| JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA LOCATION : PERTH CITATION : HUTCHESON & ANOR -v- KELARIS PTY LTD (ACN 009 323 095) as trustee for THE HSS UNIT TRUST trading as HARMAN SETTLEMENT SERVICE [2002] WADC 95 CORAM : KENNEDY DCJ HEARD : 2 & 3 MAY 2002 DELIVERED : 23 MAY 2002 FILE NO/S : CIV 2807 of 1998 BETWEEN : ALAN JOHN HUTCHESON JOAN HUTCHESON
Plaintiffs
AND
KELARIS PTY LTD (ACN 009 323 095) as trustee for THE HSS UNIT TRUST trading as HARMAN SETTLEMENT SERVICE
Defendant
Catchwords: Contract - Tort - Settlement agent - Failing to secure easement - Damages
Legislation: Nil
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Result:
Damage award $15,468.13
Representation:
Counsel:
Plaintiffs : Ms J Pinnington
Defendant : Mr C McIntosh
Solicitors:
Plaintiffs : Lawton Gillon
Defendant : Craig McIntosh
Case(s) referred to in judgment(s):
Cusmano v Pinner & Ors, unreported, FCt of WA; Library No BC9803622; 25 August 1998
Green Team (WA) Pty Ltd v Brulee Pty Ltd (1995) A Tort Rep 81-362
Neagle v Power (1967) SASR 373
Case(s) also cited:
Nil
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1 KENNEDY DCJ: The plaintiffs purchased a house and land in the belief that they were getting an easement to obtain water from an adjoining property. There was no easement. Eventually, they obtained an easement but, in the meantime, say that they suffered loss and damage for which their settlement agents, the defendant, is liable to them in contract and tort.
2 Alan John Hutcheson gave evidence for the plaintiffs. He said that he and his wife had been living in Port Hedland and had determined to return to live closer to the city. To supplement their retirement incomes, they decided to purchase a small property which they could develop and from which they would make some income. 3 In 1993, they saw two advertisements for the property they purchased eventually and in each advertisement, it said that the property had scheme and bore water. A relative videoed the property and sent the video to them. After viewing it, they made an offer. 4 There are three copies of the contract for sale of land by offer and acceptance, exhibits 3.1, 3.2 and 3.3. It is only exhibit 3.3 which is stamped. The three indicate negotiations commenced in March 1993 and the final document is dated 11 June 1993. Common to each of the documents is the following condition: "The vendor is aware that access for scheme water to the said property is registered over Avon Location 2564." 5 The vendor actually owned Lot 2564 referred to in that condition and also Lot 2565 which is the land purchased by the plaintiffs. From the position of the fencing at the time of the video, that is in May 1993, the two pieces of land appeared to join. Unbeknown to the plaintiffs, the land does not adjoin. In fact, in between the two pieces of land is a piece of land owned by a third party and it is Lot 6267 (exhibit 1 shows how these three pieces of land relate to each other). 6 The plaintiff determined to use a settlement agent, the defendant. The contract was sent to the defendant who advised that settlement had taken place on 21 June 1993. 7 Prior to that, on 27 May 1993, the defendant had sent the plaintiffs a copy of conditions for the provision of a water service for the supply of water to the property, issued by the Water Authority of WA. There was an attempt to suggest that those conditions, exhibit 5, provided that the plaintiffs must make their own enquiries and absolved the defendant from
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responsibility. There is nothing in that document which does that. It is simply the conditions for the provision of a water service by the Water Authority and the obligations on a person who seeks a water supply from the Water Authority. 8 The plaintiffs shifted on to the property in or about September 1993 and it is apparent that disputes to which I will refer later arose between the plaintiffs and the owners of Lot 6267. However, it was not until April 1994 that there was any problem in relation to the water supply. The water supply in fact came from a pipe that came across the land belonging to Lot 6267 from the land at Lot 2564. In April 1994, there was an earthquake and the water pipe on Lot 6267 was damaged so that there was no water supply into the plaintiffs' home. The plaintiffs say that they were refused permission to go on to the land at Lot 6267 to fix the water pipe. As a result, they had no choice but to vacate the land because they had no water and take action against the owners of Lot 6267 to seek an easement over that land and the right to go on to the land to repair the water pipe. 9 Had the plaintiffs been aware prior to the settlement that there was no easement, then they may well have been able to rescind the contract but it transpires from subsequent information that we have they probably could have obtained a registered easement at that stage and before a dispute arose between themselves and the owners of Lot 6267. I say that because of a letter of 8 June 1995 from Michael, Whyte & Co who were the solicitors for the vendor (Morton Schell) of the land and subsequently were the solicitors for the owners of Lot 6267. In that letter to the plaintiffs' solicitors, they say: "In respect to the water easement, the requirement for a water easement was extensively discussed between this office, the selling agent and Mr Schell [vendor] prior to the settlement to the point where we sought advice from the Water Authority (Northam branch) and the services of a surveyor to prepare survey easement plans in order to enable us to complete easement documents granted firstly by the Smiths and secondly by Schell Holdings Pty Ltd. Copies of both these easements are enclosed for your attention. As we were awaiting completion of the necessary easement plans, these easements were not prepared until after the completion of settlement on 21 June 1993. However, you will note from the contract of sale that the vendor acknowledged the availability of easements
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being provided for the scheme water that existed at the time of settlement. Our file records indicate that we wrote to Hutcheson's settlement agent, being Harman Settlement Services [the defendant], on 20 July 1993 to enquire whether they would be attending to execution and registration of the easement documents. We received no reply to our letter and the matter of the registered easements has been in abeyance since the said date." 10 In the statement of claim, it is pleaded: "8. It was an implied term of the Defendant's appointment as settlement agent for the settlement of the Purchase Agreement that it would exercise all proper skill and care, diligence and competence in or about the settlement and completion of the purchase of the Property. 9. Further or alternatively, the Defendant owed a like duty in tort independent of and additional to the said duty in contract pleaded in the previous paragraph herein. 10. In breach of contract or alternatively negligently, the Defendant failed to exercise all proper skill and care, diligence and competence in or about the settlement and completion of the purchase of the said Property.
PARTICULARS
(i) It failed to discover that there was no registered easement over the Adjoining Property (in favour of the Property being purchased). (ii) It failed to make any or any adequate investigation into the title of the Property to the extent of searching the land titles register or otherwise requisitioning the Vendor as to whether there was any registered easement or like right of access to water in favour of the Property. (iii) It failed to make any or any adequate enquiries to the Water Authority of Western Australia or like body as to whether the water pipe-line access to the
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Property was protected by a registered easement or legal right of a like nature. (iv) It failed to make any or any adequate enquiries as to the extent of water pipe-line access enjoyed by the Property. (v) It failed to notify or otherwise advise the Plaintiffs:
(a) that any easement or like right to water pipe-line access was an unregistered interest or alternatively unenforceable at law as against the registered proprietor of the Adjoining Property; (b) that the said Property did not enjoy the benefit of a registered easement for water pipe-line access across the Adjoining Property; (c) that the Property was in effect restricted from water pipe-line access from the nearest Western Australian Water Authority mains unless it could establish and sufficiently enforce an equitable right (or interest to that extent) against the registered proprietor of the Adjoining Property.
(vi) It failed to investigate and advise the Plaintiffs of the circumstances surrounding a special condition contained in the contract ('the Special Condition'). (vii) It failed to investigate the accuracy of the Special Condition. (viii) In the premises, it failed to give any or any adequate oral or written notice or advice to the Plaintiffs concerning the full nature and extent of their rights and obligations in relation to water access to the said Property. (ix) It permitted the Plaintiffs to proceed with the purchase of the said Property without giving any or any such adequate notice or advice as aforesaid.
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(x) In the circumstances, it failed to advise the Plaintiffs on all matters relevant to the purchase and settlement of the Property." 11 By the defence it is pleaded: "2. As to paragraph 3 of the further amended substituted statement of claim the defendant: 3. As to paragraph 6 of the further amended substituted statement of claim the defendant: 12 The appointment of the defendants to act as settlement agent is dated 3 June 1993 and it is prepared by the defendant and says, inter alia, that the plaintiffs:
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"Hereby appoint: The acting manager of Harman Settlement Service to act as my settlement agent in the purchase of the above property. To facilitate and expedite your effecting settlement in this matter, you are hereby irrevocably authorised to complete all documents executed by the undersigned in connection with the transaction by inserting therein all relevant dates and to amend all such documents by way of addition, omission or variation in any manner which may be requisite for the purpose of completing the same in order to give effect to the agreed terms and conditions of the transaction and the registration of such documents and the undersigned appoint you our attorney for all or any of the purposes aforesaid. (emphasis added)" 13 As to the duty of a settlement agent, in Neagle v Power (1967) SASR 373 at 376 Bray CJ said: "What then is the extent of the duty of a licensed land broker to his client, whether imposed by contract or by tort? It is surely the ordinary duty to use reasonable care and skill in the exercise of a skilled occupation. Mr Boylen complains that there was no evidence of the practice of land brokers or of the standard of care normally exercised in that occupation. Such evidence has not been thought necessary in the case of actions against solicitors. The court presumably knows for itself what the ordinary reasonably prudent and careful solicitor ought to know and to do. The licensed land broker is licensed as a fit and proper person for transacting business under the provisions of the Real Property Act, 1886-1963 (s 271) and, as Chamberlain J. points out, that section equates his charges for such business with those of a solicitor. I would not be prepared to assent to the proposition that his duty of care is for all purposes connected with the Real Property Act 1886-1963 identical with that of a solicitor, but I think that at least for the purpose of the transaction of routine business, it must be so. It may be, as Mr Boylen contends, that licensed land brokers ought not to be expected to know the niceties of the law. But we are not concerned to fix the appellant with knowledge of the niceties of the law, but with whether a licensed land broker can reasonably be expected to know that, if a purchaser pays out the full value of land subject to mortgage without any proof that the mortgage has been discharged, he is in great danger of losing
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his money. I do not think the appellant would contend that he did not know that. The question of the extent of the duty and the breach of it do not really relate to the appellant's knowledge of general legal propositions at all, but to the reasonableness of his action in the particular circumstances, not as a matter of juristic science but as a matter of business prudence." 14 In Cusmano v Pinner & Ors, unreported, FCt of WA; Library No BC9803622; 25 August 1998, Justice Carr cited Neagle with approval. 15 Justice Carr went on to say at page 18: "In my opinion a solicitor acting for the applicant would have been negligent had he or she not advised him of the need to arrange insurance of the building from the time of settlement or completion of a contract of sale or (if possession were taken earlier) from the time of possession. I am quite confident that that would be the situation if a solicitor had been so retained before the contract of sale were executed. A prudent solicitor acting reasonably would, in those circumstances, have taken the client through the relevant terms of contract and explained any pitfalls. That would, of course, have included the matter of arranging insurance at the appropriate time. I am also sufficiently confident that even if a solicitor were retained after the execution of a contract of sale and were retained only to attend to completion and settlement of that contract of sale, he or she would be under an identical duty unless the retainer included a clear term excluding any such duty. I say this because, in my view, the solicitor's function would not be confined to the relatively routine services of preparation of a transfer, title searches and rates and taxes enquiries, adjustments of rates and taxes, attendance at settlement and registration of the transfer. An essential part of the retainer of a solicitor is that, where reasonably necessary, a solicitor will give legal advice in relation to such a transaction. That legal advice would include the identification of the time at which the client becomes at risk and the steps which should be taken for protection against that risk.
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The relationship between a purchaser of land and a settlement agent retained to effect that purchase is, in my view, materially different in that essential factor of giving legal advice. This is not to exclude the possibility that occasions might arise when a settlement agent, acting reasonably, might be required to suggest that the purchaser retain a lawyer to deal with a particular situation which crops up during the course of the transaction. For example, a title search might disclose an easement, the terms of which might require expert assessment and explanation. The same would apply if by way of further examples, a vendor died or became the subject of a sequestration or winding up order after execution of the contract of sale but before settlement." 16 Later in his judgment, his Honour adopted what Lee J said about the duties of a settlement agent in the Green Team (WA) Pty Ltd v Brulee Pty Ltd (1995) A Tort Rep 81-362 at 62, 701: "The contract between the applicant and LJW Settlements required the latter to arrange settlement of the transaction and to attend on that settlement on the applicant's behalf to complete the transfer of the property to the applicant in the terms of a contract of sale. It was not part of the contract that LJW Settlements advise the applicant as to the applicant's rights under the contract. The scope of the contractual obligations of LJW Settlements was considerably narrower than would have been applied under a solicitor's retainer if a solicitor had been instructed to perform the same task." 17 It would seem, therefore, that it is fairly well established that a settlement agent does not have a duty at the same level as a solicitor but of the three cases cited, where the settlement agent was found to be liable, that is in Neagle, the mistake directly related to the title. 18 In the present case, one assumes that the defendant obtained a search of the plaintiff's Certificate of Title. Exhibit A, which is such a search, makes it very clear that there is no easement and indeed, that Location 2564 does not adjoin Lot 2565. By contrast, exhibit 15 is a copy of the Certificate of Title of Lot 2565 after the easement has been lodged. Condition 8 of the contract must have alerted a reasonably prudent settlement agent to the fact that the purchasers, that is, the settlement agent's clients, expected that there would be something registered, at least on the title of the vendor to show that the purchaser had access to water.
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When this was not found on the Certificate of Title for the piece of land that the purchasers eventually purchased, a reasonably prudent settlement agent would have done a search of Location 2564 and then alerted the purchaser to the fact that the settlement agent was unable "... to give effect to the agreed terms and conditions of the transaction ...". This is not to put a great burden on the settlement agent and required no more than two very obvious title searches. It is plainly inappropriate for the settlement agent to give effect to that part of the transaction that the settlement agent can give effect to and ignore the balance of the contract, particularly as it relates to the title. 19 This is compounded by the fact that according to the vendor's solicitors, Michael Whyte & Co in exhibit J, they wrote to the defendant on 20 July 1993 to enquire whether the settlement agents would be attending to the execution and registration of the easement documents and "we received no reply to our letter and the matter of the registered easements has been in abeyance since the said date". 20 The dispute which led to the damage for which the plaintiffs now make a claim did not arise until April 1994. 21 In my view, the defendant breached their duty both in contract and in tort. So far as the breach in contract is concerned, the test as to the damages is what are the damages which may naturally be expected to flow from the breach? And in tort, the plaintiff must show a causal relationship between the negligence sued on and the damages suffered. 22 In this matter, the plaintiffs say they may have been able to rescind the contract, however, as it has transpired, the owners of Lot 6267 eventually agreed to giving the plaintiff an easement and what the plaintiff seeks are damages for the expenses incurred by them between the time that it became necessary for them to obtain an easement and the time in which they actually obtained the easement. In practical effect, the damages are the same in either contract or tort.
Damages 23 On the issue of damages, the central witness for the plaintiff was the male plaintiff, Alan John Hutcheson, and for the defendant, Terry Charles Schell, a director of Schell Holdings Pty Ltd (Schell), the owner of Lot 6267.
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24 It is important not to judge either of these men harshly as witnesses. In Mr Hutcheson's case, originally, it was not intended that he give evidence and he did not believe that he had all the facts at his fingertips. He was forced into the role because his wife had to go to the United Kingdom. As to Mr T Schell, he was subpoenaed on short notice by the defence. He is not the defendant and he was not proofed. The issues about which they gave evidence started in 1993 and were completed in 1996. It is natural that when each side reflects, each side sees only his own point of view and the rightness of his own cause.
25 Nevertheless, I am satisfied that there was already a dispute in existence between these people before April 1994 when it was necessary to fix the water pipe and it became obvious that there was no easement. 26 Various members of the Schell family appear to own various pieces of land in this area. As I have recorded, Schell own Lot 6267 but the previous owner of Lot 2564 and Lot 2565 was another relative of theirs, Morton Schell. 27 At the time the plaintiff saw the video, there was a fence connecting Lot 2564 and Lot 2565 which gave the impression that the corridor of land between the two allotments belonged to Lot 2565. By the time the plaintiff shifted into Lot 2565, that fence had been shifted so that most of that corridor was now in Lot 6267 (see exhibits 1.1 and 1.2). 28 Although neither side will admit it, it is apparent that each was suspicious of the other in that each side believed that the piece of land belonged to them and that the other side was endeavouring to claim it. At that point, a survey should have been obtained by the plaintiffs. 29 So this tension between the plaintiffs and Schell already existed when there was an earthquake in April 1994. The male plaintiff made temporary repairs to the water pipe and arranged for insurance to cover the balance of the work. 30 In the meantime, instead of having the survey done, the plaintiff re-fenced a corner of the block which is apparently a rather pretty area and cut down some fig trees. This incensed the owners of Lot 6267, who took down the piece of fence and told the plaintiffs in blunt language not to come back on to their land again. During the heated debate between them, the plaintiff said that they needed water and the Schells said that they did not care what the plaintiff needed, the plaintiffs were not to set foot on their land again. It was at this point that the plaintiffs made
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enquiries of Morton Schell and were told then that there was no easement over the land. 31 Subsequently, Terry Schell, his father and his son-in-law came to their home and there was another argument about the land in which there was plainly more heat than light. It is apparent that Schell was trying to protect its land and that was its major interest and the plaintiffs were trying to get water rights and that was their major interest, but it is my finding that the plaintiffs were not conceding that that piece of land belonged to Schell. 32 It was at this point, in July 1994, that the land was surveyed and it was then discovered that the owners of Lot 6267 were correct about the boundaries. 33 By then, the relationship between the parties had deteriorated to such an extent that the plaintiffs obviously did not believe that they could go on to the land and this was an impression created by the behaviour of Schell. Since there was no other way to get their water pipe fixed and they had no water coming into their home, they shifted off the land. I accept what the male plaintiff says about this, that the plumbing into the house for bathing, washing and toilet facilities was all connected to the pipe that came across Lot 6267 and without that pipe being fixed, there was no water into the house. There was certainly water on the land in that there were dams and a windmill, but that is not adequate and I accept that without hesitation. 34 The plaintiffs shifted off the land and obtained alternative accommodation from 1 August 1994 and did not shift back on to the land until 13 May 1996. It is during that period that they say that they sustained economic damage and it is that which they claim against the defendants. 35 As a result of the state of the relationship between the plaintiffs and Schell in August 1996, the plaintiffs were firmly of the view that the animosity from Schell was such that they would need to take legal action to secure their rights to water. Given the animosity between the parties, this was reasonable and it was a position into which they were put by the negligence of the defendant in not securing the easement. Even if the plaintiffs were in the wrong in their initial argument with Schell, there would have been no damage if they had an easement. 36 The plaintiffs sought assistance including making applications for legal aid, which eventually were unsuccessful. They were finally referred
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to their solicitors who wrote to the manager of Schell, Terry Schell, on 13 January 1995, stating that the plaintiffs had purchased the property on the basis that: 37 The plaintiffs' solicitors also said that while he had originally said that he would complete the appropriate documentation, he subsequently "reneged on that undertaking and thereafter made threats against our clients to stop them from using your property either for vehicular or water access". 38 The plaintiffs' solicitors went on to claim adverse possession, but then said: "Mr and Mrs Hutcheson, however, have no use for that land other than for the purpose of access and are willing to relinquish portion of it to you provided the easement is registered as a matter of urgency." 39 The response to that was a letter of 23 January 1995 handwritten by Mr T Schell in which he disputes many of the statements made by the plaintiffs' solicitors but goes on to say: "Having said all this, my position is that I have no difficulty with allowing your client an easement over the water pipe line at a Water Authority recommended depth through my property." 40 The balance of the letter appears to deny vehicular access, but goes on to say that Mr Terry Schell believes that this matter could be sorted out on a personal basis if the plaintiffs approached him. It was obviously beyond that by this time. 41 On 28 February 1995, the plaintiffs' solicitors responded, saying that they also wanted an easement in relation to vehicular access and making further claims in relation to adverse possession. There was no response to that and they sent a reminder letter on 4 April 1995. A writ was then issued in the Supreme Court.
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42 The next document that I have is the letter of 8 June 1995 (to which I referred earlier in the reasons) from Michael Whyte & Co, solicitors for Mr Morton Schell. They enclose the easement documents and advise that, if acceptable, they will have them signed and the plaintiffs can register them. In the same letter, they advise that their client will not support a claim for adverse possession. A copy of that easement is attached to the affidavit of Mr Terry Schell, filed in the Supreme Court action. That easement provides everything that the plaintiffs were entitled to under the contract and everything that the defendant to this action could be expected to obtain for the plaintiffs, or advise them they did not have. Nevertheless, the plaintiffs continued with their legal action because they wanted vehicular access across this piece of land, not only to get to the pipe line which the easement they were being offered gave them, but to get to Lot 2564 and then a quicker way into the town site.
43 I have no doubt that that was a legitimate aim of the plaintiffs but the defendant should not have to pay damages in relation to that period of time. Allowing a reasonable time for instructions and negotiations and for registration this easement could have been registered and the plaintiffs could have returned to their property by at least 1 September 1995 and I intend to assess damages to that date. 44 What in fact happened was that the legal proceedings continued and eventually a settlement was reached in which the plaintiffs dropped their claim for adverse possession to the whole land, Schell agreed to an easement not only to access the water pipe line, but also a carriageway in terms of the ninth schedule to the Transfer of Land Act and each party paid their own costs. This appears to have taken place in April and May 1996. 45 I make it very clear that I do not regard it as improper or unreasonable of the plaintiffs to pursue their claim for the right of carriageway across this piece of land and no doubt it was an extremely sensible and wise thing for them to do. All I am dealing with is the amount of damages and the period of time for which the defendant should have to pay damages. There was nothing to alert the defendant that the plaintiffs wanted a right of carriageway over this piece of land or that that had been agreed between the plaintiffs and the vendors.
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Particulars of loss
46 As to the particulars of loss and damage, the plaintiff claimed $230 a fortnight rent for alternative accommodation for 39 fortnights. I have allowed 26 fortnights, making $5,980. 47 The plaintiffs have claimed legal fees of $5,377.50, however, those legal fees relate to the entire proceedings. Doing the best I can, I have allowed the plaintiff two-thirds of those fees, being $3,602.92. The relocation costs of postal, telecom and SECWA, again, I have reduced for the relevant period of time but allow the initial Telecom connection fee of $50, making a total of $373.83. 48 So far as the claim of travel is concerned, I have allowed that, again in a reduced amount. It was necessary for the plaintiffs to travel to their property from their rental accommodation in the city because the insurance policy required it and also it was necessary to look after the property and I have allowed that at $4,895.21. 49 There is then a claim for rates on the country property and I have not allowed that. That is part of the ownership of the property. They have continued to own the property and they were not paying rates in their rental accommodation. 50 There is then a large claim for deterioration of the property through non-attendance, being $5,269. The property is mud blocks with plaster. While they were living away from home, part of the roof blew off and water got in and, had they been there at the time, they could have taken steps to dry it out at the same time, however, they were not there and the claim is that the water got into the walls and slowly deteriorated them. They called evidence from one Mick Cassen, a plasterer, who said that the total cost of fixing the damage that was done was $5,269. I accept his evidence. The insurance company have not been asked or are not willing to cover this as being part of that water damage. According to Mr Terry Schell, the previous owners had problems with rising damp in this area and without an expert's report telling me that this was caused by the rain water or that there was a strong probability of that, I would not be prepared to allow this and I do not allow it. 51 The plaintiffs then claim $720 for theft of various signs and railings and $1,226 for missing or dead livestock and trees and shrubs. On a farming property, there are always going to be losses, even if people are in attendance and, accordingly, I allow this, doing the best I can, at $1,000.
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52 It follows from these reasons that the plaintiff is entitled to an award as follows:
Rent $ 5,980.00 Legal fees $ 3,602.92 Relocation $ 373.83 Travel $ 4,895.21 Losses $ 1,000.00 TOTAL $15,851.96
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