Poche v Ellingworth

EX TEMPORE JUDGMENT (revised)

1. I am dealing with two motions in this matter in the possession list. If I may say so, the matter has had a somewhat longer history than usual in this list, and for that reason I propose to give an ex tempore decision now rather than reserve my judgment.
2. I have been greatly assisted by the submissions of learned counsel, Mr R Turnbull for the plaintiff/cross-defendant and Mr P Boncardo for the defendant/cross-claimant, and the manner in which counsel have conducted the case gives me confidence that I can decide it now.
3. The motion is brought by the cross-claimant, whom I will refer to by his name of Mr Ellingworth, for leave to file and serve a further amended statement of cross-claim. That motion is opposed by the plaintiff/cross-defendant, whom I will also refer to by his name of Mr Poche. Mr Poche, by the second notice of motion, seeks orders that the residue of the amended statement of cross claim that had been filed on 3 August 2021 be struck out without granting leave to replead or, in the alternative, for summary dismissal of the cross-claim. Entitlement to that relief naturally turns upon the first question about whether leave should be granted to Mr Ellingworth to file and proceed on the basis of the further amended statement of cross claim. The "residue" I have referred to is that part of the cross claim left on foot following orders by Rothman J (see [13]-[14] below).

Factual background

1. It is necessary to say a little about the background to the case. In this regard, I have received the following affidavits: on behalf of Mr Ellingworth his affidavit of 1 June 2023 and a further affidavit of 12 July 2023; and on behalf of Mr Poche, the affidavit of his solicitor Mr Lyon of 19 June 2023. As this is an interlocutory judgment, I am not purporting to make any findings of fact. But for present purposes, the background is derived from those sources.
2. The property concerned is a rural property in hilly country at Burringbar NSW. According to the evidence, it was purchased by Mr Ellingworth in 1999, and he resided there, as his home, with his partner of some years.
3. He had had a serious accident in about 1978 which resulted in him undergoing a spinal fusion. Prior to that accident, he had been a professional musician and it was in the course of that profession that he met Mr Poche. They became not only professional colleagues but close friends.
4. After Mr Ellingworth acquired the property, and lived there, as his home, for a number of years, his health deteriorated in as much as the previous spinal fusion failed and he became, on his evidence, quite disabled. He also ran into financial difficulty in relation to the maintenance of the property and his obligations under the mortgage he had taken out for its acquisition and improvement.
5. It is in these circumstances that there was discussion between Mr Ellingworth and Mr Poche for the latter to acquire the property, and the real question in dispute relates to the terms upon which Mr Poche acquired the property, which I will return to in a moment. Suffice it to say that there was a contract for the sale of land in the usual standard form approved by the Law Society and the Real Estate Institute dated 29 October 2015, with a proposed date for completion of 10 November 2015. The stated purchase price was $400,000.
6. It is common ground between the parties that there was a collateral arrangement between them. I hesitate at this stage to use the expression "collateral contract". What is in dispute is the terms of that arrangement and whether it is in fact a legally binding contract. Both parties agree that the collateral arrangement between involved Mr Poche granting a tenancy to Mr Ellingworth for a specified period or fixed term. There may be some issue about precisely what the term was, but it seems to be accepted, and it is sufficient for my purposes to say, that there is no dispute that Mr Ellingworth and his partner were permitted to reside there as tenants rent-free for the first 2 years after completion of the sale in or about November 2015. It may also be the case that there is no real dispute that there was a further term of 3 years agreed during which Mr Ellingworth and his partner could reside there with rent payable in the sum of $200 per week.
7. These arrangements were not reduced to a formal tenancy agreement, whether under the Residential Tenancies Act 2010 (NSW) ("RTA") or otherwise. When the parties eventually fell into dispute about their arrangement, proceedings were taken in the NSW Civil and Administrative Tribunal ("NCAT") before General Member Stewart, who accepted that there was such a collateral arrangement following upon the sale of the land. As it happens, his decision was the terms of that arrangement, by force of s 8(1)(f) RTA, took the arrangement beyond the reach of that legislation and outside the jurisdiction of NCAT.
8. The purpose of the proceedings in NCAT brought by Mr Poche was to terminate the tenancy for non-payment of rent and to obtain a warrant for possession under that legislation. As NCAT had no jurisdiction, according to Member Stewart's decision, which was not challenged, Mr Poche commenced proceedings in this Court in April 2021 by way of statement of claim for possession.
9. Mr Ellingworth sought to defend the proceedings principally, I think I can say informally, by way of a cross-claim asserting rights arising out of what he said or asserted was a collateral contract. He received some advice from a barrister (not Mr Boncardo), and an amended form of cross claim was propounded. That is the document to which I referred that was filed in August 2021.

The decision of Rothman J

1. Mr Poche took proceedings for summary dismissal which were contested and were allocated for hearing by Rothman J, who gave his decision in relation to the matter on 3 May 2022. I should say that the relief sought at that time extended not only to summary judgment of Mr Poche's claim for possession but also to summary dismissal of Mr Ellingworth's cross-claim. His Honour granted summary judgment for possession, but he did not dismiss the whole of the cross claim. His reasons (Poche v Ellingworth [2022] NSWSC 700) indicate that although many of the categories of cross claim sought to be maintained by Mr Ellingworth were not maintainable, other aspects were and at paragraphs 95 to 97 of his judgment his Honour said: "Finally, I conclude that the plaintiff has made out a case for summary judgment on the statement of claim, but such a judgment would not deal with the real issue between the parties. I take into account the overriding purpose of the [Civil Procedure Act], which is to facilitate the just, quick and cheap resolution of the real issues between the parties. Ordinarily, a claim for possession of property in circumstances where there has been a transfer should be dealt with expeditiously, but the Cross-Claim raises significant issues of fact and law upon which summary judgment could not issue because such issues of fact and law are not manifestly unarguable or, even after extensive analysis, unarguable. Fundamentally, those issues depend upon what I assume is a factual contest as to the content of the alleged collateral contract. I assume it is a contest only because, thus far, the plaintiff has not defended the Cross-Claim, but, taking the plaintiff's case at its highest, I assume the existence of the collateral contract and/or its terms is a matter of dispute."
2. His Honour accordingly stayed the judgment for possession and, without pronouncing an express order striking out the amended cross-claim, granted leave to Mr Ellingworth to replead restricted to that specified in the extract above within 14 days of the date of the judgment. That order was not complied with until these proceedings were brought on these interlocutory motions and, in particular, the motion of 1 June 2023 brought by Mr Ellingworth.
3. For reasons which are not entirely clear, the matter became dormant until, as Mr Turnbull put it, the list judge, Davies J, suo moto, brought the parties back before the Court and extended the time for the bringing of Mr Ellingworth's motion to amend, in response to which Mr Poche brought the motion of 19 June 2023 to which I have referred.
4. I should say that both parties have, since the decision of Rothman J, changed legal representation and that might suggest something about the reasons for matter not proceeding in the meantime. In any event, it is unnecessary for me to delve further into that. Mr Poche does not take any point now in relation to the relief sought today about delay or the lack of an explanation for it.

Mr Ellingworth's motion

1. I will deal first, as it was argued, with Mr Poche's objections to the proposed pleading. I will observe, with respect, as Mr Turnbull conceded, whilst not accepting it is adequate, that it is a much better document and far more compliant with UCPR than the document that had been propounded back in August 2021.
2. In specific terms, the document seeks relief on two alternative legal categories. The first, as it would be contended by Mr Boncardo, is damages for breach of the collateral contract and, the alternative is, relief in equity based upon that category of equitable estoppel referred to as promissory estoppel.
3. While there is a very substantial factual dispute about the terms of the collateral contract, as I have already said, and from the material placed before me, there is likely to be a significant contest at any hearing that proceeds as to who should be believed. Those issues are not the primary objection, obviously, for my purposes today, and Mr Turnbull makes the proper concession that those matters are matters that can only be determined after a trial.
4. The argument mounted on behalf of Mr Poche is that neither of the categories pleaded are legally maintainable. In this regard, of course, I acknowledge that such an objection may be taken to an amendment to pleadings, and also may form a basis for the relief sought by Mr Poche in his motion. The relevant authorities in relation to summary judgment make quite clear that even complex legal arguments can sometimes be advanced in an application for summary judgment. As an example, I refer to Wickstead v Browne (1992) 30 NSWLR 1.
5. It is also apparent from the decision of Wickstead v Browne that separate challenges may be made to separate categories of relief claimed by a plaintiff. For instance, in Wickstead v Browne, although the application for summary dismissal of the whole of the claim was refused, the Court of Appeal summarily dismissed a claim against a trustee founded upon a common law duty of care recognised by the law of negligence. Their Honours pointing out that the equitable principles in Barnes v Addy (1874) 9 LR CH APP 44, and not the common law of negligence, applied.
6. So far as the pleading of the collateral contract aspect of the claim is concerned, I do not understand Mr Turnbull to make any particular complaint about its form. Although a number of different grounds were advanced in writing, in the end, if I may say, with respect, the point that was made was that the asserted collateral contract had to fail as a matter of law because it was necessarily inconsistent with the formal contract for the sale of land to which I have already referred. In this regard, counsel referred to the well-known principle that can be traced to Hoyts Pty Limited v Spencer (1919) 27 CLR 133 at 147-148 and subsequent cases. That principle is not in dispute.
7. I should also say that another related ground relied upon was that clause 10.1.5 of the standard form of contract for the sale of land operated like an "entire agreement clause", applying to deny the legal effect of any alleged collateral contract. But Mr Turnbull accepted the force of Mr Boncardo's argument that clause 10 as a whole, by its express terms, only applied to restrict the purchaser's, not the vendor's, rights. And Mr Ellingworth was the vendor.
8. I return now then to what Mr Ellingworth alleges is the collateral contract. Quite apart from the agreement as to the grant of a tenancy, which, as I have said, is not really disputed, so far as it goes, Mr Ellingworth also avers that as part of the collateral agreement between him and Mr Poche, for which the entry into the formal contract was the consideration, Mr Poche promised, in substance, to improve the property during the period of Mr Ellingworth's occupation under the tenancy and to sell the property after a period of 5 years in this improved state on the basis that the proceeds of the sale, it is common ground that means the profit generated by the sale, would be equally divided between the parties. Mr Poche strenuously denies that any such promise or representation was ever made by him at any time. His case is that the grant of fixed term tenancy was the only collateral benefit agreed.
9. As I say, that is not a matter for me today. The point that is made is that given that the contract for sale itself was for the transfer to Mr Poche of an unencumbered and unqualified title in fee simple, a collateral contract by which he agreed to sell the property and to split part of the proceeds, necessarily involved the retention by Mr Ellingworth of a proprietary interest in the land. That was put as a necessary legal conclusion. Accordingly, it could be seen that there was an inconsistency of the type that made a claim founded on the collateral contract if its terms were otherwise established not maintainable at law.
10. Mr Boncardo pointed to the remedy claimed; a claim for damages for breach of contract. It was not asserted that the collateral promise upon which Mr Ellingworth was suing constituted anything more than a right in personam which could be enforced by an action for breach of contract simpliciter for which damages was the appropriate remedy.
11. In my judgment, acknowledging the force of the competing arguments, accepting that categorising of the nature of Mr Ellingworth's interest is a matter of law, it does not seem to me to follow that the only possible categorisation of the arrangement, if it is proved at any trial, is the retention by Mr Ellingworth, or the granting by Mr Poche to him, of property rather than a chose in action to sue for damages. While I accept if the view of Mr Poche prevails at a hearing, there may be a number of difficulties in Mr Ellingworth succeeding including those that might follow from the rule in Hoyts v Spencer. There may also be matters of importance related to the requirements for the creation of an interest in land which are of course matters of substance. But I am not satisfied that that is the only outcome or that that legal outcome is so clear as to be a barrier to Mr Ellingworth bringing his claim on the collateral contract and I propose to grant leave to permit that amendment to be made.

Equitable estoppel

1. I turn then to the alternative which is, the pleading of a claim in promissory estoppel. Quite properly, Mr Turnbull submitted that in the circumstances of this case given the long delay in bringing forward the proposed amendment permitted by Rothman J, Mr Ellingworth should be restricted to that category of equitable estoppel which is the only category articulated in the proposed pleading, and that there should be no investigation of whether a proprietary estoppel or otherwise might be available on the same facts. I did not understand Mr Boncardo to cavil with that submission. Although I referred to Macfarlan JA's judgment in O'Brien v Bank of Western Australia Ltd [2013] NSWCA 71; (2016) 16 BPR 31,705 that the relevant question for summary dismissal is whether there is a pleadable case, I accept that in the particular circumstances of this case I should not look beyond what is proposed in the actual pleading.
2. Mr Turnbull complained about the form of the pleading in as much as the detrimental reliance upon the promise that Mr Ellingworth avers is not specified or particularised. I think that however would be something which could be readily overcome, and Mr Boncardo I think identified that detriment to be entering into the contract for the sale of the land. Again, were I otherwise satisfied that the claim was legally maintainable, I would permit that additional amendment to be made. How that pans out as a disputed question of fact, of course, would be a matter for a trial.
3. Mr Turnbull's submission was commendably, may I say, with respect, to the point. He relied upon the dictum of Handley JA (with whom Giles JA and Sackville AJA agreed), in Saleh v Romanous (2010) 79 NSWLR 453; [2010] NSWCA 274 at 462 [73], where his Honour said: "In my judgment the Judge correctly held that the purchasers had established a promissory estoppel which entitled them to restrain the vendors from enforcing the contract of sale. Such an estoppel is not the equitable equivalent of a contract and cannot give the purchasers positive rights to rescind and recover their deposit that they would have had if the pre-contractual promise had contractual force. A pre-contractual promissory estoppel which conferred positive rights of that nature would be contrary to Hoyt's case." (My emphasis) Presumably because contrary to Hoyts v Spencer, it would be a collateral contract inconsistent with the terms of the formal written agreement.
4. That dictum was essentially referred to with approval in DHJPM Pty Limited v Blackthorn Resources Limited (2011) NSWLR 728; [2011] NSWCA 348) by Meagher JA at [47], and Handley JA at [93]. Macfarlan JA agreed in all respects with Meagher JA.
5. The matter arose again for consideration in the Court of Appeal in Ashton v Pratt (2015) 88 NSWLR 281; [2015] NSWCA 12, where Bathurst CJ (with the agreement of McColl JA, Meagher JA not deciding) at 306 [138] said: "This analysis of the authorities demonstrates two significant obstacles to Ms Ashton's claim based on equitable estoppel. First, there is a significant body of authority in this court, as well as at least one decision of the House of Lords, which has maintained the distinction between the scope of promissory and proprietary estoppel. These cases indicate that the former only acts as a restraint on the enforcement of legal rights whilst the latter can be a source of obligation. However, it must be acknowledged that there is significant dicta contrary to this limitation on promissory estoppel." (My emphasis)
6. Naturally, I am bound, as would any divisional judge of the Court, by that body of authority in the Court of Appeal, even if it fell into the category of considered dicta rather than ratio decidendi.
7. I should say, Mr Boncardo in argument had relied specifically upon Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387. That authority is part part of the significant body of dicta analysed by Bathurst CJ in Ashton v Pratt. Bathurst CJ sourced the contrary available view not only to to the influential judgment of Brennan J in Waltons v Maher, which is considered a seminal decision in the development of the law of equitable estoppel in Australia, in particular at p 425; but also to, the joint judgment of Mason CJ and Wilson J in the same case at p 406; and the judgment of Deane J at 450-452. In that difficult case of The Commonwealth of Australia v Verwayen (1990) 170 CLR 394, each of Mason CJ, Brennan J and Deane J adhered to their previous view, according to Bathurst CJ's analysis. His Honour also referred to Giumelli v Giumelli (1999) 196 CLR 100; [1999] HCA 10. And I should not overlook the decision of McPherson J in Riches v Hogben [1985] 2 Qld R 292 at 300-301. I repeat that I am bound by considered dicta by the Court of Appeal, but that represents an impressive body of contrary dicta, with respect.
8. Although this argument is principally advanced as a reason not to allow the amendment, it is also relevant to the claim for summary dismissal to which I will return. But of the many cases that set out the principles applicable in respect of summary judgment or dismissal, it is convenient to refer to Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41 at [57], where the plurality said: "It is, of course, well accepted that a court whose jurisdiction is regularly invoked in respect of a local defendant (most often by service of process on that defendant within the geographic limitations of the court's jurisdiction) should not decide the issues raised in those proceedings in a summary way except in the clearest of cases. Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way."
9. Notwithstanding that the trial judge who may hear this case would be bound to apply the considered dicta of the Court of Appeal to which Mr Turnbull has taken me, one cannot assume that the case will be finalised once and for all at trial given the availability of appeals to the Court of Appeal and by special leave to the High Court. I am not suggesting by any stretch of the imagination that that would occur in this case, but in terms of deciding whether something is pleadable or not pleadable one has to bear those considerations in mind. Whereas I think it unlikely that the promissory estoppel case could succeed, if the collateral contract case failed on legal grounds rather than factual grounds, a test of even "extremely unlikely to succeed" is not the test to be applied in terms of refusing leave to amend or indeed, for that matter, summary dismissal, and subject to that amendment I referred to, to clarify detriment, I will allow the matter to proceed.

Mr Poche's application

1. As I have said, the factual matrix for each of Mr Ellingworth's alternative claims is the same. If the version Mr Ellingworth gives is not accepted, then both claims must fail. But that is not a decision for me today. I will make orders in due course granting leave to file and proceed on the further amended statement of cross-claim.
2. The reasons I already given really deal with the application for summary judgment. In fairness, I should say that that relief was sought sequentially. In as much as had Mr Poche successfully resisted the application for leave to amend, then what was sought in terms was the striking out of the residue of the amended statement of cross claim of 3 August 2021 or summary dismissal of it. The arguments that would support summary dismissal of the cross claim as reformulated would in my judgment anyway fail on the same grounds I have already expressed.
3. I should say that I had some discussion with counsel about the consideration that this was a second run over the target so far as summary judgment and dismissal was concerned. Had I been satisfied that the claims were not maintainable for legal reasons, notwithstanding perhaps the arguable irregularity of the second application, I would have acceded to it in any event. When I say irregular, of course there is no finality in an interlocutory judgment which the decision on an application for summary judgment is. Even so, under section 56 to 58 Civil Procedure Act 2005 (NSW), parties, as well as the Court, are bound to proceed in accordance with the overriding purpose, and a second application may have run afoul of that.

Costs

1. I turn to the final question which is, whether the costs the subject of costs orders made by Rothman J, and Davies J should be varied to "otherwise order" in accordance with rule 42.7 Uniform Civil Procedure Rules 2005 (NSW). That is to say, whether I should grant leave for the plaintiff to assess and enforce those costs orders now.
2. I content myself in saying there is much to be said for the submission on behalf of Mr Poche. However, in my judgment, given the evidence before me, permitting that order, which is not the usual order, would have the effect of stultifying what seems to be a maintainable claim, and for that reason I would not make that special order, and I will permit the orders to stand as they have been pronounced.

Orders

1. My orders are: 1. grant leave to the defendant/cross-claimant to file and serve the further amended statement of cross-claim in accordance with these reasons by 3 August 2023; 2. the plaintiff/cross-defendant's notice of motion of 19 June 2023 is dismissed; 3. the plaintiff/cross-defendant to pay the defendant/cross-claimant's costs of the motions of 1 June 2023 and 19 June 2023 on the ordinary basis, 4. (and case management orders made).

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