Fleming v Segal

[2002] NSWSC 42

CITATION:	Fleming v Segal [2002] NSWSC 42
CURRENT JURISDICTION:	Common Law Division Professional Negligence List
FILE NUMBER(S):	SC 20237/00
HEARING DATE(S):	24/09/01
JUDGMENT DATE:	14 February 2002
PARTIES :	Brian William Fleming v Alan Lewis Segal
JUDGMENT OF:	Howie J at 1

COUNSEL :	T. Lynch - Plaintiff D. Davis SC - Defendant
SOLICITORS:	Hunt & Hunt, Lawyers - Plaintiff Ebsworth & Ebsworth, Lawyers - Defendant
CATCHWORDS:	Limitation of Actions - Application of statute - When time begins to run - Tort - Professional negligence - Solicitor - Failure to discover defect in title - Rectification of contract for sale - Damage accrued when rectification no longer available.
LEGISLATION CITED:	Limitation Act 1969 - s 14 Real Property Act 1900 - s 127(1)
CASES CITED:	Smouha v Fleming (NSWSC, Hodgson J, 20 May 1997) Fleming v Segal [2001] NSWSC 754 Wardley Australia Limited v State of Western Australia (1992) 175 CLR 514 Scarcella v Lettice (2000) 51 NSWLR 302 Cartledge v E. Jopling & Sons Limited [1963] AC 758 Hawkinsv Clayton (1988) 164 CLR 539 Registrar-General v Cleaver (1996) 41 NSWLR 713 Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 Doundoulakis v Antony Sdrinis & Co. [1989] VR 781 Cheney v Duncan [2001] NSWCA 197 Christopoulos v Angelos (1996) 41 NSWLR 700 Australian Gypsum Ltd and Plaster Co. Ltd v Hume Steel Ltd (1930) 45 CLR 54 Commision for the New Towns v Cooper [1995] Ch 259 Bush v National Bank Ltd (1992) 35 NSWLR 390 Mackenzie v Coulson (1869) LR 8 Eq 368
DECISION:	The defence based upon the Act fails and is dismissed.

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION
PROFESSIONAL NEGLIGENCE LIST

20237/00

HOWIE J

THURSDAY 14 FEBRUARY 2002


BRIAN WILLIAM FLEMING v ALAN LEWIS SEGAL

JUDGMENT

: The plaintiff has commenced proceedings against the defendant, a solicitor who acted for him on the sale of a block of land in suburban Sydney. The defendant was also instructed, in conjunction with that sale, to attend to the removal of any right of carriageway that existed over an adjoining block of land, also owned by the plaintiff and which was to be retained by him, and that benefited the block of land that was to be sold. However, the defendant failed to remove all rights of way then in existence over that block. The property retained by the plaintiff remained burdened by a right of way in favour of the property sold; see Smouha v Fleming (NSWSC, Hodgson J, 20 May 1997).

2 The plaintiff maintains that the defendant was both in breach of the agreement arising from his retainer and negligent in failing to take such action as was necessary to bring about the extinguishment of the right of way. The plaintiff alleges that he suffered economic loss as a result of the defendant’s failure to carry out his instructions and seeks damages accordingly.

3 The defendant denies that he was negligent or in breach of contract in failing to remove the right of carriageway but asserts that in any event the proceedings are statute-barred by reason of the operation of s 14 of the Limitation Act 1969 (the Act). On 31 August 2001 Sperling J ordered, pursuant to Part 31 Rule 2 of the Supreme Court Rules, that there be a separate trial of the limitation issue: Fleming v Segal [2001] NSWSC 754. This is the matter that was argued before me.

4 Section 14 of the Act relevantly provides that an action founded on contract or tort cannot be maintained if brought after the expiration of the period of six years running from the date when the cause of action first accrues. The issue presently before the Court is, when did the present causes of action first accrue to the plaintiff? Because time runs from the date of breach of contract, which in this case is clearly outside the limitation period, the parties have argued the matter solely on the basis of the action in tort. It has been agreed that the cause of action accrued on the occasion when the plaintiff first suffered actual (and not potential or contingent) damage as a result of the conduct of the defendant: Wardley Australia Limited v State of Western Australia (1992) 175 CLR 514 at 530-531; Scarcella v Lettice (2000) 51 NSWLR 302 at 306. For the purpose of determining this issue, the actual damage suffered must be “measurable”: Wardley at 531 or “beyond what can be regarded as negligible”: Cartledge v E. Jopling & Sons Limited [1963] AC 758 at 772. The limitation period can commence to run even though the plaintiff has not discovered or could not on any reasonable inquiry have discovered that damage has been sustained: Hawkins v Clayton (1988) 164 CLR 539 at 543, 560-561, 587-588, 598-602; Wardley at 540, 554-555, Registrar-General v Cleaver (1996) 41 NSWLR 713 at 719.

5 The particular matter for decision, therefore, is when the plaintiff first suffered damage as a result of the defendant’s failure to remove the right of carriageway that continued to burden the plaintiff’s property after the sale of the other block. The defendant maintains that damage first arose in 1987 when the property was sold without the right of way being extinguished. The plaintiff maintains that the cause of action did not arise until September 1994 when the purchaser of the property sold it to the present owners. The plaintiff commenced the current proceedings on 6 June 2000 and, therefore, they are statute-barred if the damage, which the plaintiff alleges he suffered, occurred before June 1994.

6 There is no significant dispute as to the facts. A Statement of Agreed Facts was admitted into evidence on behalf of the plaintiff without objection. That Statement has been supplemented by material tendered by both parties. There were some minor objections taken to certain parts of this material by the party not tendering it. As a result of those objections some parts of the documents tendered were not pressed and I have marked those parts accordingly. Where the tender was pressed over objection, it became unnecessary to resolve the issue because, sensibly, the parties were content for me to proceed on the material tendered without regard to the objections taken.

7 In light of the way the matter has been argued, the facts can be stated briefly. In May 1977 the plaintiff acquired a block of land on the waterfront of Double Bay at Point Piper (“Lot 1”). This property is a battle-axe block set behind another property that fronts Wolseley Road Point Piper (“Lot 2”). Access was gained from the substantial part of Lot 1 into Wolseley Road via a thin strip of land running from the corner of Lot 1 alongside the boundary of Lot 2. Lot 2 has no water frontage but access was gained from it to a jetty on Double Bay by a right of carriageway that ran alongside the boundary of Lot 1. This encumbrance on Lot 1 was created in favour of Lot 2 in 1971 by an instrument with the registration number, M 306169 (“the 1971 right of way”). At the same time, an easement for sewerage and drainage was also created for the benefit of Lot 2 over the same strip of land in Lot 1.

8 In 1976 a right of carriageway was created over both lots with the result that each property had access to both Wolseley Road and Double Bay. So far as Lot 1 was concerned, it was encumbered by a four-foot right of way extending along the strip of land from Wolseley Road and continuing down to Double Bay. This right of way was created by an instrument registered as P 236518 (‘the 1976 right of way”).

9 A set of stairs and an inclinator were built over the strip leading to Double Bay thus giving the owners of both properties access to the water.

10 In 1983 the plaintiff, jointly with his sister, purchased Lot 2. However, the existing tenants of the house on that property remained in occupation of it. In 1986 the plaintiff decided that Lot 2 would be sold and he retained the defendant to act on the sale and instructed him to extinguish all rights of access to Double Bay that existed over Lot 1 in favour of Lot 2. The plaintiff wished to protect his privacy on Lot 1 by denying access to Double Bay to the new purchasers of Lot 2.

11 Lot 2 was sold by auction. It was made clear to potential purchasers, both before and during the auction, that the property as sold would have no access to the waterfront of Double Bay.

12 In October 1986 the plaintiff and his sister entered into a contract for the sale of Lot 2 for $1.61 million. The contract contained a number of Special Conditions, number 11 of which (“SC11”) was as follows:

“ Notwithstanding any other term or condition as herein contained the Purchaser acknowledges that the Vendors will be seeking the extinguishment of that right of carriageway 4 feet wide created by D.P. 547705 and instrument filed as No. M. 306169 appurtenant to the land. The Vendors shall do all things reasonably necessary to obtain such extinguishment on or before settlement PROVIDED HOWEVER that if the Purchaser is unable to obtain registration of such extinguishments on or before settlement then the Purchaser shall do all things necessary and sign all such documents as the Vendors may reasonably request to enable such extinguishment without cost to the Purchaser. This clause shall not merge on completion.”

It seems clear that the word “Purchaser” where it appears on the second occasion in that clause should read “Vendors”.

13 Lot 2 was sold to Mr Toltz. Settlement took place on 6 February 1987. On 13 May 1987 a transfer from the plaintiff and his sister to Mr Toltz was registered at the Land Titles Office. At the same time a Transfer Releasing Easement that extinguished the 1971 right of way was registered.

14 Nothing was done to extinguish the 1976 right of way either before or after the sale of the property.

15 In August 1989, after he had been informed that the four-foot right of way over Lot 1 still existed, the plaintiff asked the defendant whether any error had occurred during the sale of Lot 2. The defendant wrote to the plaintiff assuring him that no error had been made in relation to the extinguishment of any right of way burdening Lot 1. The defendant expressed some indignation at the suggestion that he had been negligent in that regard and complained of the time and money that had been expended in confirming that no error had in fact been made.

16 In April 1994 Mr Toltz informed the plaintiff that the right of way had not been removed and still appeared on his title. The plaintiff, no doubt relying upon what the defendant had told him, refused to accept the accuracy of this assertion.

17 In September 1994 Mr Toltz entered into a contract for the sale of Lot 2 with Mr Smouha and Ms Ho.

18 On 15 January 1996 the plaintiff again sought advice from the defendant as to whether Lot 1 was still burdened by a right of way in favour of Lot 2 extending to the Bay. On 3 July 1996 the defendant wrote to him re-asserting that no error had been made in 1987 and that no right of carriageway then affected the property. The defendant set out in some detail the reasons for that assertion but it is unnecessary for present purposes to specify the reasons he gave.

19 In July 1996 Mr Smouha and Mrs Ho commenced proceedings in the Equity Division of this Court to obtain a declaration that the right of carriageway created in 1976 still existed over Lot 1 for the benefit of their property. They were successful and Hodgson J made an order to that effect on 20 May 1997.

20 The plaintiff sold Lot 1 in 1999. As I have indicated, the present proceedings were commenced on 6 June 2000.

21 In the Statement of Claim filed by the plaintiff the particulars of the loss and damage suffered by the plaintiff are given as:

“(a) Loss of value of Lot 1
(b) Loss of enjoyment of Lot 1
(c) Further particulars will be supplied in due course.”

On 29 November 2000 the plaintiff’s solicitors advised the solicitors for the defendant that the plaintiff intended to claim:
“a) loss of value of his property which will be the difference in its value burdened and unburdened by the right of accessway in September 1994 or March 1995;
(b) loss of enjoyment of his property; and
(c) costs of Equity Division proceedings and Court of Appeal proceedings of $55,171.08”

On 10 May 2001 the plaintiff’s solicitors advised the defendant that the plaintiff would rely upon the further particular:
“Loss of opportunity to obtain rectification of the Sale Agreement between the Plaintiff and Mr Toltz”

22 The defendant submits that any damage that was occasioned to the plaintiff by the failure to remove the right of way arose at a point of time outside the limitation period. It is submitted that the occasions upon which damage was suffered by the plaintiff could be identified as any or all of the following:

(a) 23 October 1986 when the plaintiff and his sister entered into the contract for the sale of Lot 2. Damage was suffered on that date because: either (i) Lot 2 sold for less than it would have fetched at auction had it been known that the right of way still existed giving access to Double Bay; or (ii) the contract entered into provided only for the extinguishment of the 1971 right of way and the plaintiff could not rely upon the SC11 in the contract to enforce the purchaser to co-operate in the later extinguishment of any other right of way.

(b) 14 May 1987 when the transfer of title to Mr Toltz and the transfer extinguishing the 1971 right of way were registered. The damage suffered at that time was that the plaintiff was left with an indefeasible right of way burdening Lot 1 in favour of Lot 2.

(c) August 1989 when the plaintiff was alerted to the fact that the right of way may not have been extinguished.

(d) 29 April 1994 when Mr Toltz informed the plaintiff that the right of way was still showing on his title. From this date the plaintiff knew that the owner of Lot 2 was claiming that the right of way still existed and, thereafter, was required to disclose this claim in any future sale of Lot 1.

23 The plaintiff denies that he suffered any such damage as the defendant alleges because until Mr Toltz sold the property, the plaintiff was able to enforce the removal of the right of way. The argument is that there was a common mistake made between the plaintiff and his sister, on one hand, and Mr Toltz, on the other, when Lot 2 was sold. It was erroneously believed that, after the sale, Lot 2 would not enjoy any right of way over Lot 1. This was the condition upon which Lot 2 was sold at auction and purchased by Mr Toltz. SC 11 was in the contract to ensure that this condition and the intention of the parties would be met. However SC11 did not represent the understanding and intention of the parties because it referred only to the 1971 right of way. The argument continues that this disconformity between the oral agreement resulting from the auction and the written contract entered into by the parties could have been rectified had the plaintiff been aware of the defendant’s omissions. Maralinga P/L v Major Enterprises P/L (1973) 128 CLR 336 at 343, 350-351, is relied upon to support this argument. It is noted that the 1971 right of way was not extinguished until 1987. It is submitted that Mr Toltz had a personal obligation to rectify the contract, that this personal obligation continued after settlement, and that the plaintiff, relying upon a rectified SC11, could have required Mr Toltz to execute a transfer extinguishing the 1976 right of carriageway had he become aware of its continued existence.

24 The argument proceeds that, when Mr Toltz contracted to sell the property in September 1994, the plaintiff lost the right to have the written contract with Mr Toltz rectified and SC11 specifically performed. Thereafter, the plaintiff was unable to have the 1976 right of way extinguished. The plaintiff contends that it was not until this date that damage was suffered because until this time any damage was contingent and it was only at this time that the contingency firmed into fact when the plaintiff lost the power to exercise his right to have the 1976 right of way extinguished under the contract of sale. It is submitted that, if the damage is the loss of a chance to enforce a right, damage accrues upon the expiry of any period in which that right could be exercised. Reliance is placed on Doundoulakis v Antony Sdrinis & Co [1989] VR 781 at 787 and Cheney v Duncan [2001] NSWCA 197 at [27]-[28] for that proposition.

25 The plaintiff submits that, until Mr Smouha and Ms Ho, the purchasers from Mr Toltz, obtained the declaration made by Hodgson J in May 1997, the plaintiff had no belief, or reason to believe, that the 1976 right of way had not been extinguished. It was noted that by letter dated 3 July 1996 the defendant denied that any right of way in favour of Lot 2 over Lot 1 remained. The plaintiff submits that in those circumstances he never suffered damage by the continued existence of the right of way until Mr Smouha and Ms Ho enforced it.

26 The application of the Act to proceedings arising from defects in title was most recently considered in Scarcella v Lettice, above. The Court of Appeal was concerned with the operation of the Act in a case of alleged professional negligence by a solicitor who acted in the purchase of a property in 1982. The purchasers believed that there was a right of way giving vehicular access to part of the property over two neighbouring properties. In 1994 they discovered that no right of way existed over one of the blocks and subsequently sued the solicitor who pleaded the defence based upon the provisions of the Act. The trial judge found that the solicitor was negligent in failing to obtain all searches required. He rejected the defence on the basis that the purchasers first suffered damage in 1994 when they discovered they did not have a right of way as they had previously believed.

27 On appeal it was held that the trial judge was in error in dismissing the defence. The Court of Appeal stressed that damage accrues even if the plaintiff is not aware of it. It was noted that, where an owner suffers loss because of latent defects in a building, the cause of action accrues when the defects become manifest or otherwise discovered and not before. This principle has been extended to cases involving latent defects in title, see Christopoulos v Angelos (1996) 41 NSWLR 700 and Registrar-General v Cleaver (1996) 41 NSWLR 713. In each of those cases, it was held that time did not begin to run under the Act until the purchasers discovered the defect in title because, until that time, they suffered no economic loss. In each case the defects would not have been discovered by normal conveyancing procedures.

28 However, the Court of Appeal distinguished the facts of the case before it from those two decisions on the basis that the defect in title was not a latent defect of the kind considered in those decisions. The purchasers in Scarcella v Lettice could never have sold the property without the defect being discovered by normal conveyancing procedures and, as a result of the discovery, they would have faced a claim either for compensation for the defect in title or for rescission of the contract. Handley JA, who gave the principal judgment of the Court, stated at [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 the 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 occurred”.

29 The plaintiff argues that Scarcella v Lettice can be distinguished from the facts in the present case, because there the purchasers acquired a property with an existing defect in title, which was discoverable by proper search, and as a result paid more than the property was worth. It is submitted that, unlike the present case, that damage was occasioned by settlement and the cause of action arose at that time. It is argued that because Mr Toltz could have been required to do what was necessary to extinguish the 1976 right of way had SC11 been rectified, the enhanced value of an unencumbered Lot 1 was not lost while the right to rectify and enforce SC11 remained.

30 The plaintiff argues that the situation in the present case was akin to that of the plaintiff’s in Christopoulos v Angelos and Registrar-General v Cleaver, to which I have referred above.

31 In Christopoulos v Angelos, above, the plaintiffs purchased a property without notice of an easement which affected the property but which was not recorded on their title. The Registrar-General recorded the easement some four years after the purchase. The Court of Appeal held that the plaintiffs suffered economic loss on the date of the registration of the easement and not on the date of purchase of the property. The defect in title was not discoverable by normal search and inquiry. It was significant to the decision of the majority of the Court that, until the easement was recorded on the title, the plaintiffs could have sold the property for its value unaffected by the easement and, therefore, suffered no economic loss.

32 In Registrar-General v Cleaver, the Registrar-General, when registering a transfer severing the ownership of two blocks of land, had failed to note that one lot (Lot 1) was subject to a height covenant in favour of the other lot (Lot 2). Both lots changed hands without any person noting the defect in title of the subservient tenement. When the owners of Lot 1 indicated that they intended to build in breach of the covenant, the defect was discovered. The Registrar-General then noted the covenant on Lot 1 but later removed it following proceedings by the owners of that lot. The owners of Lot 2 then brought proceedings for damages under s 127(1) of the Real Property Act relying upon the loss of value in the property by the unenforceability of the covenant in its favour. The Registrar-General pleaded the defence under the Limitation Act. The defence failed and the Registrar-General appealed. On appeal it was held that the defence did not apply because the owners of Lot 2 suffered damage, not when they purchased the property but when the Registrar-General noted the covenant on their title. As in Christopoulos v Angelos, the defect in title was not discoverable by normal procedures.

33 Of course the present case is somewhat different from those that have been considered by the Court of Appeal and to which I have referred. This was not a case of the plaintiff purchasing a defective property and, as a result, suffering economic loss being the difference in the value of the property as purchased and that free of the defect that was later discovered. In such a case, unless the defect was latent in the sense as explained in the decisions of the Court of Appeal to which I have referred, the damage occurred at the time of purchase even though the defect had not been discovered.

34 However, putting the question of rectification aside and assuming that SC11 had not existed in the contract of sale between the plaintiff and Mr Toltz, it seems to me that the principles set out and applied in Scarcella v Lettice would require that the defence be upheld. In that case the omission of the solicitor, which allegedly resulted in economic damage to the plaintiff, was a failure to properly search the title of the property purchased and, as a result, a failure to identify that there was no right of way to the benefit of the property being purchased by the plaintiff. The defect in title was discoverable by normal conveyancing search and inquiry and, therefore, was not latent. Economic loss was suffered as soon as the purchase was complete because the property, as purchased, was of less value than the price the plaintiff paid for it. The limitation period under the Act, therefore, ran from the date of purchase not the date of discovery of the defect.

35 In the present case the value of Lot 1 was affected by the existence of the two rights of way on the title. The plaintiff instructed the defendant to remove any right of way when Lot 2 was sold. The defendant failed to comply with that instruction because, notwithstanding his search of the titles of the relevant properties, he omitted to identify the 1976 right of way and, therefore, to take appropriate steps to extinguish it. The defect was not latent, although it was unknown to the plaintiff, in that it could have been discovered by normal conveyancing search and inquiries once the notification of the right of way was understood and appreciated. In May 1987, when the transfer to Mr Toltz and the instrument extinguishing the 1971 right of way were registered, (disregarding for present purposes the existence of SC11) the plaintiff suffered economic loss in relation to Lot 1 because the property was of less value by reason of the defendant’s omission than it would have been had that omission not occurred.

36 I am unable to discern any difference in principle between the failure to identify a defect in title in Scarcella v Lettice and the failure in the present case. The omission in each case resulted in economic loss being occasioned to the plaintiff on completion of the relevant conveying transaction: in the former case, the purchase of the property and, in the present case, the sale of Lot 2 by the plaintiff. In each case the plaintiff was left in ownership of property with a defect in title. Absent any capacity in the present plaintiff to redress that position, the damage suffered by him as a result of the defendant’s omission was actual and not contingent. Lot 1 remained encumbered to the benefit of Lot 2. As in the case of Scarcella v Lettice, the plaintiff would have been met with the defect in his title whenever he came to sell the property. The fact that the defect might not have been discovered by a potential purchaser of Lot 1 does not lead to the conclusion that any damage to the plaintiff was prospective or contingent, see Scarcella v Lettice at [32] and [42].

37 The question then is, does the existence of SC11 make any difference to that situation? The plaintiff argues that, prior to the sale of Lot 2 by Mr Toltz, he could have obtained rectification of SC11 to accord with the antecedent oral agreement between himself and Mr Toltz that Lot 2 was being sold without any access over Lot 1 to Double Bay. Once the contract was rectified, the plaintiff could have taken action to have Mr Toltz execute the necessary instrument to give effect to that agreement and to extinguish the 1976 right of way. The argument is that until the plaintiff lost this right, any damage was merely contingent.

38 There is no dispute that Lot 2 was sold to Mr Toltz on the clear understanding that it would have no access to the water over the plaintiff’s property. This is how the property was advertised for sale and the basis upon which it was sold at auction. There is material indicating that after the sale Mr Toltz sought to have the right of way remain, but the plaintiff was adamant that it should be extinguished in accordance with the understanding upon which Lot 2 was sold. It appears that after the sale Mr Toltz, who was a friend of the plaintiff, was allowed access to the water over the plaintiff’s property notwithstanding that both he and the plaintiff believed that no right of way existed.

39 Rectification of a contract will be granted where the written contract does not accurately represent an antecedent agreement or common understanding between the parties to the contract, which agreement or understanding existed up until the time the written agreement was entered into; Australian Gypsum Ltd and Plaster Co Ltd v Hume Steel Ltd (1930) 45 CLR 54 at 64; Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 at 349. Before granting the relief the court must be satisfied that the term of the contract to be rectified was not intended to supplant or supplement a term of the antecedent agreement or understanding: Maralinga at 350. It is no bar to rectification that the antecedent agreement did not comply with statutory requirements such as the need for a contract for the sale of land to be in writing. Generally rectification is not available where there was a unilateral mistake made by one of the parties: Commission for the New Towns v Cooper [1995] Ch 259 at 277.

40 Rectification can be granted where the mistake concerns the legal effect of the words in the document rather than as to the actual words used: Bush v National Bank Ltd (1992) 35 NSWLR 390 at 407, although Hodgson J (as he then was), noted the difficulties of a practical nature which may attend an application for rectification in such a situation. But it is important to bear in mind that “Courts of equity do not rectify contracts; they may and do rectify instruments purporting to have been made in pursuance of the terms of contracts”: Mackenzie v Coulson (1869) LR 8 Eq 368 at 375.

41 In the present case, it is clear that the understanding of the parties, before the written contract was entered into, was that Lot 2 was being sold without the benefit of any existing right of way over Lot 1 and, further, that any existing right of way would be extinguished either before, or if necessary, after completion of the contract. SC11 was intended to be, and would have been understood as, a fail-safe to ensure that the necessary steps to achieve the understanding could take place after settlement, if the right of way had not been extinguished by that time. The error was that only one right of way was identified, that being described in SC11. It seems to me to be clear that both parties erroneously believed that the removal of that right of way would achieve the result intended by the original agreement.

42 This aspect of the case has centred on a dispute as to whether the plaintiff could have obtained rectification of SC11 and then required Mr Toltz to execute an instrument extinguishing the 1976 right of way. The defendant has argued that rectification was not open and Mr Toltz’s personal obligation arising under the contract related only to the 1971 right of way specified in SC11.

43 As I have indicated, SC11 was not really necessary to bring about the common understanding or intention between the parties. The plaintiff could simply have required that settlement not take place until the right of way was extinguished. SC11 seems to have been inserted into the contract merely to ensure that settlement was not delayed by the inability of the plaintiff to have the instrument extinguishing the right of way registered. I believe that there is a strong argument that the personal obligation of Mr Toltz to remove any right of way could have been enforced against him regardless of the need to rectify SC11. Mr Toltz ought not to be heard to assert against the plaintiff that he enjoyed a right of way over Lot 1 in light of the assumption upon which he purchased the property. However, this was not a matter which was canvassed before me and I am prepared to assume that rectification was necessary before this Court would have required Mr Toltz to carry out what action was necessary to ensure that the agreement between him and the plaintiff was put into effect.

44 I am of the opinion that, if rectification were necessary, the plaintiff could have obtained that relief at any time until Mr Toltz sold Lot 2. This could have been achieved by deleting the description of the particular right of way specified and inserting the word “any” before the words “right of carriageway”. As amended in that way, and after correcting the wrong use of the word “Purchaser” clause SC11 would read:

“ Notwithstanding any other term or condition as herein contained the Purchaser acknowledges that the Vendors will be seeking the extinguishment of any right of carriageway appurtenant to the land. The Vendors shall do all things reasonably necessary to obtain such extinguishment on or before settlement PROVIDED HOWEVER that if the Vendors are unable to obtain registration of such extinguishments on or before settlement then the Purchaser shall do all things necessary and sign all such documents as the Vendors may reasonably request to enable such extinguishment without cost to the Purchaser. This clause shall not merge on completion.”

45 It appears to me that, if the plaintiff had sought rectification of SC11 there was no basis upon which it could be opposed by Mr Toltz or would have been refused by the Court. It would have been unconscionable for Mr Toltz to benefit from the omission to specify the 1976 right of way in SC11 when he purchased Lot 2 on the clear understanding that any right of way then existing was to be extinguished. The fact that both he and the plaintiff erroneously believed that there was only one right of way in existence cannot alter the nature of their agreement or their understanding as to what was being sold by the plaintiff and purchased by Mr Toltz.

46 It has been submitted on behalf of the defendant that, even if the plaintiff were able to seek rectification of SC11 or otherwise require Mr Toltz to assist in the extinguishment of the existing right of way prior to the sale of Lot 2, it did not follow that he suffered no damage prior to that time. It was argued that the plaintiff had no right to have the contract rectified or the right of way extinguished. As I understand the argument, it was that, although the plaintiff had a right under SC11 in respect of the 1971 right of way, he had no such right in respect of the 1976 right of way. Thus he suffered damage, even if at the end of the day Mr Toltz of his own volition or by order of the Court might have extinguished the right of way. It was submitted that the plaintiff’s position after the settlement of the sale to Mr Toltz was analogous to that of the plaintiff in Doundoulakis v Sdrinis [1989] VR 781, that is the position of a person who has a lesser right after the expiration of a limitation period than he, or she, had before. The operation of the Limitation Act itself takes away the right of a person. In that case it was held that the negligent impairment of a right or remedy can sound in damages:

47 I do not find the analogy a sound one. It seems to me that, until Mr Toltz sold Lot 2, the plaintiff was in the position where he could seek to have him execute the necessary instrument to have the existing right of way extinguished either by relying on rectification or equitable estoppel. He suffered no economic loss following the defendant’s failure to remove the right of way because he could take action to correct the consequence of the failure. In my opinion the present facts are distinguishable from those considered in Scacella v Lettice because the plaintiff had the means, aided by the Court if necessary, to correct the defect in his title caused by the omission by the defendant. The plaintiff would suffer economic loss only if, and when, those means were frustrated, such as when Mr Toltz sold Lot 2 to a purchaser without notice.

48 I acknowledge that the plaintiff by reason of the failure to remove the 1976 right of way was left with a block of land which was not as valuable as it would have been had the right of way been removed. But, in my view, he suffered no actual damage from that circumstance alone, either by way of economic loss or otherwise, while he possessed the means to have the defect remedied by taking action, if necessary, against Mr Toltz. Had he utilised those means, then I cannot see how Mr Toltz could have avoided his moral and legal obligation arising from the contract between them. To the extent that the plaintiff may have been damaged by the defendant’s conduct, that damage was merely prospective or contingent until Mr Toltz sold Lot 2.

49 In my view the defence based upon the Act fails and is dismissed.

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Last Modified: 02/28/2002