Kirkland v Quinross Pty Ltd - [2008] NSWSC 286

No judgment structure available for this case.

CITATION: Kirkland v Quinross Pty Limited [2008] NSWSC 286

HEARING DATE(S): 28 March 2008

JUDGMENT DATE :
2 April 2008

JURISDICTION: Equity Division

JUDGMENT OF: Austin J

DECISION: See under heading "Conclusions".

CATCHWORDS: NEGLIGENCE - economic loss - whether solicitor requesting Registrar-General to correct lot numbers on strata plan owed duty of care to plaintiffs who later became mortgagees of a strata lot - TORRENS SYSTEM - Registrar-General's power to correct register by correcting references to lot numbers on a plan (s 12(1)(d1)) - whether plaintiffs entitled to claim compensation from solicitor under s 120 - whether plaintiffs entitled to recover compensation from Torrens Assurance Fund under s 129 - whether Court should grant leave nunc pro tunc under s 132(2) for proceedings to be commenced without prior administrative proceedings

LEGISLATION CITED: Real Property Act 1900 (NSW)
Civil Procedure Act 2005 (NSW)

CATEGORY: Principal judgment

CASES CITED: Austress Freyssinet Pty Ltd v Joseph [2007] NSWSC 1513
Bebonis v Angelos (2003) 56 NSWLR 127
Bryan v Maloney (1995) 182 CLR 609
Bullock v London General Omnibus Co [1970] 1 KB 264;
Challenger Managed Investments Ltd v Direct Money Corporation Pty Ltd (2003) 59 NSWLR 452; [2003] NSWSC 1072
Chandra v Perpetual Trustees Victoria Ltd [2008] NSWSC 178
Connell v Odlum [1993] 2 NZLR 257
Flounders v Millar [2007] NSWCA 232
FNCB-Waltons Finance Ltd v Crest Realty Pty Ltd (1987) 10 NSWLR 621
Fordyce v Fordham (2006) 67 NSW LR 497;
Gran Gelato Ltd v Richcliff (Group) Ltd [1992] Ch 560
Hill v Van Erp (1997) 188 CLR 159
March v E&MH Stramare Pty Ltd (1991) 171 CLR 506
Pirie v Registrar-General (1962) 109 CLR 619
Printy v Provident Capital Ltd [2007] NSWSC 287
Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622;
Reiffel v ACN 075 839 266 Ltd (2003) 132 FCR 437; 45 ACSR 67; [2003] FCA 194 at [69]\
Travel Compensation Fund v Tambree (2005) 224 CLR 627
Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515

PARTIES: John Birch Kirkland (P1)
Jon Annette Kirkland (P2)
St George Bank Limited (D15)
Meyer Gutnick (D17)
Hama Holdings Pty Limited (D18)
Mark Ronald Frank Davidson (D22)
Registrar General (D23)
Michael David La Greca (D24)

FILE NUMBER(S): SC 1710 of 2006

COUNSEL: D Ronzani (P)
J Harris (D15)
A G Rogers with A Chee (D17 and D18)
G Curtin (D22)
G A Sirtes (D23)
M Callanan (Sol) (D24)

SOLICITORS:
Boyd House & Partners (P1 & P2)
St George Bank Limited (D15)
R L Kremnizer & Co (D17 & D18)
Ebsworth & Ebsworth (D22)
A Booth (D23)
Ellison Tillyard Callanan (D24)

- 41 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

AUSTIN J

WEDNESDAY 2 APRIL 2008

1710/06 JOHN BIRCH KIRKLAND & ANOR V QUINROSS PTY LTD & ORS

JUDGMENT

1 HIS HONOUR: By their Amended Statement of Claim filed 17 July 2006, the plaintiffs in part sought declarations and orders concerning rectification of the Register for certain Lots in Strata Plan No 71211. That part of the plaintiffs' claims was addressed by consent orders made on 3 November 2006, authorising the Registrar-General to correct the Register under s 12(1)(d1) of the Real Property Act 1900 (NSW), and by the Registrar-General subsequently acting on that authority.

2 The Amended Statement of Claim also seeks the following relief:

3 The present judgment addresses the plaintiffs' claims for this relief.

Facts

4 No 149 Old South Head Road, Bondi Junction is a 3-storey residential flat building. In 2003 the owner of the building, Dimepark Pty Ltd, made an application for registration of a strata plan of subdivision to convert the property into 12 strata units plus common property. Prior to registration of the strata plan, Dimepark entered into separate contracts for the sale of each of the 12 lots to Oates Properties Pty Ltd. The contracts were dated 10 November 2003. Oates Properties then set about on-selling the strata units. At about that time Mr Davidson, a solicitor (the 22nd defendant), began to act for Oates Properties.

5 The contracts between Dimepark and Oates Properties were for the sale of the units "off-the-plan": that is, each contract annexed the draft strata plan which specified the strata lot that was the subject of the sale, and was conditional upon Dimepark registering the strata plan of subdivision with respect to the lot prior to completion. The first four on-sales by Oak Properties were also sales "off-the-plan". They were sales of Lots 2, 4, 10 and 12 shown in the draft plan, to purchasers named Tsoukarellis, Doorey, Mifsud and Strasser. For convenience I shall refer to the lots in the draft strata plan annexed to the "off-the-plan" contracts as "Mark 1" lots.

6 The strata plan was registered as Strata Plan No 71211 on 14 January 2004. But the plan as registered was not identical with the draft plan annexed to the "off-the-plan" contracts. The numbers of the strata units had been changed for all except three of the lots. For example, the unit in the north-eastern corner of the first floor, which had been Lot 6 in the draft strata plan, became Lot 8 in the strata plan as registered; the unit in the south-western corner of the first floor, which had been Lot 7 in the draft strata plan, became Lot 6 in the strata plan as registered; and the unit in the south-eastern corner of the first floor, which had been Lot 8 in the draft strata plan, became Lot 7 in the strata plan as registered. Lots 2, 4, 10 and 12 (the units sold by Oates Properties "off-the-plan") became Lots 4, 3, 12 and 11 respectively. There were also changes in the unit entitlements attached to some of the lots. The evidence does not reveal why the changes occurred. I shall refer to the lots in the strata plan as registered as the "Mark 2" lots.

7 Oates Properties settled its sales of Lots 2, 4, 10 and 12 (Mark 1) after the registration of the strata plan, in January and February 2004. Apparently at that time Mr Davidson's firm, acting for Oates Properties, was not aware of the changes to the lot numbers. Whereas, for example, the purchaser of Lot 2 (Mark 1) had contracted with Oates Properties to buy a unit identified in the draft plan and called Lot 2 in the draft plan, the purchaser acquired on settlement a memorandum of transfer relating to a different lot, namely Lot 2 (Mark 2).

8 According to Mr Davidson, he identified the variation in lot numbers in about February 2004. Steps were then taken by his firm, with the cooperation of Dimepark, to correct what Mr Davidson referred to in his affidavit as "the mistake". Someone in Mr Davidson's office contacted the Department of Lands, which in April 2004 sent back some information about the Registrar-General's practice in dealing with applications to correct lot numbers shown in a deposited or strata plan, under s 12(1)(d1) of the Real Property Act. Eric Scerri, the surveyor who prepared the draft strata plan that had been annexed to the "off-the-plan" contracts and also the strata plan as registered, made a statutory declaration on 19 April 2004 identifying the differences in lot numbers between the draft plan and the Registered plan and attaching a fresh plan amended so as to re-number the lots back to their original numbering. He did not purport to explain why the variance had occurred in the first place.

9 Mr Davidson's firm did not promptly make a request to the Registrar-General under s 12(1)(d1) in April 2004, after Mr Scerri made his statutory declaration. Instead, to satisfy the requirements of s 12(1)(d1), the firm approached registered proprietors and mortgagees of strata units to obtain their consents to an application to amend the registered strata plan so as to re-number the lots back to their original numbers. It was only on 23 December 2004 that Mr Davidson's firm lodged a form of Request to correct the lot numbers, as dealing No AB 183103. Attached to the form of Request was the statutory declaration of Mr Scerri, and a statutory declaration by Christopher Emery, a solicitor from Mr Davidson's firm. The form of Request bore certificates constituting consents by Dimepark, and by Messrs Tsoukarellis, Doorey, Mifsud and Strasser, who were described as the purchasers of Lots 2, 4, 10, and 12, and by the mortgagees of Lots 2, 4 and 12. Though the form of Request itself is not clear, it is plain from the names of the consenting purchasers that the Mark 1 numbering was used to identify the lots for which consents were supplied.

10 Mr Emery's statutory declaration bears the printed date 23 April 2004, but that date has been struck out by hand and the date 10 December 2004 has been substituted. In his declaration, Mr Emery said that the alterations to the draft plan were made by the surveyor, Mr Scerri, but he did not purport to explain why they occurred. He referred to the "off-the-plan" sales of Lots 2, 4, 10 and 12 (Mark 1) and the settlement of those purchases in January and February 2004 after the registration of the strata plan, saying that at that time he was unaware that the numbering of the lots in the draft plan had been altered on the registered strata plan, and consequently that all transfers of the lots were prepared using the lot numbers shown on the draft plan, with the result that incorrect lots were conveyed to the purchasers of these four units. As to the remainder of the units, Mr Emery said:

"Settlement of the remaining lots is pending and due shortly. The remaining lots are still owned by Dimepark Pty Ltd."

11 Mr Emery's statement that the remaining lots were still owned by Dimepark was probably true on 23 April 2004 (the printed date on his statutory declaration), as there is evidence that the purchases of the other lots by Oates Properties from Dimepark had not been settled at that time. But the statement was untrue on 10 December 2004 (the corrected, handwritten date of the declaration), as I shall now explain.

12 On 1 March 2004 the 24th defendant, Michael La Greca, entered into a contract for the purchase of one of the lots from Oates Properties Pty Ltd. There were mistakes in the contract of sale as to the correct identity of the subject property, but I need not explore that problem because Mr La Greca gave evidence that on settlement on 3 May 2004 he obtained the unit he had intended to buy, namely Lot 7 (Mark 2) which had been Lot 8 (Mark 1). Mr La Greca granted a mortgage over Lot 7 (Mark 2) to St George Bank Ltd in about October 2005.

13 Thus, well before 10 December 2004 the registered proprietor of Lot 7 (Mark 2) was Mr La Greca, a fact not acknowledged in Mr Emery's statutory declaration. That is all the more surprising given the evidence that Mr Emery acted for both the vendor, Oates Properties, and the purchaser, Mr La Greca, on this transaction.

14 In about August or September 2004 completion of the contracts of sale from Dimepark to Oates Properties with respect to the remaining lots was overdue. Dimepark and Oates Properties then agreed that the purchase of Lots 1, 5, 6, 8 and 11 (presumably Mark 1) would be completed by transfer of those lots to Quinross Pty Ltd, which was a related company of Oates Properties. Quinross obtained finance for completion from lenders whose loans were arranged by Mr Kremnizer, solicitor. Amongst the lenders were the plaintiffs, who were approached by Mr Kremnizer on 20 December 2004. By that time, of course, the strata plan had long since been registered. They agreed to take a mortgage over Lot 8 (Mark 2), as security for a loan by them to Quinross of $250,000. They understood, and it was correct, that Lot 8 (Mark 2) was the unit on the north-eastern corner of the first floor of the building.

15 Settlement of the plaintiffs' mortgage over Lot 8 (Mark 2) took place on 24 December 2004, which, as it happened, was the day after the lodgement of the form of Request to correct the lot numbers. The mortgage was stamped on 29 December 2004 and lodged for registration by Mr Kremnizer's firm, RL Kremnizer & Co. A search indicates that it was recorded in the Register on the same day, immediately after the transfer of Lot 8 (Mark 2) from Dimepark to Quinross, and immediately before a mortgage (evidently a second mortgage) of Lot 8 (Mark 2) to Nelpop Pty Ltd and Bleier Mortgage Corporation Pty Ltd. A certificate of title for Lot 8 (Mark 2), issued on 14 January 2005, confirms the registration of the transfer and the two mortgages and shows that the second mortgage had subsequently been transferred to Meyer Gutnick, the 17th defendant.

16 The form of Request had been lodged before lodgement of the transfer of Lot 8 (Mark 2) from Dimepark to Quinross and also before lodgement of the mortgage over Lot 8 (Mark 2) to the plaintiffs. But the Registrar-General is not required to register dealings in the order in which they are lodged, and may register dealings in the order that will give effect to the intentions of the parties (s 36(4)).

17 Amended Strata Plan No 71211, purporting to correct the Register in response to the Request, by correcting references to lot numbers in the registered plan under s 12(1)(d1), was registered on 1 February 2005. There is no evidence on behalf of Registrar-General to explain how it happened that the Amended Strata Plan was registered without the consent of persons who at the time of registration held registered interests in affected lots, namely Mr La Greca and the plaintiffs. Evidence on behalf of the Registrar-General was given by Anthony Booth, a solicitor employed by the Solicitor for the Registrar-General, who did not say that he dealt with the processing of the Request and the registration of the Amended Strata Plan, and did not give any relevant admissible evidence about the determination of the Request by the Registrar-General.

18 I shall refer to the lot numbers after registration of the amended strata plan as the lot numbers "Mark 3". It must be remembered, however, that the purpose of the amendment was to restore the lot numbers used in the draft strata plan for "off-the-plan" sales, and so the lot numbers Mark 3 are the same as the lot numbers Mark 1.

19 The correction of the Register presumably improved the situation for the owners and mortgagees of the units that had been purchased "off-the-plan", for they had expected to acquire Lots 2, 4, 10 and 12 respectively (these being Mark 1 numbers), and the amendment restored those numbers. Not surprisingly, however, the amendment created a good deal of confusion for the plaintiffs and Mr La Greca, because they had acquired interests in units which they knew by their registered plan numbers (the Mark 2 numbers), and now the numbers were being changed. The amendment had the effect that the unit that had been Lot 7 (Mark 2), owned by Mr La Greca, was re-numbered Lot 8 (Mark 3), and the unit that had been Lot 8 (Mark 2), owned by Quinross subject to a first mortgage in favour of the plaintiffs and a second mortgage in favour of Mr Gutnick, was re-numbered Lot 6 (Mark 3).

20 It was submitted that the plaintiffs and Mr La Greca (and, for that matter, Hama Holdings and Mr Gutnick) were protected by s 12(3A)(c). That provision offers some protection to persons affected by the exercise by the Registrar-General of his power under s 12(1)(d1), but it only applies to the construction of an instrument made before the correction, and would not prevent the change of lot numbers from operating in accordance with the Registrar-General's determination, and therefore would not insulate interest-holders from the confusion that re-numbering created. It was also submitted that the re-numbering pursuant to the Request, which was a "dealing", in no way affected the registration of the plaintiffs' mortgage, in light of s 41. That is correct, and it is also correct that the plaintiffs and the other interest-holders had the protection of indefeasibility of title under s 42. But again, that protection did not prevent the Registrar-General from altering lot numbers so that the registered estates or interests, while still estates or interests in respect of the same physical properties, became estates or interests in respect of properties designated by new numbers.

21 Both Mr Kirkland and Mr La Greca gave evidence that they were not asked to consent, and did not consent, to the amendment of the strata plan, and that they found out about the amendment some time after it had occurred. I accept this evidence, from which it follows that at the time when the Registrar-General purported to correct the Register by correcting the references to the lot numbers in SP 71211, he did not have the consent of all of the proprietors and mortgagees of the affected land, and consequently a requirement for the exercise of the power of correction under s 12(1)(d1) was not present.

22 According to the evidence of Mr Kirkland, the plaintiffs’ mortgage from Quinross went into default on 27 May 2005. After Quinross defaulted, the plaintiffs took proceedings for possession, evidently obtaining an order for possession of the security property, "Unit 8", in about December 2005. Frustrated at not receiving overdue payments from the mortgagor or any rental payments from the tenant of the property, they engaged a new solicitor who discovered the amendment to the strata plan, at some time after 20 February 2006. Mr Kirkland was then informed that the unit that had become Unit 8, also a tenanted unit, was owned by Mr La Greca, and that it was previously Lot 7 (Mark 2). The tenant of Unit 8 (that is, Lot 8 (Mark 3)/Lot 7 (Mark 2)) was (not surprisingly) paying rent to Mr La Greca. The plaintiffs were not receiving any rent from the tenant of Lot 8 (Mark 2), which had become Lot 6 (Mark 3). It is not clear from the evidence whether this was because of confusion about the lot numbers.

23 On 27 February 2006 the plaintiffs' solicitors wrote to Mr La Greca's solicitors demanding an accounting for the rent being collected from the tenant of "Unit 8", apparently referring to the tenant of Mr La Greca's property, which had been Lot 7 (Mark 2) until the amendment. This led to Mr La Greca's solicitors notifying the Registrar-General of what had occurred, and making a demand, also on 27 February 2006, on Mr Davidson, on the ground that "on the face of the title … our clients do not now own the Lot which was originally purchased by them". The Amended Statement of Claim alleges that on 2 March 2006 a Notice to Vacate (presumably issued at the instigation of the plaintiffs) was forwarded by the Local Court and Sheriff in respect of Lot 8 (Mark 3). If that event occurred (unfortunately I can find no proof of it in the evidence), the Notice was misdirected, because the plaintiffs had no rights in respect of Lot 8 (Mark 3), but only rights in respect of Lot 8 (Mark 2)/Lot 6 (Mark 3).

24 The plaintiffs commenced the present proceedings by Summons filed on 3 March 2006, seeking nothing more specific than "a declaration as to the registered proprietors and other interest holders in SP 71211", consequential orders for the re-issue of certificates of title and registration of a corrected strata plan, and costs against Mr Davidson and the Registrar-General. After the Court directed that the matter proceed by pleadings, a Statement of Claim was filed on 15 March 2006, seeking a declaration that Quinross was the beneficial and legal owner of "Unit 8", a declaration as to the identity of the registered proprietors and other interest holders of the entirety of SP 71211, consequential directions to the Registrar-General to rectify the Register and to re-issue certificates of title and amend the strata plan, and also damages, compensation under the Real Property Act, interest and costs.

25 The proceedings were originally framed as proceedings against 24 named defendants. This was on the theory that the proper course would be to establish the ownership of all the lots in the strata plan, possibly by restoring the Mark 2 numbers for all lots. Following a change of solicitors, the plaintiffs decided to discontinue the proceedings against all except seven of the defendants. I infer that this was on the theory that the only correction that was needed to address the plaintiffs' case was in respect of Lots 6, 7 and 8, whose numbers had been swapped around amongst themselves by the various alterations.

26 It was necessary for the plaintiffs to obtain either the consent of the affected defendants or the leave of the Court, in order to file Notices of Discontinuance against the defendants who were no longer to be parties. It was also necessary for the plaintiffs to re-plead against the remaining seven defendants, a step that would require leave to amend their Statement of Claim. On 19 April 2006 the plaintiffs' solicitors wrote to the defendants, other than the seven who would remain defendants, seeking their consents to discontinuance. Some defendants consented, but others did not reply. Eventually the plaintiffs made an application to the Registrar in Equity, who granted leave for the filing of Notices of Discontinuance against all non-consenting defendants (other than the remaining seven). Leave was granted in respect of most of those defendants on 16 June 2006. The plaintiffs meanwhile sought the consent of the remaining seven defendants to the correction of the Register in respect of Lots 6, 7 and 8, and also to the amendment of the Statement of Claim.

27 The evidence shows that the Registrar-General was supportive of the proposal to correct the numbering of Lots 6, 7 and 8, although he made clear his preference for fixing the problem administratively under s 12(1)(d1) rather than through court proceedings. On 20 April 2006, after conferring with the legal representatives of the plaintiffs and others, the Legal Services Branch of the Registrar-General's office wrote to the plaintiffs' solicitors confirming the Registrar-General's view that the most expedient way to correct the problem would be by an amendment under s 12(1)(d1), with the consent of all of the registered proprietors and mortgagees. The letter suggested that if this course of action was agreed, the proceedings could be disposed of by consent orders (that was probably excessively hopeful, because by that time the plaintiffs were claiming compensation and damages). On the same day the Legal Services Branch wrote to Mr La Greca's solicitors conveying the same proposal. By a letter dated 27 June 2006, the Legal Services Branch confirmed to the plaintiffs' solicitors that the Registrar-General was prepared to amend the Register regarding Lots 6, 7 and 8 on condition that the current registered proprietors of those lots and all other registered interests consented to the dealing.

28 It appears that an obstacle to the Registrar-General's proposal was that it required, appropriately, the consent of everyone who had a registered interest in Lots 6, 7 and 8. Mr La Greca owned one of the lots, subject to a mortgage to St George Bank. Both Mr La Greca and the Bank indicated they were prepared to consent. The other two lots were owned by Quinross, which had defaulted on its mortgage to the plaintiffs in May 2005 and had been deregistered on 19 March 2006, so that effectively the only remaining interests in those two lots were the mortgagee interests. The first mortgagees of Lot 6 (Mark 3), which had previously been Lot 8 (Mark 2), were the plaintiffs, who claimed a secured amount exceeding the value of the property. Lot 7 (Mark 3), which was previously Lot 6 (Mark 2), was subject to mortgages in favour of Hama Holdings and Mr Gutnick. Therefore the task for the plaintiffs was to obtain the consent of Hama Holdings and Mr Gutnick to the proposed renumbering.

29 The correspondence that is in evidence shows that this proved to be a difficult task. It also proved to be difficult for the plaintiffs to obtain the consent of Hama Holdings and Mr Gutnick to their proposed Amended Statement of Claim. It is necessary to pay some attention to this correspondence because it is pertinent to the questions of causation and costs.

30 The plaintiffs' solicitors prepared a draft Amended Statement of Claim in May 2006, seeking rectification of the Register as regards Lots 6, 7 and 8 (Marks 1, 2 and 3), and also compensation and costs, retaining the seven defendants as parties. They sought the consent of the remaining defendants to the filing of the amended pleading. Hama Holdings and Mr Gutnick were represented by RL Kremnizer & Co. On 26 June 2006 the plaintiffs' solicitors wrote to that firm noting that there was no appearance on behalf of their clients when the matter was before the Registrar on 16 June 2006, and so it was not possible on that day for the Court to grant leave to the plaintiffs to file the Amended Statement of Claim. The letter said that if consent was not forthcoming, a notice of motion would be filed. The letter also sought the consent of those two parties to the proposal to rectify the Register to restore Lots 6, 7 and 8 to their Mark 2 numbering, noting that all other interested parties had consented and that the Registrar-General was prepared to act.

31 The plaintiffs' solicitors received no reply to their letter of 26 June, nor to a follow-up letter of 10 July 2006. But when the matter was next mentioned before the Registrar on 14 February 2006, Mr Fernon of counsel appeared for Hama Holdings and Mr Gutnick, and consented to short minutes of order which included an order granting the plaintiffs leave to file their Amended Statement of Claim.

32 The Amended Statement of Claim, filed on 17 July 2006, reflected the discontinuances and also the plaintiffs' determination to proceed for relief by way of "rectification" of the Register, compensation and costs. The seven remaining defendants were the following:

· Quinross (first defendant), which had in fact been deregistered;

· the Registrar-General (23rd defendant) and Mr Davidson (22nd defendant), against whom compensation and costs were sought; and

· Mr La Greca (24th defendant), St George Bank (15th defendant), Hama Holdings (17th defendant) and Mr Gutnick (18th defendant), in respect of whom the only argument was as to costs.

33 Consent orders were made on 18 August 2006 under which Hama Holdings and Mr Gutnick were required to file and serve their Defences by 1 September. On 5 October 2006 RL Kremnizer & Co sent to the plaintiffs' solicitors the unverified Defences of those two defendants. But the Defences also purported to apply to a number of other defendants against whom the plaintiffs had by that time discontinued; they purported to relate to the unamended Statement of Claim; and they pleaded no substantive case. The plaintiffs' solicitors wrote to RL Kremnizer & Co on 27 October 2006 drawing attention to these alleged defects in the Defences and threatening to seek summary judgment against Hama Holdings and Mr Gutnick.

34 The letter of 27 October also foreshadowed an application to the Duty Judge for orders for rectifying Lots 6, 7 and 8 to restore the numbering to the Mark 2 form, and invited Hama Holdings and Mr Gutnick to consent to that application. Not having received any intimation that consent would be given, the plaintiffs served a Notice of Motion, returnable on 3 November 2006, seeking summary judgment against Hama Holdings and Mr Gutnick, and a declaration that the Register for Lots, 6, 7 and 8 be rectified. When the matter came before Macready AsJ on 3 November, Hama Holdings and Mr Gutnick appeared by their counsel, Mr Rogers, and consented to the making of orders for rectification of the Register.

35 The orders made on 3 November 2006 in effect authorised and required the Registrar-General to correct the Register by amending the amended strata plan so as to restore the Mark 2 numbers for Lots 6, 7 and 8. The orders were made with the consent of all affected parties: the plaintiffs, Mr La Greca and his mortgagee St George Bank, Hama Holdings and Mr Gutnick, and the Registrar-General. The Registrar-General subsequently acted on the Court's orders, presumably exercising his power under s 12(1)(d1).

36 I shall call the lot numbers settled pursuant to the Court's orders the "Mark 4" lot numbers. The Mark 4 numbering for Lots 6, 7 and 8 was the same as the Mark 2 numbering for those lots. Thus, the position after the Registrar-General gave effect to the Court's orders was as follows:

· the property over which the plaintiffs were first mortgagees and Mr Gutnick was second mortgagee was Lot 8 (Mark 4), the unit in the north-eastern corner of the first floor, which had been Lot 6 in the original draft strata plan (Mark 1), Lot 8 in the registered strata plan (Mark 2), and Lot 6 in the amended strata plan (Mark 3);

· the property over which Hama Holdings and Mr Gutnick were mortgagees was Lot 6 (Mark 4), the unit in the south-western corner of the first floor, which had been Lot 7 in the draft strata plan (Mark 1), Lot 6 in the registered strata plan (Mark 2), and Lot 7 in the amended strata plan (Mark 3); and

· the property of which Mr La Greca was registered proprietor, and St George Bank was mortgagee, was Lot 7 (Mark 4), the unit in the south-eastern corner of the first floor, which had been Lot 8 in the draft strata plan (Mark 1), Lot 7 in the registered strata plan (Mark 2), and Lot 8 in the amended strata plan (Mark 3).

37 On 16 November 2006 the plaintiffs' solicitors wrote to RL Kremnizer & Co, informing them that the Registrar-General had given effect to the Court's orders and asserting that because of the default by Quinross, the plaintiffs as first mortgagees were effectively the owners of Lot 8 (Mark 4), and Hama Holdings as first mortgagee of Lot 6 (Mark 4) was effectively the owner of that lot. Arrangements were proposed for the collection of rent from the tenants of those properties.

38 The plaintiffs sold Lot 8 (Mark 4) as mortgagees, settlement taking place on 21 June 2007. Mr Kirkland's evidence about the decision to take this step is curious. In his first affidavit, made on 21 September 2006, he explained how the plaintiffs obtained orders for possession and then discovered, in about February 2006, that the unit numbers had been changed. He then gave evidence of steps he had taken, up to September 2006, to rectify the Register. In his second affidavit, made on 14 December 2006 he referred to the fact that the Registrar-General had acted to correct the numbering of Lots 6, 7 and 8 pursuant to the Court's orders, and then gave evidence about negotiations with RL Kremnizer & Co with respect to rental, then saying:

"It is my intention in the new year to seek to list the property for sale and obtain the best market value".

39 He then gave some particulars of loss. He did not say, or otherwise seek to prove, that the plaintiffs' delay in exercising their power of sale as mortgagees, after the mortgagor defaulted in May 2005, was caused by the re-numbering of lot numbers effected by the Registrar-General on 1 February 2005. His third affidavit, made on 6 July 2007, does no more than particularise losses in consequence of completion of the sale on 21 June 2007.

40 According to Mr Kirkland, the net sum received by the plaintiffs on completion was $245,811.31. Thus their capital loss in respect of the mortgage was $4,188.89. Additionally they did not receive interest on the mortgage from June 2005 onwards. The default rate of interest under the mortgage was 12% per annum. At the hearing the plaintiffs claimed loss of interest of $60,000. They acknowledged receiving some rental payments amounting to $6,755. Making allowance for that amount, the plaintiffs' net claim is for damages of $57,433.89, together with their legal costs in the present proceedings, which they seek on the indemnity basis. None of the defendants challenged Mr Kirkland's figures, as he was not required to give oral evidence at the hearing though he was available to do so.

The pleadings

41 Having pleaded certain material facts, the Amended Statement of Claim made substantive claims against only two defendants, namely Mr Davidson and the Registrar-General. A case for damages for negligence was pleaded against Mr Davidson (see below), and a case for compensation under s 120 of the Real Property Act was pleaded against both Mr Davidson and the Registrar-General. There was no pleading that would support a case for substantive relief against any other defendant.

42 Mr Davidson, the Registrar-General, Mr La Greca and St George Bank filed Defences to the Amended Statement of Claim.

43 In his Defence filed on 4 October 2006, Mr Davidson denied the contentions that he owed the plaintiffs a duty of care and had breached it causing them damage. He contended that the Request was prepared and lodged for registration upon the instructions of Quinross and with the consent and authority of the affected registered owners of the lots within Strata Plan 71211. He said the Registrar-General properly acted upon the Request and further, that the mortgage by Quinross to the plaintiffs was at all material times granted over Lot 8 in Strata Plan 71211.

44 In his Defence filed on 14 August 2006, the Registrar-General denied the allegations of liability made against him, and made the following additional claims:

· if the plaintiffs suffered loss or damage as a result of the mistaken amendment of the strata plan (which was denied), any such loss or damage was a result of a negligent act or omission by a solicitor, compensable by a professional indemnity insurer, and therefore not conduct compensable from the Torrens Assurance Fund pursuant to s 129(2)b) of the Real Property Act;

· the Registrar-General is entitled to correct the Register pursuant to s 12(1)(d) of the Act and does not require any order of the Court to do so;

· in March 2006 the Registrar-General notified the plaintiffs that it would correct the strata plan on condition that the plaintiffs lodged a formal request and obtained the written consent of the relevant parties, but the plaintiff had not done so;

· the proceedings are incompetent as a claim for compensation under s 120 of the Act, because the plaintiffs have not obtained the Registrar-General's consent or the leave of the Court as required by the Act.

45 In his Amended Defence filed on 11 September 2006, Mr La Greca denied that the plaintiffs were entitled to possession of Lot 8 in the Amended Strata Plan and asserted that he had an indefeasible title to Lot 7 in the Strata Plan, which had become Lot 8 in the Amended Strata Plan, and that his legal estate could not be affected by the registration of the Amended Strata Plan without his knowledge or consent, in circumstances where the plaintiffs' mortgage (granted prior to the registration of the Amended Strata Plan) related to Lot 8 in the Strata Plan (which had become Lot 6 in the Amended Strata Plan).

46 In its Amended Defence filed on 29 August 2006, St George Bank reinforced Mr La Greca's case that he had an indefeasible title to Lot 8 in the Amended Strata Plan, and asserted that it had a registered first mortgage in respect of that Lot 8.

The plaintiffs' claim for damages for negligence against Mr Davidson

47 By their Amended Statement of Claim, the plaintiffs claim damages against Mr Davidson on two alternative bases, namely negligence and statutory liability under s 120 of the Real Property Act.

48 As to the claim for damages for negligence, the Amended Statement of Claim states:

Particulars of Loss and Damage

49 There are several insuperable difficulties with the plaintiffs' pleading against Mr Davidson. First, in my opinion Mr Davidson did not owe to the plaintiffs the pleaded duty of care, so as to become liable to compensate the plaintiffs for economic loss in the event of breach.

50 I was taken to several cases that have addressed the question whether a solicitor for one party can ever owe a duty of care to another party to avoid economic loss. It is necessary to put these cases into context within the rapid development of the law of negligence causing economic loss that has taken place in the High Court of Australia in recent years. Some earlier cases in this area treat the concept of proximity as the centrepiece of analysis. As recently as 1995, in Bryan v Maloney (1995) 182 CLR 609, Mason CJ, Deane and Gaudron JJ said that "the overriding requirement of a relationship of proximity represents the conceptual determinant and the unifying theme of the categories of case in which the common law of negligence recognises the existence of a duty to take reasonable care to avoid a reasonably foreseeable risk of injury to another" (at 619). But more recent decisions by the High Court have taken a different approach, with the result that now, "proximity is no longer seen as the 'conceptual determinant' in this area" (Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515, at 528-9 per Gleeson CJ, Gummow, Hayne and Heydon JJ; and note the extensive list of cases decided by the High Court in the period from 1997 to 2002, cited by their Honours in footnote 80 on pages 158-9).

51 Generally speaking, the concept of vulnerability of the plaintiff has emerged as an important requirement in cases where a duty of care to avoid economic loss has been held to have been owed. In the Woolcock case, Gleeson CJ, Gummow, Hayne and Heydon JJ explained the concept as follows (at 530; see also at 548-9 per McHugh J):

UCLA Law Rev

Perre v Appand Pty Ltd

Hill v Van Erp

Esanda Finance Corporation Ltd v Peat Marwick Hungerfords

52 I would add that this analysis is readily extended to Connell v Odlum [1993] 2 NZLR 257, one of the cases cited by counsel for Mr Davidson. There the validity of the matrimonial agreement between husband and wife depended, from the husband's point of view, on the wife's solicitor carefully explaining the agreement to her and providing a certificate that he had explained to her its effect and implications. The husband could not do otherwise than rely on the fact that the wife's solicitor had given the certificate. He was therefore unable to protect himself from the consequences of the solicitor's want of reasonable care.

53 The same analysis is to be applied to the position of a vendor's solicitor, when responding to the purchaser's requisitions on title, though the outcome will depend upon a precise analysis of the instant facts. As regards some matters, the purchaser is not in a position of vulnerability because alternative avenues of inquiry are available (for example, with respect to such matters as zoning and unpaid rates). Difficulty has arisen, however, where the requisition relates to a subject on which the vendor's solicitor has special knowledge: for example, the contents of an unregistered agreement between the vendor and a third party affecting the land (cf Gran Gelato Ltd v Richcliff (Group) Ltd [1992] Ch 560, another case cited by counsel for Mr Davidson) or the existence of an unregistered easement created over the land in a transaction in which the vendor's solicitor acted (cf Bebonis v Angelos (2003) 56 NSWLR 127). In those cases it will be necessary to make a factual assessment in order to determine whether the purchaser's position of vulnerability is sufficient, together with other relevant circumstances, to give rise to a duty of care owed to him or her by the vendor's solicitor. In the Gran Gelato case it was held that no such duty existed; but in Bebonis, Handley JA, with whom Beazley and Heydon JJA agreed, questioned that decision (at 135 [42]), suggesting it might be anomalous that the lay vendor would owe a duty of care to the purchaser but the solicitor would not. It is unnecessary to resolve that issue here, as the facts are some distance away from requisitions on title.

54 Counsel for Mr Davidson placed some emphasis on the following observation by Handley J in Bebonis v Angelos (at 134-5 [42]):

"A solicitor acting for one party does not ordinarily owe a duty to another but exceptionally may do so if a responsibility to that party has been assumed".

55 The notion of assumption of responsibility as a guiding principle has also been addressed by the High Court. In Woolcock, Gleeson CJ, Gummow, Hayne and Heydon JJ said (at 531):

"In other cases of pure economic loss ( Bryan v Maloney is an example) reference has been made to notions of assumption of responsibility and known reliance. The negligent misstatement cases like Mutual Life & Citizens' Assurance Co Ltd v Evatt [(1968) 122 CLR 556; (1970) 122 CLR 628; [1971] AC 793] and Shaddock & Associates Pty Ltd v Parramatta City Council [No 1] [(1981) 150 CLR 225] can be seen as cases in which a central plank of the plaintiff's allegation that the defendant owed it a duty of care is the contention that the defendant knew that the plaintiff would rely on the accuracy of the information the defendant provided. And it may be, as Professor Stapleton has suggested [(2002) 50 UCLA Law Rev 531, at 558-9], that these cases, too, can be explained by reference to notions of vulnerability."

56 In the present case Mr Davidson (through his employed solicitor, Mr Emery) was acting for Oates Properties and Quinross, to whom he undoubtedly owed a contractual and probably also a tortious duty of care. He acted for Quinross on its mortgage of Lot 8 (Mark 2) to the plaintiffs. But the plaintiffs were not his clients; they were represented by RL Kremnizer & Co in the mortgage transaction. In making the Request on behalf of his clients, Mr Davidson initiated a process that could cause damage to the plaintiffs, but he did not have control over that outcome. His action placed an application before the Registrar-General, who under the statute was entitled and perhaps obliged to grant the application if the consents of the proprietors and mortgagees of the lots had been obtained. Even if the plaintiffs had had a registered interest at the time of the making of the Request, they would not have been vulnerable to suffer loss at the hands of Mr Davidson. The Registrar-General's statutory power to correct the lot numbers was not enlivened, under s 12(1)(d1), except with the consent of the proprietors and any mortgagees of the strata lots. Regardless of the content of the information supplied in support of the Request, it was open to the Registrar-General to satisfy himself, by consulting the Register, that the requirement of consent had been fully satisfied. A fortiori, in circumstances where the plaintiffs' interest arose only after the making of the Request, the plaintiffs cannot have been in the position of vulnerability as regards any conduct by Mr Davidson in and about the making of the Request. For the same reasons, it could not be said, on the evidence, that Mr Davidson assumed responsibility to the plaintiffs in making the Request. Contrast this situation with Hill v Van Erp (1997) 188 CLR 159 and Connell v Odlum, where in each case the plaintiff depended upon the solicitor discharging his retainer with due care, and could do nothing to ensure that this occurred.

57 The plaintiffs' pleading does not contend that Mr Davidson owed a duty of care that would have required him to draw the Registrar-General's attention to their registered interest once it arose, some six days after the Request was launched.

58 Assuming (contrary to my view) that Mr Davidson owed the plaintiffs a duty of care at the time of lodgement of the Request, another difficulty for the plaintiffs would be to show that there was a breach of that duty. The Request did not fail to take into account the plaintiffs' interest because at the time of the making of the Request, there was no such interest. Clearly the Request was deficient for failing to identify the registered interest of Mr La Greca and failing to obtain his consent. But in my view that would not constitute a breach of a duty of care owed by Mr Davidson to the plaintiffs. The plaintiffs' vulnerability, if it existed, was that Mr Davidson might make the Request without proper regard to their position, rather than the position of a third party. Any duty of Mr Davidson to the plaintiffs would arise out of what Handley JA described in Bebonis as a responsibility assumed in favour of another party. It is not plausible to argue that Mr Davidson assumed a responsibility to the plaintiffs to take care to address the registered interest of someone else, Mr La Greca, for then the duty of care would amount to an underwriting of the accuracy of the application in favour of every interest-holder.

59 Those reasons are sufficient to dispose of the plaintiffs' claim in negligence against Mr Davidson. Additionally, I note that the plaintiffs have not proved that all of the losses they claim were caused by the breaches of duty they seek to attribute to Mr Davidson. The question of causation also arises in the assessment of the plaintiffs' statutory claim against the Registrar-General, and I shall address it in detail when I come to that issue. Suffice it to say here that I approach the question of causation in respect of the claim in negligence causing economic loss by the application of the test of causation enunciated by the High Court in March v E & MH Stramare Pty Ltd (1991) 171 CLR 506: that is to say, causation is essentially a question of fact to be answered by reference to common sense and experience (while allowing for the possibility of multiple causes for a loss) rather than by the application of a "but for" test. That was a personal injury case. It has been acknowledged that the application of the test may be subject to further refinements in economic loss cases (see, in particular, the comments of Ipp JA in Flounders v Millar [2007] NSWCA 232 at [38], commenting on the observation of Gleeson CJ in Travel Compensation Fund v Tambree (2005) 224 CLR 627 at 638 [28] that "issues of causation commonly involve normative considerations, sometimes referred to by reference to 'values' or 'policy'"). Fortunately, in the present case the dictates of common sense are relatively clear, and further, the statutory test of causation imposed by s 129 (considered below) seems to me to be indistinguishable from the test of causation in negligence causing economic loss. Consequently my reasoning on causation in the context of s 129 would be equally applicable to the question of causation that would arise had the plaintiffs proved that Mr Davidson owed them a duty of care that he had breached.

The plaintiffs' claim against Mr Davidson under s 120

60 The alternative claim against Mr Davidson, made in para 24 of the Amended Statement of Claim, is that he is "a person whose acts or omissions have given rise to loss or damage suffered by and which continues to be suffered by the plaintiffs for the purposes of section 120 Real Property Act 1900 (NSW)".

61 Section 120, which appears in Part 13 ("Civil Rights and Remedies"), Division 2 ("Proceedings for Compensation"), is in the following terms, so far as relevant to this case:

(b) any error, misdescription or omission in the Register, … may take proceedings in any court of competent jurisdiction for the recovery of damages.

62 In Challenger Managed Investments Ltd v Direct Money Corporation Pty Ltd (2003) 59 NSWLR 452; [2003] NSWSC 1072, Bryson J made the following observations about s 120 (at 456 [69]):

"In Pt 13, s 120 authorises proceedings for the recovery of damages to be brought by any person who suffers loss or damage as a result of the operation of the Act in respect of any land, where the loss or damage arises from stated circumstances. Subsection (2) and subs (3) have the effect that where proceedings of a kind dealt with in s 120 are brought against the Registrar-General they are to be taken in accordance with Part 14. In my understanding s 120 does not create a cause of action or an entitlement to the recovery of damages, but by subs (1) authorises proceedings for the recovery of damages to be taken; in most or perhaps all circumstances authorisation by s 120 is superfluous as an entitlement would exist under the general law."

63 On the facts of the Challenger case, it was not necessary for his Honour to decide whether s 120 created a statutory private cause of action against a person other than the Registrar-General. But his view that it does not demands respect, expressed as it was part of a considered exposition of Parts 13 and 14 by a very experienced judge. It is somewhat odd to treat the statutory language as merely confirming and not adding to whatever right of action would otherwise exist. Perhaps that is explained on the basis that the thrust of s 120 is, while confirming that the section does not abrogate other private rights of action, to make provision for cases against the Registrar-General to be taken in accordance with Part 14. In any event, my view is that I should follow the observations of his Honour, with the result that s 120 does not confer upon the plaintiffs any new cause of action against Mr Davidson. Of course, if it did, the plaintiffs would still have to prove that the acts or omissions of Mr Davidson had given rise to their loss or damage (s 120(2)(a)), a difficult task for them on the facts.

64 That being so, the only cause of action asserted against Mr Davidson is in negligence, and the plaintiffs have failed to make out their case on that ground. The result is that their claim for damages or compensation against Mr Davidson is unsuccessful.

The plaintiffs' claim for compensation against the Registrar-General

65 The Amended Statement of Claim also asserts, in para 26, that "the Registrar-General is liable to compensate the plaintiffs by reason of the provisions of section 120 of the Real Property Act 1900 (NSW)".

66 In the present case, the loss or damage claim to have been suffered by the plaintiffs is, as explained above:

a. lost interest from the time of the mortgagor's default (May 2005) to completion of the sale of the mortgaged strata lot (June 2007), with an allowance for rental received;

b. capital loss on sale of the mortgaged strata lot;

c. costs of the proceedings for possession;

d. costs of correcting the lot numbers in the Register;

e. costs of the present proceedings.

67 Section 120 allows a person who has suffered loss or damage as a result of the operation of the Act in respect of a strata lot to take proceedings against the Registrar-General under Part 14, if the loss or damage arises from, inter alia, an error, misdescription or omission in the Register. The circumstances in which compensation is payable are further addressed in s 129, where the same questions of causality are raised. Proceedings against the Registrar-General under s 129 are proceedings for compensation out of the Torrens Assurance Fund against the Registrar-General as normal defendant (s 132(1).

68 Section 129 provides, as far as relevant to the present case:

69 It was submitted that s 129(2)(b) is applicable in the present case, but I have reached the conclusion, as explained, that the plaintiffs failed to make out their case in negligence against Mr Davidson and so subparagraph (b) has no application. The critical question under s 129, in the present circumstances, is whether all or any of the categories of loss or damage claimed by the plaintiffs is recoverable against the Fund on the ground that it is loss or damage "as a result of the operation" of the Act which has arisen out of the act of the Registrar-General in changing lot numbers on 1 February 2005 or out of the misdescription of lot numbers made on that occasion.

70 Earlier in these reasons for judgment I referred briefly to the test of causation applicable in an action for negligence. In my opinion the statutory language (“as a result of the operation" of the Act, and "where the loss or damage arises from" stated matters) enunciates substantially the same test of causality, namely the common sense test expounded by the High Court in March v Stramare. That was the view taken by Bryson J in the Challenger Managed Investments case, at [86]. More recently, his Honour has explored the issue in another s 129 case, Chandra v Perpetual Trustees Victoria Ltd [2008] NSWSC 178 (7 March 2008). There he described tort law's "pragmatic approach rather than one founded in a highly defined enquiry" (at [17]). He added:

"Practical limits have to be imposed when deciding causation. At some point which has to be recognized by an assessment based on common sense, facts or events become too remote, or too little connected with an outcome to be treated as causes of the outcome: even though they must have existed for the outcome to occur."

71 A consequence of applying the negligence test of causation is that s 129(1) can probably be satisfied by showing that the operation of the Real Property Act materially contributed to the loss without being its dominant cause (compare Reiffel v ACN 075 839 266 Ltd (2003) 132 FCR 437; 45 ACSR 67; [2003] FCA 194 at [69] and cases there cited).

72 It is necessary to apply the test of causation to the present facts, so as to determine whether each of the categories of loss or damage claimed by the plaintiffs falls within s 129(1).

Interest

73 The plaintiffs claim interest of $60,000, adjusted by an allowance for rent received. That is calculated at the default rate of interest for the period from the time of default, May 2005, to the time of completion of the mortgagee sale in June 2007. In my opinion, the evidence does not show that the plaintiffs' loss of mortgage interest during that whole period was as a result of the operation of the Real Property Act in respect of the mortgaged lot, but I have reached the conclusion that the interest lost over part of that period falls within that description.

74 The period from May 2005 to February 2006 was taken up by the plaintiffs moving towards possession of the mortgaged lot, oblivious of the change of lot numbers. The evidence is inconsistent with the proposition that the plaintiffs were kept out of their money during this time because of the incorrect lot numbering. The cause of their loss of mortgage interest up to the time when they discovered the change of unit numbers was the default of the mortgagor and the consequent time taken to enforce their security. They are not entitled to recover interest for this period from the Fund.

75 From late February until 3 November 2006 the plaintiffs pursued litigation to correct the lot numbering and evidently did not take any steps towards sale of the mortgaged property. Curiously, they did not give evidence to show that the sale process was delayed because of the incorrect lot numbering. Strictly the plaintiffs had good title to a first mortgage of the strata lot in the north-eastern corner of the first floor, which had come to be Lot 6 (Mark 3) rather than Lot 8 (Mark 2), and were in a position by exercising their power of sale as mortgagees to convey that good title. However, it seems to me an obvious inference from the proven facts that any sale process would have been rendered very difficult by the change in lot numbers, particularly bearing in mind that both Unit 6 and Unit 8 were tenanted and the certificate of title that the plaintiffs would be able to hand over on settlement would be to Lot 8. In those circumstances, my view is that the rational course for the plaintiffs to pursue was to correct the lot numbers before selling.

76 For reasons given below, I do not accept the argument that legal proceedings were unnecessary. However, the approach initially employed in the litigation was unnecessarily complex, time-consuming and excessive in terms of costs, because it involved the joinder of some 26 defendants. In my view, the plaintiffs lost interest in the period from February 2006 until the filing of their Amended Statement of Claim on 17 July 2006 because they were seeking to correct the lot numbers by an inappropriate procedure. They are not entitled to recover against the Fund for that lost interest.

77 Once the Statement of Claim was amended and the proceedings became, so far as correcting the lot numbers was concerned, proceedings about the correction of lot numbers 6, 7 and 8, the evidence shows that they were prosecuted by the plaintiffs with due vigour and the delay in correction of Register, from 17 July to mid-November 2006, was due to lack of cooperation by Hama Holdings and Mr Gutnick. In my view the plaintiffs' loss of interest during that time was loss or damage as a result of the operation of the Act and in particular, s 12(1)(d1) upon which the Registrar-General relied when changing the lot numbers on 1 February 2005, and it arose from the act of the Registrar-General in changing the lot numbers and the misdescription of the lot numbers thereby produced. Therefore under s 129(1)(a) and (c) the plaintiffs are entitled to compensation from the Fund for interest lost in the period from 17 July to mid-November 2006.

78 From mid-November 2006 until some time in early 2007 the plaintiffs did not endeavour to sell the mortgaged lot, without any explanation whatever for that delay. Then there was a sale process extending over some months, again without explanation for the length of time taken in the sale. It seems to me that a large portion of the delay between mid-November and late June was caused by matters other than the incorrect lot numbers, or alternatively that during this period the plaintiffs failed to mitigate their loss or damage under s 129(2)(c). Specifically, I do not see why the plaintiffs could not have put the property up for sale immediately in mid-November, perhaps by auction in early December, for settlement at the end of January 2007. Therefore it seems to me that the plaintiffs' entitlement to compensation from the fund for lost interest should be limited to the period up to the end of January 2007.

79 My conclusion on the plaintiffs' claim for compensation for lost interest is that they are entitled to compensation for the period from 17 July 2006 to 31 January 2007, but not otherwise. They claimed interest at the default rate of 12% and that claim has not been challenged.

Capital loss

80 The plaintiffs claim their capital loss of $4188.89, the difference between the amount lent and the amount recovered on mortgagee sale. There is no evidence to show that the problem with lot numbers affected the value of the mortgaged strata lot or its sale price. Even if there had been some temporary loss, the mistaken numbering was corrected on 3 November 2006, well before the mortgaged property was sold. Prima facie, if a mortgagee sale realises less than the mortgagor's debt, the explanation is that the mortgagee has taken insufficient security. In my view the plaintiffs have not proven their claim in this category.

Costs of possession proceedings

81 The plaintiffs did not provide evidence of the costs incurred in possession proceedings. Moreover, there is nothing in the evidence to indicate that those costs were caused by the incorrect lot numbers, rather than the mortgagor's default in the process of realising the security. In my view the plaintiffs have not proven their claim.

Cost of correcting the lot numbers in the Register

82 The plaintiffs' legal costs in obtaining the orders made on 3 November 2006 were, in my opinion, costs incurred by them as a result of the operation of the Act in respect of the mortgaged lot, and were costs arising from the misdescription of the lot numbers in the Register, for the following reasons. When the Registrar-General corrected the lot numbers on 1 February 2005, the Act (s 12(1)(d1)) operated to create the appearance that the plaintiffs' mortgage, held over Lot 8 (Mark 2), had become a mortgage over Lot 6 (Mark 3). Arguably that was only an appearance and not the reality, for the consents of all proprietors and mortgagees, required by s 12(1)(d1), had not been obtained and in any event, the plaintiffs had the protection of ss 41 and 42. But the practical effect of the Registrar-General's action was to put the plaintiffs in a position where they had to act to clarify their rights.

83 In my opinion, it was probably necessary for the plaintiffs to embark upon litigation of some kind in order to correct the mistaken re-numbering. The facts indicate that Hama Holdings and Mr Gutnick were uncooperative and that their solicitors did not respond to correspondence seeking their consent to arrangements that would lead to the Registrar-General exercising his power, until the issue was brought to court in interlocutory circumstances. In those circumstances it seems unlikely that Hama Holdings and Mr Gutnick would have co-operated voluntarily without litigation, by consenting to the Registrar-General correcting the problem under s 12(1)(d1).

84 It is necessary to refer to some submissions by counsel for Mr Davidson about s 12(1)(d). It may be that the Registrar-General's power to correct errors and omissions in the Register under s 12(1)(d) is available to correct lot numbers in a plan, notwithstanding the specific provisions of s 12(1)(d1), and that s 12(1)(d) gives the Registrar-General a broader and more flexible power. Counsel for Mr Davidson referred me to some authorities on the construction of s 12(1)(d), namely FNCB-Waltons Finance Ltd v Crest Realty Pty Ltd (1987) 10 NSWLR 621 at 629G-630B; Pirie v Registrar-General (1962) 109 CLR 619 at 623 and 644, which establish that if an error is identified in the Register, the Registrar-General has the power to correct the error, and indeed, has a duty to do so. But in my opinion it would not be open to the Registrar-General, by acting under s 12(1)(d) rather than s 12(1)(d1), to correct lot numbers without regard to whether the proprietors and mortgagees of the affected lots consented to the change, because the question whether all interest-holders have consented to the proposed change is fundamental to the fair and proper exercise of the discretion. In my opinion, therefore, it would not have been open to the plaintiffs to sidestep the lack of consent by Hama Holdings and Mr Gutnick by persuading the Registrar-General to act under s 12(1)(d) rather than s 12(1)(d1).

85 Consequently, it was appropriate for the plaintiffs to act by taking legal proceedings rather than seeking administrative correction of the Register, so as to provide themselves with a mechanism of requiring all the parties whose consents were needed to address the issue of consent. Those costs of the proceedings that related to the application for re-numbering of Lots 6, 7 and 8 were, in my opinion, as a result of the operation of the Act. Therefore in my view the plaintiffs are entitled to be compensated for those costs out of the Fund.

86 I would exclude, however, costs relating to the proceedings prior to the amendment of the Statement of Claim on 17 July 2006 (other than the costs of preparing the amended pleading itself). This is because, as I have said, the proceedings were misdirected until that time, and so it could not be said that costs incurred in the unamended proceedings resulted from the operation of the Act or arose from the incorrect lot numbering.

87 In summary, the plaintiffs are entitled to be compensated from the Fund for that part of their costs of the proceedings that related to the correction of the Register eventually achieved pursuant to the orders of the Court on 3 November 2006, excluding costs incurred prior to 17 July 2006 (other than the costs of preparation of the Amended Statement of Claim) and excluding costs relating to parts of the proceedings (such as the claim for compensation) not related to correction of the Register.

Costs of proceedings

88 The plaintiffs' claim for recovery of the remainder of the costs of the proceedings (principally the costs of pursuing the compensation claims) should be assessed, in my view, not as a claim for compensation against the Fund under s 129 but as a claim for the costs of proceedings by the successful litigant against the unsuccessful litigant. This is because the costs of pursuing the compensation claim are not themselves loss or damage as a result of the operation of the Act arising from the Registrar-General's act or the misdescription in the Register. That is consistent with s 132(5), which implies a distinction between the claimant's loss or damage recoverable from the Fund and the claimant's costs in court proceedings. It is also consistent with Bryson AJ's judgment in Chandra v Perpetual Trustees Victoria Ltd [2008] NSWSC 178.

The Registrar-General's defence under s 132(2)

89 Section 132(2) provides as follows:

"132(2) Court proceedings may not be commenced:

(a) unless administrative proceedings have been commenced and determined in relation to the compensable loss, or
(b) more than 12 months after the date on which administrative proceedings have been determined in relation to the compensable loss,
except by leave of the court or with the consent of the Registrar-General."

90 In his Defence, the Registrar-General pleaded that the proceedings are incompetent as a claim for compensation under s 120, because the plaintiffs have not obtained the Registrar-General's consent or the leave of the Court as required by this provision. Although the Defence was filed as long ago as 14 August 2006, it appears that the plaintiffs made no request for the Registrar-General's consent until after the hearing commenced, or any interlocutory application to the Court for leave. Counsel for the plaintiffs was unable to give any satisfactory explanation for their failure to pursue this matter. On the other hand, the Registrar-General did not make any strike-out application and he participated in the proceedings and in particular, consented to the making of the Court's orders of 3 November 2006 for correction of the Register.

91 Counsel for the plaintiffs made an application for leave under s 132(2), nunc pro tunc, during the hearing. Although brief attempts were made to approach the Registrar-General for consent, there was effectively no time for such an application to be made or considered. There was argument as to whether the Registrar-General might have impliedly consented to the bringing of the compensation proceedings or might now be estopped from relying on s 132(2). In my view there is nothing in the evidence before the Court that would establish any such consent or estoppel. The Registrar-General fully and properly co-operated in the making of the orders designed to lead to his correction of the Register, but his doing so cannot be construed as consent to the plaintiffs' claims for other relief in the proceedings, including in particular their compensation claim. As to the compensation claim, the Registrar-General relied on s 132(2) in his Defence and there is nothing to suggest that he has done otherwise than maintain that position.

92 As counsel for the Registrar-General submitted, the point taken under s 132(2) is not a merely technical point. As Bryson J said in the Challenger Managed Investments case (at [76]), Part 14 took its present form as part of amendments enacted in 2000, which were "intended to be and operate as a wide ranging reform". Part 14 exhibits a legislative intention for compensation claims to be addressed in the first instance in administrative proceedings before the Registrar-General, and only by the Court after the administrative process has been implemented. The Court should be cautious not to allow this legislative policy to be thwarted.

93 On the other hand, these are drawn-out and complex proceedings which have taken an inordinately long time to come to final hearing. At last the relevant parties are all before the Court, and their counsel have had the opportunity to make full submissions on the claim for compensation and all other relevant matters. If the Court now declines leave, the plaintiffs will be required to pursue the administrative process if they wish to persist in their claim for compensation, and if that is not satisfactory they will have the opportunity to come to Court again. This will entail further delay and substantial additional cost. If compensation is truly payable out of the Fund, there can be no prejudice to the Registrar-General in making a determination to that effect now. Counsel for the Registrar-General was invited to make submissions about prejudice and said that his client may have taken some forensic decisions differently had he been aware that an application for leave would be made or that leave would be granted, but the submission was not specific and I am not persuaded that any such prejudice would be significant. While no encouragement should be given to claimants sidestepping the procedures ordained by Part 14, the present case has for whatever reason reached the point that I have described, and in these very unusual circumstances the granting of leave could hardly be seen as creating a precedent for avoidance of the administrative process

94 I am satisfied that s 132(2) gives the Court the discretion to grant leave in the present circumstances. Although the subsection prohibits the commencement of proceedings "except by leave …", in my view the statutory language does not exhibit an intention to prevent the Court from exercising its discretionary power, nunc pro tunc, after the proceedings have been commenced. Weighing up the discretionary considerations that are applicable, and taking particularly into account the overriding purpose of the Civil Procedure Act 2005 (NSW) to facilitate the just, quick and cheap resolution of the real issues in civil proceedings (s 56(1)), my view is that the correct course here is to grant leave.

Costs

95 The plaintiffs have partially succeeded in their claim for compensation out of the Torrens Assurance Fund, but they have pursued their claim without following the administrative procedures ordained by Part 14. That has deprived the Registrar-General of the advantage conferred upon him by s 132(5). According to that provision, if court proceedings are commenced following administrative proceedings that have been determined by an offer of compensation, and the compensation awarded by the Court is less than the compensation offered by the determination, then the claimant's costs of the court proceedings are not payable by the Registrar-General and the Registrar-General's costs are payable by the claimant, unless the Court orders otherwise. If the plaintiffs had proceeded administratively against the Registrar-General, he would have had the opportunity to make an offer of compensation and to be protected as to costs if the Court's determination were for a lesser amount. Although I have decided, in all the circumstances, to grant leave under s 132(2), the plaintiffs have not advanced any good reason for not pursuing the administrative process for compensation and in those circumstances, it would be unfair to require the Registrar-General to pay the plaintiffs' costs.

96 Counsel for the plaintiffs informed the Court that if his clients were unsuccessful against Mr Davidson and the Registrar-General, then but not otherwise he would seek costs against Hama Holdings and Mr Gutnick, or at least resist any claim for costs by them against the plaintiffs, on the ground of their delays (T 32). The plaintiffs have succeeded in their claim for compensation against the Registrar-General, and accordingly they make no claim for costs against Hama Holdings and Mr Gutnick. If they had made such a claim, I would not have upheld it. I agree with the submissions made by counsel for those parties (T 34) that the mere non-attendance of his clients at directions hearings was not a basis for a costs order against them. Although they were uncooperative and delayed their response to the request for consent to the correction of the Register, they had no obligation to consent or to respond to an informal request for consent, and when faced with a notice of motion they acted. In circumstances where there was no substantive claim against them my view is that it would be inappropriate to order them to pay the plaintiffs' costs are any part of those costs.

97 Counsel for the plaintiffs made no claim for costs against Mr La Greca or St George Bank (T 33). There was obviously no basis for any such order.

98 As to the defendants' costs, counsel for Hama Holdings and Mr Gutnick told the court his clients sought no costs against anyone (T 34).

99 St George Bank sought an order for costs against Mr Davidson on the basis that the Request should never have been filed, but that case has not been made out on the facts. The Bank also sought costs against the Registrar-General on the basis that the Amended Strata Plan should not have been registered. But the Bank made no substantive claim for relief against the Registrar-General in the proceedings, and there is no basis for suggesting that the Bank should recover costs in the absence of establishing some foundation for a substantive claim.

100 I accept the submission by counsel for the Bank that the fact that the orders for correction of the Register were made by consent rather than in a contested hearing does not preclude the Court from determining who is responsible for the purpose of ordering costs (Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622; Fordyce v Fordham (2006) 67 NSW LR 497; Austress Freyssinet Pty Ltd v Joseph [2007] NSWSC 1513). But here there is no substantive claim for relief on behalf of the Bank on the basis of which the Court could make any such determination.

101 In my opinion Mr La Greca is in no better position than the Bank on the question of costs. He has had the benefit of the corrections to the Register that were procured in the proceedings and in my opinion, the proper outcome is that he should bear his own costs.

102 The plaintiffs have been unsuccessful in their claims for damages and compensation against Mr Davidson. I see no reason why costs should not follow that event. Nor, in view of my findings, is there any basis for giving the plaintiffs the benefit of a Bullock order for recoupment of those costs from any defendant (Bullock v London General Omnibus Co [1970] 1 KB 264; see Printy v Provident Capital Ltd [2007] NSWSC 287).

Conclusions

103 The plaintiffs' claims for damages and compensation against Mr Davidson should be dismissed with costs.

104 Leave should be granted to the plaintiffs under s 132(2) of the Real Property Act, nunc pro tunc, to commence the present proceedings against the Registrar-General for the payment of compensation out of the Torrens Assurance Fund. The plaintiffs' claims against the Torrens Assurance Fund for compensation should succeed to the extent that I have indicated, but not otherwise, that is to say:

· compensation for lost interest at the rate of 12% for the period from 17 July 2006 to 31 January 2007;

· compensation for that part of the plaintiffs' costs of the proceedings that relate to the correction of the Register eventually achieved pursuant to the orders of the Court on 3 November 2006, excluding costs incurred prior to 17 July 2006 (other than the costs of preparation of the Amended Statement of Claim) and excluding costs relating to parts of the proceedings (such as the claim for compensation) not related to correction of the Register.

105 Except with respect to Mr Davidson's costs, there will be no order for costs, with the intention that the plaintiffs and the other defendants are to bear their own costs of the proceedings.

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Citations

Kirkland v Quinross Pty Ltd [2008] NSWSC 286

Most Recent Citation

Solak v Registrar of Titles [2011] VSCA 279

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Jea Holdings (Aust) Pty Ltd v Registrar-General of New South Wales [2024] NSWSC 85

Ausbao (286 Sussex St) Pty Ltd v The Registrar-General of New South Wales [2021] NSWSC 1651

Lincu v Registrar-General [2019] NSWSC 568

Cases Cited

23

Statutory Material Cited

2

San Sebastian Pty Ltd v The Minister [1986] HCA 68

Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16

San Sebastian Pty Ltd v The Minister [1986] HCA 68

CITATION:	Kirkland v Quinross Pty Limited [2008] NSWSC 286
HEARING DATE(S):	28 March 2008
JUDGMENT DATE :	2 April 2008
JURISDICTION:	Equity Division
JUDGMENT OF:	Austin J
DECISION:	See under heading "Conclusions".
CATCHWORDS:	NEGLIGENCE - economic loss - whether solicitor requesting Registrar-General to correct lot numbers on strata plan owed duty of care to plaintiffs who later became mortgagees of a strata lot - TORRENS SYSTEM - Registrar-General's power to correct register by correcting references to lot numbers on a plan (s 12(1)(d1)) - whether plaintiffs entitled to claim compensation from solicitor under s 120 - whether plaintiffs entitled to recover compensation from Torrens Assurance Fund under s 129 - whether Court should grant leave nunc pro tunc under s 132(2) for proceedings to be commenced without prior administrative proceedings
LEGISLATION CITED:	Real Property Act 1900 (NSW) Civil Procedure Act 2005 (NSW)
CATEGORY:	Principal judgment
CASES CITED:	Austress Freyssinet Pty Ltd v Joseph [2007] NSWSC 1513 Bebonis v Angelos (2003) 56 NSWLR 127 Bryan v Maloney (1995) 182 CLR 609 Bullock v London General Omnibus Co [1970] 1 KB 264; Challenger Managed Investments Ltd v Direct Money Corporation Pty Ltd (2003) 59 NSWLR 452; [2003] NSWSC 1072 Chandra v Perpetual Trustees Victoria Ltd [2008] NSWSC 178 Connell v Odlum [1993] 2 NZLR 257 Flounders v Millar [2007] NSWCA 232 FNCB-Waltons Finance Ltd v Crest Realty Pty Ltd (1987) 10 NSWLR 621 Fordyce v Fordham (2006) 67 NSW LR 497; Gran Gelato Ltd v Richcliff (Group) Ltd [1992] Ch 560 Hill v Van Erp (1997) 188 CLR 159 March v E&MH Stramare Pty Ltd (1991) 171 CLR 506 Pirie v Registrar-General (1962) 109 CLR 619 Printy v Provident Capital Ltd [2007] NSWSC 287 Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622; Reiffel v ACN 075 839 266 Ltd (2003) 132 FCR 437; 45 ACSR 67; [2003] FCA 194 at [69]\ Travel Compensation Fund v Tambree (2005) 224 CLR 627 Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515
PARTIES:	John Birch Kirkland (P1) Jon Annette Kirkland (P2) St George Bank Limited (D15) Meyer Gutnick (D17) Hama Holdings Pty Limited (D18) Mark Ronald Frank Davidson (D22) Registrar General (D23) Michael David La Greca (D24)
FILE NUMBER(S):	SC 1710 of 2006
COUNSEL:	D Ronzani (P) J Harris (D15) A G Rogers with A Chee (D17 and D18) G Curtin (D22) G A Sirtes (D23) M Callanan (Sol) (D24)
SOLICITORS:	Boyd House & Partners (P1 & P2) St George Bank Limited (D15) R L Kremnizer & Co (D17 & D18) Ebsworth & Ebsworth (D22) A Booth (D23) Ellison Tillyard Callanan (D24)