Angelos v Christopoulos

[1997] HCATrans 145

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S196 of 1996

B e t w e e n -

NICHOLAS P. ANGELOS

Applicant

and

THEODOROS CHRISTOPOULOS and SOTIRA CHRISTOPOULOS

Respondents

Application for special leave to appeal

GAUDRON J

McHUGH J
GUMMOW J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 6 JUNE 1997, AT 2.17 PM

Copyright in the High Court of Australia

MR D.L. DAVIES, SC:   May it please the Court, I appear with my learned friend, MS C.A. WEBSTER, for the applicant.  (instructed by Philips Fox)

MR W.R. DAVISON, SC:   May it please your Honours, I appear with my learned friend, MR D.R. PARRY, for the respondent.  (instructed by Stewart Levitt & Company

GAUDRON J:   Yes, Mr Davies.

MR DAVIES:   Your Honours, there are two short points which flow from the Court of Appeal’s judgment.  The first point is the extent of the survival of the principle in Forster v Outred and the cases which followed it, and the second related point is whether the principle in Pirelli General Cable v Oscar Faber in the House of Lords is to be followed in this country.  Those two points were left unresolved in Wardley because they did not need to be.

GAUDRON J:   Is not the issue more fundamental than that, namely, an identification of the damage?

MR DAVIES:   Yes, it is, your Honour.

GAUDRON J:   And was not the damage ultimately a burden on the title, an encumbrance on the title?

MR DAVIES:   Yes, your Honour, it is.

GUMMOW J:   Your right was a title by registration.  That was what you had.

MR DAVIES:   Yes.

GUMMOW J:   That was later detracted from or qualified by what the Registrar-General did under his extraordinary powers.  Until that happened, you had your title by registration.

GAUDRON J:   Or the other side had it.

GUMMOW J:   The other side had it, rather.

MR DAVIES:   Not quite, your Honour, because the Court of Appeal held in Christopoulos v Kells which was the same piece of land, same person, that the easement or right of way was always there and that arose because of the exception in 42(b) of the Real Property Act.  It was merely just noted on the title in 1983, it was always there.

GAUDRON J:   The easement may have existed but the title was a different matter and it was the encumbrance on the title that constituted the damage in this matter, I would have thought; the registration of the encumbrance.

MR DAVIES:   With respect, your Honour, if the Court of Appeal had held in the earlier case that it was always on the land, then the land was encumbered from the time the title was taken.

GAUDRON J:   Yes.  The land may have been but the title was not.

MR DAVIES:   Yes, I am sorry, your Honour, that distinction is quite right.

GUMMOW J:   It is fundamental to this case, really.  It might have been looked at this way in the Court of Appeal and that seems to be the way it must be looked at.

MR DAVIES:   But that does not really resolve the problem, with respect, because the Court of Appeal accepted that the burden on the land of the easement meant that the land was worth less when it was bought.  Now if it was worth less when it was bought, we say, there was damage suffered at that time, and that was not contingent or prospective damage, it was actual damage.

GAUDRON J:   That was not the way Mr Justice Handley looked at the matter, was it?

MR DAVIES:   He did not draw that conclusion from his assumption that the land was worth less.  He says at 27, 25:

The assumption, which is reasonable but as yet unproved, is that the property was worth more without the burden of the right of way than it was with that burden.

And then he posits two alternatives to when the damage might first have said to be suffered.  But having made that assumption, which we say is right, then the only conclusion could be that the damage must have been suffered in 1979.

GAUDRON J:   I do not see it that way.  It could have been sold for more with a different title.

MR DAVIES:   Yes, but - - -

GAUDRON J:   Could the Registrar-General, for example, have entered this easement against a bona fide purchase for value without notice?

MR DAVIES:   The answer is yes, your Honour, because 42(b), as it then was in the Act, allowed him to do so.  In that respect, this respondent was a bona fide purchaser.

GAUDRON J:   Well, he bought one thing and he got something less.

MR DAVIES:   And that is why, we say, when he bought it he must have suffered the damage.  Your Honours, that was precisely the view taken by the Queensland Court of Appeal in Francis v Whatson, which is on my list, where a boat was sold to a person but there was no title in the seller of the boat and ultimately the boat was seized by the police and returned to the true owner and it was held that at the time the boat was sold to the purchaser the damage was suffered because no title was received.

GAUDRON J:   Yes, but this is not quite the same case.  If you look at it as the damage being damage to the title and not to the land, you get a different consequence.

MR DAVIES:   Your Honour, if the problem had been discovered before these purchasers sold the land, as it turned out to be, that meant that they were only able to sell the land for less than they purchased it.  Any notion that they could have sold it unknowing of the easement for the same price is really to confuse the later mitigation of the loss with the loss that has been suffered.

GAUDRON J:   How can there be mitigation of loss in these circumstances?

MR DAVIES:   In my submission, the ability to sell at no loss would amount to a mitigation of the loss that had taken place when the land was first purchased.  Now, your Honours, the other way of looking at it is the way Mr Justice Powell, in dissent, in the Court of Appeal looked at it, to say that at the time the land was purchased with this defect, the purchasers had the right either to seek compensation or rescission of the contract.  If they had that right and lost it by virtue of settlement of the contract, then damage was suffered in the loss of those rights.  That solution to the problem is not answered by the idea that it is the title which is not affected until 1983.

Your Honours, this Court in Wardley allowed for the fact that the Forster v Outred line of cases had some work to do.  They said if they are explicable on one basis then they are good law.  If they are explicable only on the basis that whenever you enter into a contract and receive less rights, fewer rights than you would have otherwise, then they are wrong.  Now, as I said, the Queensland Court of Appeal in Francis v Whatson interpreted that as meaning that if you purchase an item, purchase land or a chattel which is worth less, then you have suffered an actual loss at the time of purchase even if that is not known until later.

GAUDRON J:   But that still is the question:  are you purchasing land or are you purchasing title to land in a contract of this kind?

GUMMOW J:   I thought cases like Travinto v Vlattas said you were purchasing a title.

MR DAVIES:   Your Honour, that might be the strict legal analysis of it but as a practical matter they are paying a certain amount of money for the benefit of being able to live on this land and own this land and that benefit is undoubtedly eaten into by the fact that somebody else has the right to walk and drive across it, unbeknown to them.  But in any event, the fact that the title was clear in the register does not mean that in fact it was clear because the right of the Registrar-General to be able, retrospectively, to say that this land was burdened must mean that the title was burdened all along.

GUMMOW J:   That is the question.

MR DAVIES:   Yes.  In my submission, that is exactly what section 42 of the Real Property Act does.  It is an exception to indefeasibility but it enables the correction of the title in a retrospective fashion.  Now, your Honours, if that problem is solved then there is the question of whether one should apply the principle in the Forster v Outred Cases and in Pirelli because this case is analogous, although not identical, with the principle in Pirelli which related to a latent defect in a building.  Mr Justice Handley in the Court of Appeal took the view that this was the closest one could come by having a problem with the title.

Now, your Honours, this Court has approved impliedly the principle in Pirelli in Hawkins v Clayton in your Honour Justice Gaudron’s judgment and Justice Deane’s judgment and Pirelli has also been approved by Justice Toohey in Wardley.  Now, the Privy Council has recently, in Invercargill City Council, said that as far as the law of New Zealand is concerned Pirelli is not to be regarded as good law in latent defects in

building cases.  Now, of course, this Court has not been bound by the Privy Council for some time but it, nevertheless, is a matter - - -

GAUDRON J:   Nor is it a latent defect case in the sense of a latent defect in the fabric of a building.

MR DAVIES:   No, it is not, but from the purchaser’s point of view there is, I suppose, a latent defect in the title to the land.

GAUDRON J:   It is not really.  The question is and must be was there an encumbrance on title at all stages or did the encumbrance come about upon registration.  That must be the question.

MR DAVIES:   Your Honours, if that is the question, I can only repeat my submission that section 42(b) - - -

GUMMOW J:   You say there was this potentiality?

MR DAVIES:   Yes.  It is merely a matter of correction of what is regarded as always having been there.  Your Honours, those, with my written submissions, is what I want to say.

GAUDRON J:   Yes, thank you, Mr Davies.  Yes, Mr Davison.

MR DAVISON:   Your Honours, the position related to section 42(b) is that it provides an exception to the indefeasibility of title but does not alter the principle that it is the register to which one goes to determine title.  The provision of an exception from indefeasibility does not give rise to the operation of the restriction until - it is a potentiality to be included upon the title and, at the discretion of the Registrar-General, can, and in this case, was, included on the title, the result being that the impact upon title and, accordingly, the impact upon value was prospective in the same way that the loss was prospective at the time the contract was entered into and remained so until the Registrar-General exercised the power that he undoubtedly had to include the notation upon the title.

So much is demonstrated in a practical sense by the identification by his Honour Mr Justice Powell of the material related to the presence or absence of a right to pass across the property, which one finds at page 38 of the application papers.  He notes at line 35 a paragraph in the survey certificate that was appended to the contract:

“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.”

That was what was perceived as being the actuality. 

My learned friend in his submissions refers to the question of what would be discoverable upon inquiry and adverts to the fact that had the transfer been the subject of a search, it would have revealed the fact of the creation of the right of way.  That, with respect, again - - -

GAUDRON J:   That is not how searches are done.

MR DAVISON:   It fails to recognise the fact that the whole purpose of the Real Property Act and the Torrens system is to provide for a search of the title and to make not only unnecessary but unproductive of result going behind the title.  It is what is on the face of the title which provides the assurance which the Real Property Act was designed to create for the purpose of those dealing with property in New South Wales and in the other States which adopt the similar system.

The result, in our submission, is that though the Registrar‑General always had the power to note the title as he did, that power was a potentiality in terms of the impact upon the title.  The value of the land did not become affected until the Registrar-General exercised that power.  So that the loss, until that occurred, was prospective only in the way in which the majority found it to be. 

The passage that Mr Justice Powell refers to in Wardley at page 41 of the judgment where he notes, at line 35, the passage:

“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.”

Now that, with respect, entirely begs the question.  The valuer, coming to assess the value of the land at the date of the contract, would go no further than these purchasers did in a search of the title to ascertain whether there was or was not the right of way - - -

McHUGH J:   That may be so but the fact is that had the valuer known that the title did not properly record the underlying transaction and that the Registrar had a power to make a notation on the title, would have to discount the value which would otherwise be attached to the unencumbered fee simple.

MR DAVISON:   As at the date of the contract, your Honour, he would not have known.

McHUGH J:   But that is the fact.  That is the fact, that the value of what was conveyed was less than was paid for it because it was affected or liable to have a power used which would devalue it.

MR DAVISON:   That, with respect, your Honour, is the problem.  In our respectful submission, the majority in the Court of Appeal appropriately recognised that the value of the land is not actually affected until the title reflects the encumbrance.

GAUDRON J:   I do not know why one is looking at damages in terms of loss of value of land.  It is damage to title.

MR DAVISON:   Damage, indeed, your Honour.

McHUGH J:   To talk about damage to title, it seems to me a little unreal.  That is lawyer’s talk.  We are talking about what things are worth in the real world when you have suffered damage.  It does not matter how you describe the subject matter here, the fact is it had less value than was paid for it.

MR DAVISON:   With respect, no, your Honour.  At that point of time it did not and would not until the title was altered to reflect the fact.

McHUGH J:   Yes, but the very fact that there was a chance that a power could be exercised.  In the commercial world, anybody knowing the likelihood that there was this opportunity to exercise this power would not pay as much as that person would pay if that potential power did not exist.  It happens every day.

MR DAVISON:   But, your Honour, that is what the Real Property Act is designed to avoid and to protect against.  It is the register upon which one relies for the purpose of determining what the title to land is.

McHUGH J:   I know that.

MR DAVISON:   Or what its value is.

McHUGH J:   I know that, but what I am saying to you is that here was land which could be diminished in value by the exercise of a power.  A valuer would surely be bound to put a value on the chance that that power would be exercised.

MR DAVISON:   With respect, no, your Honour.  How would a valuer ever know unless he went behind the title?

McHUGH J:   Assume he knows all the facts of the case, and that is what we have to look at.  What did you actually get?  You did not get something that was worth the same as an unencumbered fee simple, you got something that was worth whatever the unencumbered fee simple was, less the value of the chance that the power would be exercised.  The fact that you did not know about it does not affect that.

MR DAVISON:   Your Honour, on the basis of Wardley that was a prospective loss which did not achieve actuality until the title was noted.  That is the basis of the finding of the majority which, with the greatest of respect, we say is an accurate reflection of the law found by this Court in Wardley and Hawkins v Clayton.  Those, with respect, are out submissions.

GAUDRON J:   Yes, Mr Davies.

MR DAVIES:   Just one thing, your Honours.  My friend referred to the fact that because of the way the register works and notation of easements that were always there, that the loss was only prospective until that was done.  The problem for this case is that the Court of Appeal had earlier found, in Christopoulos v Kells, that that right of way was always there.  Now, that means that the day after they purchased, the purchasers could have taken action against the vendors or my client and said, “We have suffered damage as a result of you telling us that this land was unencumbered”, and they would have recovered actual loss, being the difference in value.  The whole question of the prospective loss is bound up with this title question and the earlier decision of the Court of Appeal.

The present decision of the Court of Appeal is inconsistent in that respect from their earlier decision which says the right of way was always there.  With respect, it is inconsistent with the notion that they were purchasing title.  If the Court of Appeal in this present case should have considered the matter on the basis of title, we were locked into the other position because of their earlier decision which we could not challenge because we were not a party to it.  That is an additional reason, in the light of what your Honours have raised about title, that special leave ought to be granted so we are not left - - -

GAUDRON J:   It seems to me like a reason why it should not be granted if we are only seeing one half of the picture, as it were.

MR DAVIES:   It leaves us between two stools and, with respect, this Court would have to start on the basis that Christopoulos v Kells was correctly decided.  It might, during the course of considering this matter, indicate that they thought the Court of Appeal there had got it wrong but, otherwise, we are in the middle.  Those are my submissions.

GAUDRON J:   We will take a short adjournment, gentlemen, in respect of this matter.

AT 2.42 PM SHORT ADJOURNMENT

UPON RESUMING AT 2.51 PM:

GAUDRON J:   Having regard to the particular circumstances of the case, this is not a suitable vehicle for the elucidation of any point of principle with respect to applicable limitation periods.  Accordingly, special leave is refused.

MR DAVISON:   I seek an order for costs.

MR DAVIES:   I cannot say anything.

GAUDRON J:   It is refused with costs.

AT 2.51 PM THE MATTER WAS CONCLUDED