. Attached to the form of Request was the statutory declaration of Mr Scerri, and a statutory declaration by Christopher Emery, a solicitor from Mr Davidson's firm. The form of Request bore certificates constituting consents by Dimepark, and by Messrs Tsoukarellis, Doorey, Mifsud and Strasser, who were described as the purchasers of Lots 2, 4, 10, and 12, and by the mortgagees of Lots 2, 4 and 12. Though the form of Request itself is not clear, it is plain from the names of the consenting purchasers that the Mark 1 numbering was used to identify the lots for which consents were supplied.
10 Mr Emery's statutory declaration bears the printed date 23 April 2004, but that date has been struck out by hand and the date 10 December 2004 has been substituted. In his declaration, Mr Emery said that the alterations to the draft plan were made by the surveyor, Mr Scerri, but he did not purport to explain why they occurred. He referred to the "off-the-plan" sales of Lots 2, 4, 10 and 12 (Mark 1) and the settlement of those purchases in January and February 2004 after the registration of the strata plan, saying that at that time he was unaware that the numbering of the lots in the draft plan had been altered on the registered strata plan, and consequently that all transfers of the lots were prepared using the lot numbers shown on the draft plan, with the result that incorrect lots were conveyed to the purchasers of these four units. As to the remainder of the units, Mr Emery said:
"Settlement of the remaining lots is pending and due shortly. The remaining lots are still owned by Dimepark Pty Ltd."
11 Mr Emery's statement that the remaining lots were still owned by Dimepark was probably true on 23 April 2004 (the printed date on his statutory declaration), as there is evidence that the purchases of the other lots by Oates Properties from Dimepark had not been settled at that time. But the statement was untrue on 10 December 2004 (the corrected, handwritten date of the declaration), as I shall now explain.
12 On 1 March 2004 the 24th defendant, Michael La Greca, entered into a contract for the purchase of one of the lots from Oates Properties Pty Ltd. There were mistakes in the contract of sale as to the correct identity of the subject property, but I need not explore that problem because Mr La Greca gave evidence that on settlement on 3 May 2004 he obtained the unit he had intended to buy, namely Lot 7 (Mark 2) which had been Lot 8 (Mark 1). Mr La Greca granted a mortgage over Lot 7 (Mark 2) to St George Bank Ltd in about October 2005.
13 Thus, well before 10 December 2004 the registered proprietor of Lot 7 (Mark 2) was Mr La Greca, a fact not acknowledged in Mr Emery's statutory declaration. That is all the more surprising given the evidence that Mr Emery acted for both the vendor, Oates Properties, and the purchaser, Mr La Greca, on this transaction.
14 In about August or September 2004 completion of the contracts of sale from Dimepark to Oates Properties with respect to the remaining lots was overdue. Dimepark and Oates Properties then agreed that the purchase of Lots 1, 5, 6, 8 and 11 (presumably Mark 1) would be completed by transfer of those lots to Quinross Pty Ltd, which was a related company of Oates Properties. Quinross obtained finance for completion from lenders whose loans were arranged by Mr Kremnizer, solicitor. Amongst the lenders were the plaintiffs, who were approached by Mr Kremnizer on 20 December 2004. By that time, of course, the strata plan had long since been registered. They agreed to take a mortgage over Lot 8 (Mark 2), as security for a loan by them to Quinross of $250,000. They understood, and it was correct, that Lot 8 (Mark 2) was the unit on the north-eastern corner of the first floor of the building.
15 Settlement of the plaintiffs' mortgage over Lot 8 (Mark 2) took place on 24 December 2004, which, as it happened, was the day after the lodgement of the form of Request to correct the lot numbers. The mortgage was stamped on 29 December 2004 and lodged for registration by Mr Kremnizer's firm, RL Kremnizer & Co. A search indicates that it was recorded in the Register on the same day, immediately after the transfer of Lot 8 (Mark 2) from Dimepark to Quinross, and immediately before a mortgage (evidently a second mortgage) of Lot 8 (Mark 2) to Nelpop Pty Ltd and Bleier Mortgage Corporation Pty Ltd. A certificate of title for Lot 8 (Mark 2), issued on 14 January 2005, confirms the registration of the transfer and the two mortgages and shows that the second mortgage had subsequently been transferred to Meyer Gutnick, the 17th defendant.
16 The form of Request had been lodged before lodgement of the transfer of Lot 8 (Mark 2) from Dimepark to Quinross and also before lodgement of the mortgage over Lot 8 (Mark 2) to the plaintiffs. But the Registrar-General is not required to register dealings in the order in which they are lodged, and may register dealings in the order that will give effect to the intentions of the parties (s 36(4)).
17 Amended Strata Plan No 71211, purporting to correct the Register in response to the Request, by correcting references to lot numbers in the registered plan under s 12(1)(d1), was registered on 1 February 2005. There is no evidence on behalf of Registrar-General to explain how it happened that the Amended Strata Plan was registered without the consent of persons who at the time of registration held registered interests in affected lots, namely Mr La Greca and the plaintiffs. Evidence on behalf of the Registrar-General was given by Anthony Booth, a solicitor employed by the Solicitor for the Registrar-General, who did not say that he dealt with the processing of the Request and the registration of the Amended Strata Plan, and did not give any relevant admissible evidence about the determination of the Request by the Registrar-General.
18 I shall refer to the lot numbers after registration of the amended strata plan as the lot numbers "Mark 3". It must be remembered, however, that the purpose of the amendment was to restore the lot numbers used in the draft strata plan for "off-the-plan" sales, and so the lot numbers Mark 3 are the same as the lot numbers Mark 1.
19 The correction of the Register presumably improved the situation for the owners and mortgagees of the units that had been purchased "off-the-plan", for they had expected to acquire Lots 2, 4, 10 and 12 respectively (these being Mark 1 numbers), and the amendment restored those numbers. Not surprisingly, however, the amendment created a good deal of confusion for the plaintiffs and Mr La Greca, because they had acquired interests in units which they knew by their registered plan numbers (the Mark 2 numbers), and now the numbers were being changed. The amendment had the effect that the unit that had been Lot 7 (Mark 2), owned by Mr La Greca, was re-numbered Lot 8 (Mark 3), and the unit that had been Lot 8 (Mark 2), owned by Quinross subject to a first mortgage in favour of the plaintiffs and a second mortgage in favour of Mr Gutnick, was re-numbered Lot 6 (Mark 3).
20 It was submitted that the plaintiffs and Mr La Greca (and, for that matter, Hama Holdings and Mr Gutnick) were protected by s 12(3A)(c). That provision offers some protection to persons affected by the exercise by the Registrar-General of his power under s 12(1)(d1), but it only applies to the construction of an instrument made before the correction, and would not prevent the change of lot numbers from operating in accordance with the Registrar-General's determination, and therefore would not insulate interest-holders from the confusion that re-numbering created. It was also submitted that the re-numbering pursuant to the Request, which was a "dealing", in no way affected the registration of the plaintiffs' mortgage, in light of s 41. That is correct, and it is also correct that the plaintiffs and the other interest-holders had the protection of indefeasibility of title under s 42. But again, that protection did not prevent the Registrar-General from altering lot numbers so that the registered estates or interests, while still estates or interests in respect of the same physical properties, became estates or interests in respect of properties designated by new numbers.
21 Both Mr Kirkland and Mr La Greca gave evidence that they were not asked to consent, and did not consent, to the amendment of the strata plan, and that they found out about the amendment some time after it had occurred. I accept this evidence, from which it follows that at the time when the Registrar-General purported to correct the Register by correcting the references to the lot numbers in SP 71211, he did not have the consent of all of the proprietors and mortgagees of the affected land, and consequently a requirement for the exercise of the power of correction under s 12(1)(d1) was not present.
22 According to the evidence of Mr Kirkland, the plaintiffs' mortgage from Quinross went into default on 27 May 2005. After Quinross defaulted, the plaintiffs took proceedings for possession, evidently obtaining an order for possession of the security property, "Unit 8", in about December 2005. Frustrated at not receiving overdue payments from the mortgagor or any rental payments from the tenant of the property, they engaged a new solicitor who discovered the amendment to the strata plan, at some time after 20 February 2006. Mr Kirkland was then informed that the unit that had become Unit 8, also a tenanted unit, was owned by Mr La Greca, and that it was previously Lot 7 (Mark 2). The tenant of Unit 8 (that is, Lot 8 (Mark 3)/Lot 7 (Mark 2)) was (not surprisingly) paying rent to Mr La Greca. The plaintiffs were not receiving any rent from the tenant of Lot 8 (Mark 2), which had become Lot 6 (Mark 3). It is not clear from the evidence whether this was because of confusion about the lot numbers.
23 On 27 February 2006 the plaintiffs' solicitors wrote to Mr La Greca's solicitors demanding an accounting for the rent being collected from the tenant of "Unit 8", apparently referring to the tenant of Mr La Greca's property, which had been Lot 7 (Mark 2) until the amendment. This led to Mr La Greca's solicitors notifying the Registrar-General of what had occurred, and making a demand, also on 27 February 2006, on Mr Davidson, on the ground that "on the face of the title … our clients do not now own the Lot which was originally purchased by them". The Amended Statement of Claim alleges that on 2 March 2006 a Notice to Vacate (presumably issued at the instigation of the plaintiffs) was forwarded by the Local Court and Sheriff in respect of Lot 8 (Mark 3). If that event occurred (unfortunately I can find no proof of it in the evidence), the Notice was misdirected, because the plaintiffs had no rights in respect of Lot 8 (Mark 3), but only rights in respect of Lot 8 (Mark 2)/Lot 6 (Mark 3).
24 The plaintiffs commenced the present proceedings by Summons filed on 3 March 2006, seeking nothing more specific than "a declaration as to the registered proprietors and other interest holders in SP 71211", consequential orders for the re-issue of certificates of title and registration of a corrected strata plan, and costs against Mr Davidson and the Registrar-General. After the Court directed that the matter proceed by pleadings, a Statement of Claim was filed on 15 March 2006, seeking a declaration that Quinross was the beneficial and legal owner of "Unit 8", a declaration as to the identity of the registered proprietors and other interest holders of the entirety of SP 71211, consequential directions to the Registrar-General to rectify the Register and to re-issue certificates of title and amend the strata plan, and also damages, compensation under the Real Property Act, interest and costs.
25 The proceedings were originally framed as proceedings against 24 named defendants. This was on the theory that the proper course would be to establish the ownership of all the lots in the strata plan, possibly by restoring the Mark 2 numbers for all lots. Following a change of solicitors, the plaintiffs decided to discontinue the proceedings against all except seven of the defendants. I infer that this was on the theory that the only correction that was needed to address the plaintiffs' case was in respect of Lots 6, 7 and 8, whose numbers had been swapped around amongst themselves by the various alterations.
26 It was necessary for the plaintiffs to obtain either the consent of the affected defendants or the leave of the Court, in order to file Notices of Discontinuance against the defendants who were no longer to be parties. It was also necessary for the plaintiffs to re-plead against the remaining seven defendants, a step that would require leave to amend their Statement of Claim. On 19 April 2006 the plaintiffs' solicitors wrote to the defendants, other than the seven who would remain defendants, seeking their consents to discontinuance. Some defendants consented, but others did not reply. Eventually the plaintiffs made an application to the Registrar in Equity, who granted leave for the filing of Notices of Discontinuance against all non-consenting defendants (other than the remaining seven). Leave was granted in respect of most of those defendants on 16 June 2006. The plaintiffs meanwhile sought the consent of the remaining seven defendants to the correction of the Register in respect of Lots 6, 7 and 8, and also to the amendment of the Statement of Claim.
27 The evidence shows that the Registrar-General was supportive of the proposal to correct the numbering of Lots 6, 7 and 8, although he made clear his preference for fixing the problem administratively under s 12(1)(d1) rather than through court proceedings. On 20 April 2006, after conferring with the legal representatives of the plaintiffs and others, the Legal Services Branch of the Registrar-General's office wrote to the plaintiffs' solicitors confirming the Registrar-General's view that the most expedient way to correct the problem would be by an amendment under s 12(1)(d1), with the consent of all of the registered proprietors and mortgagees. The letter suggested that if this course of action was agreed, the proceedings could be disposed of by consent orders (that was probably excessively hopeful, because by that time the plaintiffs were claiming compensation and damages). On the same day the Legal Services Branch wrote to Mr La Greca's solicitors conveying the same proposal. By a letter dated 27 June 2006, the Legal Services Branch confirmed to the plaintiffs' solicitors that the Registrar-General was prepared to amend the Register regarding Lots 6, 7 and 8 on condition that the current registered proprietors of those lots and all other registered interests consented to the dealing.
28 It appears that an obstacle to the Registrar-General's proposal was that it required, appropriately, the consent of everyone who had a registered interest in Lots 6, 7 and 8. Mr La Greca owned one of the lots, subject to a mortgage to St George Bank. Both Mr La Greca and the Bank indicated they were prepared to consent. The other two lots were owned by Quinross, which had defaulted on its mortgage to the plaintiffs in May 2005 and had been deregistered on 19 March 2006, so that effectively the only remaining interests in those two lots were the mortgagee interests. The first mortgagees of Lot 6 (Mark 3), which had previously been Lot 8 (Mark 2), were the plaintiffs, who claimed a secured amount exceeding the value of the property. Lot 7 (Mark 3), which was previously Lot 6 (Mark 2), was subject to mortgages in favour of Hama Holdings and Mr Gutnick. Therefore the task for the plaintiffs was to obtain the consent of Hama Holdings and Mr Gutnick to the proposed renumbering.
29 The correspondence that is in evidence shows that this proved to be a difficult task. It also proved to be difficult for the plaintiffs to obtain the consent of Hama Holdings and Mr Gutnick to their proposed Amended Statement of Claim. It is necessary to pay some attention to this correspondence because it is pertinent to the questions of causation and costs.
30 The plaintiffs' solicitors prepared a draft Amended Statement of Claim in May 2006, seeking rectification of the Register as regards Lots 6, 7 and 8 (Marks 1, 2 and 3), and also compensation and costs, retaining the seven defendants as parties. They sought the consent of the remaining defendants to the filing of the amended pleading. Hama Holdings and Mr Gutnick were represented by RL Kremnizer & Co. On 26 June 2006 the plaintiffs' solicitors wrote to that firm noting that there was no appearance on behalf of their clients when the matter was before the Registrar on 16 June 2006, and so it was not possible on that day for the Court to grant leave to the plaintiffs to file the Amended Statement of Claim. The letter said that if consent was not forthcoming, a notice of motion would be filed. The letter also sought the consent of those two parties to the proposal to rectify the Register to restore Lots 6, 7 and 8 to their Mark 2 numbering, noting that all other interested parties had consented and that the Registrar-General was prepared to act.
31 The plaintiffs' solicitors received no reply to their letter of 26 June, nor to a follow-up letter of 10 July 2006. But when the matter was next mentioned before the Registrar on 14 February 2006, Mr Fernon of counsel appeared for Hama Holdings and Mr Gutnick, and consented to short minutes of order which included an order granting the plaintiffs leave to file their Amended Statement of Claim.
32 The Amended Statement of Claim, filed on 17 July 2006, reflected the discontinuances and also the plaintiffs' determination to proceed for relief by way of "rectification" of the Register, compensation and costs. The seven remaining defendants were the following: