IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY

CIV-2010-488-000247

BETWEEN	KELVIN NORMAN GEORGE ROUSE Plaintiff

AND	GRAND LTD First Defendant

AND	LISA SUZANNE ABBOTT Second Defendant

Hearing:	13 October 2010

Appearances: R C Mark for Plaintiff
P A Cowey for Defendants

Judgment:	2 November 2010 at 11:00 am

JUDGMENT OF ASSOCIATE JUDGE BELL

This judgment was delivered by me on 2 November 2010 at 11:00 am pursuant to Rule 11.5 of the High Court Rules. Registrar/Deputy Registrar

Date: ………………….

Solicitors/Counsel:
Richard Mark, PO Box 172, Kerikeri
Parry Field Lawyers, PO Box 1725, Christchurch

K N G ROUSE V GRAND LTD AND ANOR HC WHA CIV-2010-488-000247  2 November 2010

[1]       Grand Ltd owns a 157 hectare coastal farm at Tauranga Bay near Kaeo. Lisa Abbott is a director and shareholder of Grand Ltd.  She Lives in Christchurch. Grand Ltd had a farm management contract with The Tree People Ltd, a company run by the Davies-Colleys of Titoki near Whangarei.  The plaintiff, Kelvin Rouse, did farming and forestry work as sub-contractor to The Tree People Ltd on Grand Ltd’s farm from May 1996 to November 2008.  He and his wife lived in a house on the farm.  The land with the house on it had its own separate title. Until 2007, the plaintiff paid a rent of $50 a week to live in the house.  From the beginning of 2007, Grand Ltd did not charge any rent.

[2]       In this proceeding, the plaintiff seeks a declaration that Grand Ltd holds the farmhouse title on trust for him and seeks a further order for transfer of that title to him.  His claim is not based on contract, but on equitable estoppel.  He says that the second defendant, acting on behalf of the first defendant, made promises to him and he acted on those promises by continuing to work on the farm, doing work beyond what his contract required.  He says that the first promise, made in 2001, was that he would be looked after if he stayed on working at the farm.  He says that the second promise was made in February 2007.  His claim is that the second defendant offered the property with the farmhouse on it to him if he continued working on the farm, liaising with neighbours, real estate agents and potential buyers until the farm was sold.  He says that the first defendant has not kept the promises and he seeks orders to enforce them.

[3]       The defendants have applied for summary judgment against the plaintiff.

[4]       In a defendant’s application for summary judgment, the defendant has to satisfy the Court that none of the causes of action in the plaintiff’s statement of claim can succeed.  The defendant has the onus of proving on the balance of probabilities that the plaintiff cannot succeed.  On such applications, if there are material disputes of fact which cannot be resolved on affidavit, summary judgment must be refused. Summary judgment will not be appropriate where it is possible for the plaintiff to amend its claim so as to remedy defects.  Accordingly, summary judgment should be used only where the defendants have a clear answer to the plaintiff which cannot be contradicted.    It  is  not  enough  that  the  plaintiff’s  case  has  weaknesses.    The

assessment is not one to be made on a fine balance of the available evidence.  See

Westpac Banking Corporation v M M Kembla NZ Ltd [2001] 2 NZLR 298 [58]–[64].

[5]       The parties were in general agreement that the main ingredients of equitable estoppel to be established by the plaintiff are:

a)        A belief or expectation created or encouraged through some action, representation or omission to act by the party against whom the estoppel is alleged;

b)        The belief or expectation has been reasonably relied on by the party alleging the estoppel;

c)        Detriment will be suffered if the belief or expectation is departed from; and

d)        It would be unconscionable for the party against whom the estoppel is alleged to depart from the belief or expectation.

[6]       This dictum from the Court of Appeal in Krukziener v Hanover Finance

(2008) 19 PRNZ 162 at [38] is helpful:

Following the decisions of the High Court of Australia in Waltons Stores (Inter State) Ltd v Maher (1988) 164 CLR 287 and The Commonwealth of Australia v Verwayen (1990) 170 CLR 394, promissory estoppel is no longer confined to promises affecting pre-existing rights.  However, the departure from a voluntary promise is not unconscionable in itself, even if a detriment results.  Rather, equity responds to the defendant creating or encouraging an assumption in the plaintiff, and its knowledge that the plaintiff relied on the assumption to its detriment.  The plaintiff must have been led to believe that the promise would affect or result in legal relations;  thus a promise made in negotiations that are subject to contract will not lead to an estoppel:  Waltons Stores at 406 and 422.   Lastly, equity does not intervene to satisfy the promise, but to avoid the detriment. These requirements and the current authorities, as the High Court recognised, are seen as necessary to preserve the law of contract as the principal mechanism for the enforcement of promise.

[7]       Successful defendants’ applications for summary judgment or strike out of proceedings based on equitable estoppel are rare.  That is because cases on equitable estoppel turn on particular evidence.  Contested questions of fact cannot normally be

resolved in a summary judgment application.  Further, equitable estoppel cases turn on their context.  For example, statements might be held to give rise to a belief or expectation in a domestic relationship but might not in a commercial relationship. Accordingly, the defendants’ application must be approached with care.

The first promise

[8]       The statement of claim says:

5.  In 2001 the first defendant listed the farm for sale and the plaintiff gave notice of termination of contract.   The second defendant, on behalf of the first defendant, promised the plaintiff that he would be looked after if he stayed on until the farm was sold and liaised with the real estate agents and buyers (first promise).

6.  The plaintiff in reliance upon the first promise withdrew his notice, and agreed to remain working on the farm, and liaising with neighbours, real estate agents and potential buyers.

[9]       In his affidavit in opposition at paragraph 2, the plaintiff says:

The first promise, made in 2001 after the tender failed, was to “look after” me, and my family, if I stayed on until the farm was sold.  I agreed to stay on.  At that stage Lisa and Peter Davies-Colleys indicated that I would be paid a bonus for staying on and helping with the sale of the farm.  It was the second promise that offered me the farmhouse.

[10]     The second defendant denies saying this, but for this summary judgment application, the denial cannot prevail over the plaintiff’s evidence.

[11]     The first promise does not give any basis for a claim to the farmhouse.  The words  may  be  no  more  than  comforting  assurances.    At  their  highest,  on  the plaintiff’s evidence, they are an assurance of payment of a bonus for staying on. But they do not amount to an offer to transfer the farmhouse.   If anything, the encouragement to the plaintiff to stay until the sale of the farm suggests that he would not have any part of the farm himself. The first promise does not assist the plaintiff’s claim.

The second promise

[12]     The plaintiff’s statement of claim says:

7.   In February 2007, the plaintiff complained to the second defendant in writing about his treatment by the first defendant.  In response, the second defendant,  on  behalf  of  the  first  defendant,  offered  the  plaintiff  the farmhouse in which the plaintiff and his family were residing if he would remain working on the farm and liaising with, neighbours, real estate agents and potential purchasers until the farm was sold (second promise)

8.  The plaintiff, in reliance upon the second promise accepted the offer and remained  working  on  the  farm and  liaising  with  neighbours,  real  estate agents and potential buyers.

[13]     In particulars, the plaintiff identified the telephone conversation as having taken place in February 2007 between the second defendant and the plaintiff’s wife, said to be confirmed about a month later in a telephone conversation between the plaintiff and second defendant.

[14]     In his affidavit of 1 October 2010, the plaintiff says:

Although the statement of claim and the further particulars I have supplied refer to the second promise being made in February 2007, it was actually made in January 2007 before the sale to Kim Spencer.   But there were serious problems from Christmas 2006 through early January that resulted in our letter to Lisa dated 5 January 2007 ... and the reply received from The Tree People dated 16 January 2007 ... .  The second promise was made after these letters.

[15]     The plaintiff’s wife says in her affidavit:

2.  The original offer of the house was made by Lisa to me on the phone at about the time of the Kim Spencer conditional sale.  I think the offer was made in an attempt to smooth over what had happened between The Tree People and Kelvin, which was referred to in the letter from The Tree People dated 16 January 2007 ...

3.  Kelvin had had enough of working on the property and dealing with all of the problems which were caused by the farm being for sale, stock getting off the farm and the lack of any management input from Peter Davies-Colleys. We had decided that either Peter went or we did.  The job wasn’t worth the stress.   The solutions offered by Lisa and The Tree People were not acceptable to us.  Lisa then offered us the house if we would stay on.  She told me she would have to speak to her lawyer about keeping the house out of the next agreement.

[16]     There is undisputed evidence that the plaintiff and his wife had written a lengthy letter on 5 January 2007 to the second defendant describing a lot of problems they had with the sub-contract.  Amongst other things, the letter suggesed that the plaintiff should contract directly with the first defendant rather than with The Tree People Ltd.  The evidence also shows a letter sent by The Tree People Ltd to the plaintiff and his wife dated 16 January 2007, addressing some of the issues raised by the plaintiff and his wife.

[17]     The  plaintiff’s  pleading  and  evidence  are  not  precise  when  the  second defendant is said to have made the second promise. While that is a weakness in the plaintiff’s case, it is not a matter that makes the plaintiff’s case susceptible to a summary judgment.

[18]     The defendants focus on the uncertainty of what the defendants are said to have offered.  They point to the ambiguity that the offer of the house could mean either an offer that the plaintiff and his family could occupy the house, as opposed to an offer to transfer title to the property to the plaintiff.  The plaintiff submitted that any representation had to be clear and unequivocal, relying on Landsdale Developments Ltd v Bone CIV-2008-404-5238 HC Auckland 28 May 2009, Lim v Ward McCullough Solicitors Nominees Ltd (1999) 8 NZCLC 261, 922 (CA)).  Low v Bouverie [1891] 3 Ch 92 was cited:

The language upon which the estoppel is founded must be precise and unambiguous.   That does not necessarily mean that the language must be such that it cannot possibly be open to different constructions but that it must be such as will be reasonably understood in a particular sense by the person to whom it is addressed.

[19]     Clearly,  context  is  important.    For  this  application,  I cannot  dismiss  the plaintiff’s claim that the defendants gave some assurance by way of an offer of the farmhouse.  There is ambiguity in what is meant by that offer, but that ambiguity is not one that means that the plaintiff’s claim must fail because the offer is open to more than one meaning.  The resolution of such uncertainties is a trial matter, not a matter for determination on a summary judgment application.   Once evidence is given, clear findings about the meaning of the offer may be possible.  It is not correct to dismiss the plaintiff’s claim now because of possible ambiguity.

[20]     From January 2007, the first defendant did not charge the plaintiff any rent for  living  in  the  farmhouse.    That  is  evidence  that  supports  the  defendants’ contention that all that was offered was rent-free accommodation.   The plaintiff counters that by stating that the rent-free accommodation was consistent with the offer to transfer the house.

[21]     The defendants make the point that, if there had been any arrangement for transfer of the house, there would also have been arrangements for the plaintiff to pay the rates and insurance on the property.  That was never done.

[22]     Later, the plaintiff and his family left the farmhouse when requested.   The defendants say that this shows the plaintiff’s recognition that he did not have a claim to own the farmhouse.

[23]     These matters point to the weakness in the plaintiff’s claim, but, they are not enough to allow summary judgment to be given against the plaintiff.

[24]     The defendants referred to an agreement that the first defendant had entered into to sell the property to Attridge Ltd, a company associated with Mr Kim Spencer. The agreement was made in January 2007.  Mr Spencer had made himself notorious for speculating in coastal properties in Northland.  The plaintiff and his wife claim that they saw through Mr Spencer.   The point made by the defendants is that the plaintiff knew that the first defendant had agreed to sell the farm, including the title to the farmhouse which is said to have been the subject of the second promise.  The defendants argue that, as the plaintiff knew that the first defendant had entered into an agreement to sell all the farm, including the land with the farmhouse, the plaintiff therefore knew that the first defendant was not going to carry out its promise to make over the farmhouse and its land to the plaintiff.  They say that the alleged estoppel could not operate because the plaintiff knew that the first defendant had no intention of making the property over to him and he could not therefore reasonably rely on the second promise.

[25]     There is considerable weight in this point and it significantly weakens the plaintiff’s claim.   But I did not accept that it is a point that can be determined conclusively against the plaintiff without a full hearing with the evidence.

[26]     The defendants also point to the fact that the plaintiff had been properly paid for his work as sub-contractor and refer to uncertainties as to any other work that the plaintiff is said to have done beyond his work as a sub-contractor for The Tree People Ltd.  They point out that the plaintiff had originally lodged a claim with the Employment Relations Authority, but that was later withdrawn and the present proceeding was started.

[27]     Again, these matters also point to the weakness in the plaintiff’s claim.  But they do not go further.  So far, the defendants’ arguments show that the plaintiff has, at best, a weak claim, but they do not show that summary judgment can be given against the plaintiff.  I cannot say that the plaintiff’s claim is doomed to fail.

[28]     The plaintiff has sought transfer of the farmhouse lot.   That amounts to seeking an order for specific performance of the alleged second promise.   That aspect of the plaintiff’s claim is misconceived.  Enforcing performance of promises is part of the law of contract, not part of the law of equitable estoppel.   Instead, equitable estoppel addresses detriment suffered as a result of reliance on representations and assurances.

[29]     In this case, the plaintiff is not entitled to have the farmhouse lot transferred to him, but is only entitled to be compensated for any detriment he has suffered from relying on any representation he can prove against the first defendant.  At most, his claim  would  be  for  compensation  for  added  efforts  he  went  to,  outside  his contractual obligations to The Tree People Ltd, which were not adequately remunerated by the free accommodation he had in the farmhouse.    The relief for such a claim is monetary, not the transfer of the farmhouse property.

[30]     Notwithstanding the weakness in his claim, it is still possible that the plaintiff may have a claim for monetary relief based on detriment.  While his claim appears weak, I cannot say that it is impossible.  Such a claim will require amendment but,

because an amended claim may be open to him, summary judgment ought not to be entered against him in favour of the first defendant.

[31]     The matter is otherwise with the claim against the second defendant.  All the information before the Court shows that she acted only as a director of the first defendant.  There is no evidence that she incurred any personal liability.  There is no pleading against her.  There is nothing before the Court to suggest that it would be open to the plaintiff to amend his pleading to give some claim against her.

[32]     Accordingly, I make the following orders:

a)        The application for summary judgment by the first defendant against the plaintiff is dismissed.

b)        The plaintiff’s present pleading against the first defendant is struck out, but the plaintiff is entitled to file an amended pleading against the first defendant seeking monetary relief in respect of any detriment allegedly suffered by the plaintiff.

c)        There  is  summary judgment  for  the  second  defendant  against  the plaintiff.

d)        There is an order for costs on a 2B basis in favour of the second defendant against the plaintiff.

e)	Costs between the plaintiff and the first defendant are reserved.

f)         The Registrar is directed to arrange a telephone case management conference for this matter in the week beginning 15 November 2010. For that conference, the second defendant is to file a memorandum setting out costs sought.   The conference will also consider what further directions should be given for the proceeding between the plaintiff  and  the  first defendant.   The  parties  may wish to consider

whether the proceeding should be transferred to the District Court

and, if so, which District Court.

R M Bell
Associate Judge