Upcoming Mallesons seminarsThe NSW Court of Appeal decision in Scarcella v Lettice1 , delivered 1 November 2000, is highly significant in confirming the general rule that the limitation period in a negligence claim will commence at the time the claimant first suffers actual damage or loss. The respondents were statute barred from bringing an action against their solicitor alleging that his negligence caused them to purchase a property in the mistaken belief that it had a right-of-way over adjoining land. It was held that the limitation period began to run at the time the property was purchased, rather than the time at which the error was discovered.
Facts
In 1982 the appellant acted as a solicitor for the respondents on their purchase of a block of land. Vehicle access to the property was gained via a roadway along the rear of the property, passing through adjoining lots 55 and 61. Although a legal right-of-way existed over lot 55, no such right-of-way existed over lot 61. Twelve years later in 1994 the respondents applied to subdivide the property and became aware that the title to the property did not confer a right-of- way over lot 61.
In 1994 the respondents sued the appellant, alleging that he had negligently advised them at the time of the purchase that there was a right-of-way over both properties. The solicitor had destroyed his file in 1992. At the first instance the respondents were successful. The trial judge found that the respondents' loss was sustained on discovering there was no right of way in 1994, and as such the claim was brought within the six year limitation period. The appellant appealed to the NSW Court of Appeal.
NSW Court of Appeal
The principal issue before the Court of Appeal was whether the claim against the appellant was statute barred pursuant to s.14(1) Limitation Act 1969 (NSW). This essentially turned on whether the respondents had suffered actual loss in 1982 at the time they purchased the property, or whether they did not suffer actual loss until 1994, when they discovered that they did not enjoy a legal right-of-way. A cause of action in negligence is only complete when a plaintiff first suffers actual loss or damage.
In a unanimous judgment, the Court of Appeal determined that the respondents first suffered actual damage in 1982 when they purchased the property, and so the claim was statute barred. The court stated that, as a general principle, the limitation period will begin to run at the time a plaintiff suffers actual loss or damage, regardless of whether that loss has been discovered, or is capable of being discovered. There are exceptions, such as when the loss is only contingent or prospective (as in Wardley v State of Western Australia 2 ), and where there are latent defects in buildings or latent defects in title but his case did not fall into those categories. Christopoulos v Angelos 3 and Registrar-General v Cleaver 4 were cases where plaintiffs sued for losses arising from defects in their title to property. In both cases the defect could not have been discovered by normal conveyancing procedures. Thus the claimants in those cases could have resold their properties without ever becoming aware of the defect, and consequentially, never suffering a loss in value. In those cases it was held that the limitation period only began to run when the defect was discovered.
Handley JA distinguished the facts of the present case, as the absence of a right-of-way over lot 61 would inevitably have been discovered at any time if the respondents had attempted to sell the property, therefore there was no ‘latent defect’ in the title.
Giles JA agreed that the respondents had suffered actual loss in 1982, and as such the limitation period had expired. Powell JA also agreed that the action was statute barred, but expressed the view that Christopoulos v Angelos and Registrar-General v Cleaver were wrongly decided.
Conclusion
Limitations legislation attempts to strike a balance between the rights of claimants to bring actions against those who had wronged them, and the right of potential defendants to be sued within a reasonable time before memories fade or documents which could assist their defence are lost or destroyed. This decision is important, because it reaffirms the rule that loss may be suffered and therefore time begins to run, even if the circumstances are that a claimant is unaware of it.
Note: the respondents have filed an application for special leave to appeal to the High Court.