KELARIS Pty Ltd as Trustee for the HSS Unit Trust t/as Harman Settlement Service v Hutcheson
[2003] WASCA 105
•21 MAY 2003
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE FULL COURT (WA)
CITATION: KELARIS PTY LTD as Trustee for the HSS UNIT TRUST t/as HARMAN SETTLEMENT SERVICE -v- HUTCHESON & ANOR [2003] WASCA 105
CORAM: PARKER J
WHEELER J
MCKECHNIE J
HEARD: 18 MARCH 2003
DELIVERED : 21 MAY 2003
FILE NO/S: FUL 95 of 2002
BETWEEN: KELARIS PTY LTD (ACN 009 323 095) as Trustee for the HSS UNIT TRUST t/as HARMAN SETTLEMENT SERVICE
Appellant (Defendant)
AND
ALAN JOHN HUTCHESON
JOAN HUTCHESON
Respondent (Plaintiff)
Catchwords:
Contract - Contract for sale of land - Settlement agent - Implied condition agent will use reasonable care and skill - Turns on own facts
Tort - Duty required of a settlement agent - Failure to warn purchasers that property did not enjoy the benefit of a registered easement - Breach of duty by settlement agent - Turns on own facts
Legislation:
Nil
Result:
Appeal dismissed
Category: B
Representation:
Counsel:
Appellant (Defendant) : Mr A C McIntosh
Respondent (Plaintiff) : Ms J Pinnington
Solicitors:
Appellant (Defendant) : Craig McIntosh
Respondent (Plaintiff) : Lawton Gillon
Case(s) referred to in judgment(s):
Nil
Case(s) also cited:
Nil
PARKER J: I agree that this appeal should be dismissed for the reasons given by Wheeler J.
WHEELER J:
Background
This is an appeal from a judgment of the District Court finding the appellant liable in both contract and tort for failing to advise the respondents that the property they were purchasing did not have the benefit of a registered easement for scheme water.
The appellant carries on business as a settlement agent. In 1993 the respondents, Mr and Mrs Hutcheson contracted to purchase a rural property known as Avon Location 2565 ("the property") from a Mr Morton Schell. They appointed the appellant to handle the settlement. The respondents decided to purchase the property after seeing it advertised in two newspapers and viewing a video of the property made for them by a relative at their request. The advertisements stated that the property was serviced by SEC grid power, telephone and both scheme and bore water. Directly beneath the advertisement in both newspapers was a second advertisement offering another of Mr Schell's properties for sale. This second property, Avon Location 2564 was said to adjoin Avon Location 2565. The position of the fences along the western boundary of the property as they appeared in the video (which was taken some time in February or March 1993), seemed to confirm this. The respondents subsequently made an offer on the property.
After signing two initial contracts of sale, the respondents signed a final contract of sale on 11 June 1993 and had it stamped on 16 June 1993. The contract provided for a settlement date of 15 May 1993 and like the previous contracts, contained a condition (which in the final contract was condition 8) which read:
"The Vendor is aware that access for scheme water to the said property is registered over Avon Location 2564."
Given that at the time the respondents believed that Location 2564 directly adjoined the property to the west, they believed that an easement over Location 2564 would guarantee them access to the scheme water which they were told entered the property from that direction.
For reasons unrelated to the issues raised by this appeal, settlement did not take place until 21 June 1993. In September 1993 the respondents
moved onto the property. Upon taking possession, they noticed that the fences on the western boundary of the property appeared to have been moved from the position they were in both when the video was taken and later when the respondents viewed the property personally in May 1993. Specifically, the fence on the western boundary of the property had been moved eastwards so as to exclude an area of land, which prior to the re-fencing had appeared to be contained within the property. As a result, tension developed between the respondents and relatives of Mr Morton Schell who though their family company, Schell Holdings Pty Ltd owned Location 6267, a large tract of land adjoining Location 2565 to the north and part of which lay between Locations 2564 and 2565. Her Honour found that this tension arose from the fact that both the respondents and the Schell family each laid claim to the piece of land which the respondents say was formerly fenced so as to appear to be part of Location 2565 but which had now been fenced within Location 6267 by members of the Schell family. Matters came to a head in April 1994 when an earthquake caused extensive damage to the water pipe carrying scheme water to Location 2565 so that water ceased flowing to the property.
The respondents were unable to repair the pipe because the damaged section was located on the disputed land and the Schell family refused to allow them to enter the land to fix the pipe. In a bid to resolve the question of ownership, the respondents had a survey of Location 2565 carried out in July 1994. As a result they discovered that the disputed land did indeed form part of Location 6267 and so separated their property from Location 2564. They also discovered that they did not have a registered easement over either Location 2564 or Location 6267.
Without access to scheme water, the respondents were unable to continue to live on the property and moved out on 1 August 1994. After some correspondence between their solicitors and solicitors for Schell Holdings Pty Ltd, the respondents commenced proceedings in the Supreme Court on 6 June 1995 seeking adverse possession of either the disputed land, or in the alternative, that part of Location 6267 which contained the pipeline. Subsequently, they amended their claim to seek a further alternative of registered easements for water and vehicular access over Location 6267. The respondents did not join the present owners of Location 2564 (a Mr and Mrs Smith) in the action and did not seek an easement over Location 2564. There was no real explanation sought or given at trial as to why this was so.
On 8 June 1995, solicitors for Mr Morton Schell and Schell Holdings Pty Ltd, Michael Whyte & Co wrote to the respondents offering them registered easements for water access over Locations 2564 and 6267. The respondents rejected the offer and continued to pursue their claims in the Supreme Court. Eventually the proceedings were settled when the respondents agreed to drop their claim when Schell Holdings Pty Ltd agreed to grant them a registered water easement and a right of carriageway over Location 6267. Subsequently, on 13 May 1996 the respondents moved back onto the property and the easements were registered on 17 September 1996.
The respondents then sued the appellant for breaches of contract and duty claiming loss and damage for rent, legal fees, travel expenses to and from the property and their new accommodation, rates, deterioration of the property through non‑attendance and theft of various items as a result of their inability to live on the property.
The learned trial Judge found that by failing to advise the respondents that the property being purchased did not enjoy the benefit of a registered easement over Location 2564 or at all, and simply proceeding to settlement, the appellant had breached its duty to the respondent in both contract and tort. But for the appellant's breach, her Honour found, the respondents may well have been able to rescind the contract prior to settlement. In the alternative, she found that evidence tendered at trial suggested that if prior to settlement the appellant had advised the respondents that there was no registered water easement, the respondents could probably still have obtained the easement not only over Location 2564 but also over Location 6267, and if not prior to settlement, then certainly prior to the damage to the water pipe occurring which eventually led to the respondents vacating the property. Having obtained registered easements over both locations, the respondents could have lawfully entered Location 6267 and fixed the broken pipe. This being the case, the respondents would have had no reason to vacate the property and so would not have sustained the loss they did. In these circumstances, her Honour found a direct link between the appellant's breach and that loss, although for reasons which will be discussed later, she assessed the loss to be significantly less than that claimed by the respondents.
Grounds of Appeal
The appellant originally appealed from her Honour's decision on a number of grounds but at the hearing of the appeal was granted leave to abandon all but two grounds. The first is that her Honour erred in finding a link between the appellant's conduct and omissions, and the damage suffered by the respondents. The second is that her Honour erred in holding that the appellant was required to secure registered deeds of easement. In my view it is convenient to deal with the second of these grounds first.
Ground 2 - The appellant's breach of duty
This ground alleges that the learned trial Judge erred in holding that the appellant was required to secure registered deeds of easement. Specifically, the appellant takes issue with par 35 of her Honour's reasons where, when referring to the respondents’ issue of legal proceedings, she says:
"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."
Despite her Honour's words, which admittedly may be apt to mislead, a fair reading of her reasons in my view leads to the conclusion that she placed no such burden upon the appellant. Rather she found (at par 18) that
"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. 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 title."
It seems to me that this paragraph makes it clear that her Honour did not find that the appellant was under any duty actually to secure the easement, but merely to inform the respondents that no easement was registered and in those circumstances to refrain from proceeding to settlement until such time as it had their further instructions. Certainly this was the breath of the respondent's case at trial.
I would add that in my view, when a title search of Location 2565 plainly revealed neither a registered easement nor an obvious nexus with Location 2564, a reasonably competent and prudent settlement agent should have realised that something was seriously amiss. Even if the duty required of a settlement agent did not oblige it to advise its client as to the legal effect of the anomalies in the title, it did require it to alert its client to those anomalies and to advise them to take legal advice as to their rights and obligations. To fail to alert the respondents at all and to simply proceed to settlement was in my view a clear breach of the appellant's duty in both contract and tort.
Ground 1 - The respondent's loss
This ground alleges that her Honour erred both in law and in fact by finding a link between the appellant's conduct or omissions and the damage suffered by the respondents. Specifically, the appellant takes issue with her Honour's finding that the respondents may have rescinded the contract had the appellant advised them prior to settlement that there was in fact no easement registered against Location 2564 in favour of Location 2565. Rather it says, to avoid falling into error, she was obliged to find that they would have rescinded the contract, a finding the appellant says was not open to her Honour on the evidence. Further, when arguing the appeal, counsel for the appellant appeared also to contend that in any event, it was not open to her Honour to make such a finding in law, as condition 8 was not a condition of the contract which would give rise to a right to rescind if breached, but rather was a warranty which if breached would merely entitle the respondents to damages.
While it is true that at trial the respondents were not examined directly as to what they would have done had the appellant advised them prior to settlement that there was no registered easement securing access to scheme water, in my view it was open to her Honour to conclude on the evidence before her that they would have rescinded the contract. There are several reasons for this. Firstly, Mr Hutcheson gave evidence that what particularly attracted him and his wife to the property was that it was serviced by SEC grid power, telephone and scheme water. He said that few rural properties that he had seen advertised enjoyed all three of those services, particularly at the price being asked of this property. He said that this, and the general proximity of the property to the metropolitan area was what generated his and his wife’s interest in the property in the first place.
Further, condition 8 was Mr Hutcheson's creation and though clumsily drafted, nevertheless discloses the respondents' intention that they were purchasing the property on the express understanding that it had access to scheme water and that that access was protected by registered easement. Mr Hutcheson gave evidence to this effect, saying that he wrote condition 8 into the contract because the property was advertised as being serviced by scheme water and he believed that an easement was necessary in order to secure access to that water.
At trial, the appellant did not challenge Mr Hutcheson's evidence as to the importance the respondents placed upon the existence of the registered easement. Further, counsel for the appellant did not put to Mr Hutcheson in cross‑examination that the respondents would have done something other than rescind the contract if the appellant had advised them prior to settlement that the property did not in fact have the benefit of a registered easement. The alleged lack of evidence concerning this issue was not raised with her Honour at any point in the trial. The appellant cannot now hope to succeed on appeal on a point it failed to take in the court below, and which was raised only during oral argument of the appeal, rather than by either of its remaining grounds of appeal.
Clearly, her Honour accepted Mr Hutcheson's evidence as to the vital importance he and his wife placed upon purchasing a property with secure access to scheme water. Accordingly it was open to her to find that if the appellant had advised the respondents that Location 2565 did not have the benefit of an easement for scheme water, the respondents would have rescinded the contract or at least postponed settlement in order to take advantage of the then willingness of the owners of Locations 2564 and 6267 to grant them registered easements.
The fact that the respondents placed such importance upon securing access to scheme water to the extent that they included a special condition in the contract, in my view supports the conclusion that condition 8 was always intended by them to be a condition of the contract, which if not fulfilled would permit them to withdraw from the contract, rather than a warranty which would entitle them to damages but would otherwise compel them to proceed with the purchase.
Accepting that the learned trial Judge was correct in finding that if advised that the property did not have the benefit of an easement for scheme water, the respondents would have lawfully rescinded the contract, the only remaining question is whether the damages awarded to the respondents can be said to have flowed from the appellant's breach. Her Honour found that having lost the opportunity to rescind the contract, and in the face of the refusal of the Schell family to allow them to fix the broken water pipe, the respondents were obliged to vacate the property while they took steps to secure legal access to the scheme water. Her Honour accepted that plumbing which provided the household with water for domestic purposes was connected to the broken pipe, and that there was insufficient water elsewhere on the property which could be used for these purposes. In these circumstances, she found that it was reasonable for the respondents to vacate the property and move into rental accommodation. She also agreed that it was reasonable for them to visit the property on a regular basis in order to comply with their insurance policy, and to generally maintain the property. Consequently, her Honour awarded the respondents their relocation expenses, rent on their new accommodation and travelling expenses. However, she awarded them only the portion of their legal fees which she found they had incurred in their bid to secure access to scheme water. While she did not find the respondent's claim for vehicular access to be "improper or unreasonable", her Honour said "there was nothing to alert the appellant [to the fact] that the plaintiffs wanted a right of carriageway over this piece of land or that that had been agreed between the respondents and the vendors". For this reason she disallowed the fees which she attributed to this claim for vehicular access. The trial Judge was clearly correct in disallowing the respondent's claim in this respect. I also agree that, for the reasons she stated, her Honour was correct in rejecting the respondent's claims for reimbursement of rates on the property and damages for deterioration of the property and certain thefts which occurred during their absence.
Finally, I agree with the trial Judge that the appellant should not be held responsible for any damages suffered by the respondents after 1 September 1995, given that the respondents could have reasonably returned to the property by that date if they had accepted the offer of registered water easements contained in Michael Whyte's letter of 8 June 1995 and not pressed ahead to obtain the additional right of carriageway.
In my view the learned trial Judge was correct both in finding the appellant liable for the loss and damage suffered by the respondents, and in her assessment of that loss and damage.
I would dismiss the appeal.
MCKECHNIE J: I have read the reasons to be published by Wheeler J. I agree with those reasons and have nothing further to add.
1
0
1