13 A cause of action in negligence is not complete until the plaintiff first suffers actual loss or damage. Damage which is prospective or contingent does not qualify as actual damage for this purpose. See Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 (Wardley) at 530, 531 per Mason CJ, Dawson, Gaudron and McHugh JJ.
14 In order for the plaintiffs' cause of action to be complete, the plaintiffs' actual damage must be "measurable" (Wardley at 531), or, in the words of Lord Reid in a personal injuries case (Cartledge v E Jopling & Sons Ltd [1963] AC 758 at 772) the damage must be "beyond what can be regarded as negligible".
15 This was an action to recover damages for the plaintiffs' economic loss and the courts have developed special rules for distinguishing between actual and prospective damage in this area. Time commences to run under the Limitation Act when damage accrues, even if the plaintiff is not aware of it: see Cartledge v E Jopling & Sons Ltd [1963] AC 758 at 782-3; Hawkins v Clayton (1988) 164 CLR 539 at 543, 560-561, 587-8, and 598-602 and Wardley (1992) 175 CLR 514 at 540, 554-5.
16 Where an owner suffers loss because of the existence of latent defects in a building, it is now established that such loss accrues when the defects become manifest or are otherwise discovered, and not before. What has become orthodox doctrine in much of the common law world concerning the nature of the damage in such a case can be traced to the judgment of Deane J in Sutherland Shire Council v Heyman (1985) 157 CLR 424 at 503-5 where he said:
"… the respondent's claim … is for the loss or damage represented by the actual inadequacy of the foundations, that is to say it is for the cost of remedying a structural defect in their property which already existed at the time when they acquired it … It is arguable that any such loss … should be seen as being sustained at the time of acquisition when, because of ignorance of the inadequacy of the foundations, a higher price is paid … than is warranted by the intrinsic worth of the freehold or leasehold estate that is being acquired. Militating against that approach is the consideration that, for so long as the inadequacy of the foundations are neither known nor manifest, no identifiable loss has come home: if the purchaser or tenant sells the freehold or leasehold estate within that time, he or she will sustain no loss by reason of the inadequacy of the foundations. The alternative, and in my view preferable, approach is that any loss … involved in the actual inadequacy of the foundations is sustained only at the time when the inadequacy is first known or manifest. It is only then that the actual diminution in the market value of the premises occurs".
17 This analysis has been followed in Hawkins v Clayton (above) at 543, 587-8, 601-2; Murphy v Brentwood District Council [1991] 1 AC 398 at 466-8, 475, 480-1, 484; Bryan v Maloney (1995) 182 CLR 609 at 617, 623, 625-6, 645-7, 657-8; and Invercargill City Council v Hamlin [1996] AC 624 at 647-9.
18 In Christopoulos v Angelos (1996) 41 NSWLR 700 and Registrar-General v Cleaver (1996) 41 NSWLR 713, this Court extended this principle to cases involving latent defects of title. In Christopoulos v Angelos the plaintiffs purchased a residential property which was subject to an easement that was not recorded on their certificate of title but was recorded on the certificate of title of the dominant tenement. The plaintiffs purchased their property without actual or imputed notice of the easement. Although its existence could have been discovered by a search of the title to the dominant tenement, conveyancing practice did not require searches to be made for unregistered easements. However s 42(1)(b) of the Real Property Act provides that the title of a registered proprietor is subject to an unregistered easement "created in or existing upon" the land. The Registrar-General recorded the easement on the plaintiffs' certificate of title some four years after they became registered.
19 The majority of this Court held that the purchasers had not suffered economic loss until the Registrar-General recorded the easement on their title and they became aware of the defect. Until then they could have honestly resold the property for its full market value and successfully avoided any economic loss. Accordingly their action for negligent misrepresentation, commenced within 6 years of becoming aware of the defect but more than 6 years after their purchase, was not statute-barred. On 6 June 1997 the High Court refused leave to appeal (S 196 of 1996).
20 The same principle was applied in Registrar-General v Cleaver (1996) 41 NSWLR 713. The benefit of a restrictive covenant was recorded on the plaintiffs' certificate of title, but the burden had not been recorded on the certificate of title of the land burdened by the covenant. The error occurred in 1967 but both 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 threatened to breach the covenant.
21 The plaintiffs were unable to enforce the restrictive covenant and they sued the Registrar-General under s 127 of the Real Property Act for damages caused by the omission in the register. The Registrar-General contended that the action was statute-barred. 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. Until then they could have honestly resold the property for its full market value and successfully avoided any economic loss. Although a search of the title to the adjoining property would have disclosed the defect in title, conveyancing practice did not require such a search to be made.
22 In both cases the defects in title were discoverable but would not be discovered by normal conveyancing procedures. Thus in Registrar-General v Cleaver the previous owners of the plaintiffs' land between 1967 and 1978 suffered no economic loss because they sold the property for its market value with the benefit of the covenant. Latent defects in buildings are also discoverable if the work is opened up, or partially demolished, but owners and purchasers of property do not normally search for latent defects in buildings.
23 The situation in the present case is quite different. The contract of sale disclosed the existence of a registered easement which benefited the property. The plaintiffs specifically asked their solicitor to confirm the existence of legal access to the lower section of their property but, even without specific instructions, normal conveyancing procedures should have revealed the existence of the defect in title. This was not a latent defect of the kind considered in Christopoulos v Angelos and Registrar-General v Cleaver. There is no reason for thinking that the plaintiffs could have ever sold this property and avoided economic loss. The defect in their title would have been discovered, either by their solicitors in preparing the contract of sale, or by the solicitors for the purchaser, and in that event they would have faced claims for compensation or rescission.
24 The general principle is that time runs from when the cause of action is complete, whether or not this is discovered or discoverable. The exceptions for latent defects in buildings, latent defects in title, and prospective and contingent losses are only apparent exceptions to this general rule. They depend in each case on a finding that the particular form of economic loss had not been suffered when the plaintiff became committed to the risk, but only later when the risk actually accrued.
25 The general principle has been applied in representation cases in deceit and in negligence. Before the Judicature Act, the Courts of Common Law, after some division of opinion, decided not to allow any exception in limitation cases for fraud but this exception was allowed in the Court of Chancery. As Holker LJ said in Gibbs v Guild (1882) 9 QBD 59 at 73: "the cause of action … was the fraud and not the discovery of it". After the Judicature Act the rule in equity came to prevail. See Gibbs v Guild (above) and Lynn v Bamber [1930] 2 KB 72.
26 The equitable exception in cases of fraud or fraudulent concealment has been incorporated in modern limitation legislation including the Limitation Act 1969 (s 55), and has been extended to cases where there is a cause of action "for relief from the consequences of a mistake" (s 56). Neither exception was or could have been relied on in this case. The cause of action in this case was the negligence, and not the discovery of it. The decisions supporting this view go back to the early years of the 19th century. In Short v M'Carthy (1820) 3 B & Ald 626 [106 ER 789] an attorney who was responsible for a negligent search at the Bank of England to ascertain whether certain stock was standing in the names of trustees represented to the plaintiff that such was the case. The error was not discovered for more than six years but the defendant's plea of the Statute of Limitations succeeded. It is not clear that the plaintiff had sued in tort. In Gibbs v Guild (1881) 8 QBD 296 at 302 Field J said that this was so, but the Court in Howell v Young (1826) 5 B & C 259 [108 ER 97] at 265-7 [99-100] thought otherwise.
27 In Grainger v George (1826) 5 B & C 149 [108 ER 56] the plea of the statute was held to answer the action although the plaintiff did not discover the conversion until more than 6 years afterwards ("there not being evidence of any fraud practised by the defendant in order to prevent the plaintiff from obtaining knowledge of that which had been done" per Abbott CJ at 152 [56-7]).
28 In Howell v Young (1826) 5 B & C 259 [108 ER 97] the plaintiff retained the defendant as his attorney to advise on the sufficiency of the security for a loan. The plaintiff did not discover that the security was insufficient until 6 years later, the borrower having paid interest in the meantime. The plaintiff sued in tort alleging that the defendant had failed to exercise due care and had "represented to the plaintiff " that the security would be sufficient. The defendant's plea of the Statute of Limitations succeeded. See also Thomson v Lord Clanmorris [1900] 1 Ch 718 CA (action for compensation under Directors' Liability Act for untrue statements in prospectus).
29 The general rule in misrepresentation cases was acknowledged in Wardley (1992) 175 CLR 514 where at 530 the majority said:
"In the case of a fraudulent or negligent misrepresentation which induces the plaintiff to enter into a contract to purchase property, the plaintiff 's loss, apart from any question of consequential damage, is measured by the difference between the price paid or payable under the contract and the value of the property at the date of the contract".