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Pollard v Pollard [2016] NZCA 186 (9 May 2016)

Last Updated: 23 May 2016

IN THE COURT OF APPEAL OF NEW ZEALAND
BETWEEN
 Appellants
AND
 Respondents
Hearing:
11 April 2016
Court:
Kós, Clifford and Brewer JJ
Counsel:
G H J Brant and C W Grenfell for Appellants V A Whitfield and M J Meier for Respondents
Judgment:


JUDGMENT OF THE COURT

  1. The application to adduce further evidence is declined.

  1. The appeal is dismissed.

  1. The appellant must pay the respondent costs for a standard appeal on a band A basis and usual disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by Kós J)

[1] The principal question in this appeal is whether summary judgment for $373,825 entered in the High Court should be reduced by $160,000. The appellants say there is a reasonably arguable case that the respondents are estopped from resisting such a deduction because of an unrecorded representation made in or about February 2006. In the High Court Venning J disagreed.[1]

Background

[2] The Pollard family have owned and farmed land near Te Awamutu for several generations. In 2005, Doug Pollard and his wife Lesley discussed the future of the farm with his oldest son Mark and his wife Kazia. Mark and Kazia agreed to purchase the family farm and other assets from Doug and Lesley.[2]
[3] The agreement for sale and purchase of 15 August 2005 was between associated trusts. The trustees of those trusts are the present parties to this appeal.
[4] Doug and Lesley’s Pollard Family Trust (Pollard Trust) sold the farm to Mark and Kazia’s Present and Future Trust (P&F Trust). The land sold comprised two blocks:
[5] The sale agreement provided for two sections to be subdivided from the “small part” — and which would remain with the Pollard Trust and not therefore be sold to the P&F Trust:

People of a certain age would recognise these sections as about one and a half acres each.

[6] This intended subdivision would remove approximately 1.2627 ha from the 5.0045 ha “small part” being bought by the P&F Trust.[3] The agreement provided that the subdivision be “generally in the same form” as plans annexed to the agreement, and was subject to variations required by the Waipa District Council, Department of Survey and Land Information, and the District Land Registrar. The subdivision was not completed by the time of settlement (which occurred on 8 September 2005).
[7] The purchase price was recorded as $3,710,000, plus a further sum for stock.[4] That obligation was to be met thus:
[8] The subdivision referred to at [6] was only completed in February 2006. For reasons not entirely clear on the evidence, the first section subdivided was larger than 6,116 m2, and the second was smaller than 6,511 m2. On the evidence before Venning J the net effect was to further reduce the “small part” by 1,840 m2, or about half an acre.[5] In other words, 1.4467 ha was subdivided off instead of 1.2627 ha. It is unclear whether this resulted from party choice, regulatory imposition or both.
[9] No one however says the subdivision should not have proceeded in this manner. No one is seeking rectification or reversal of the subdivision. It is clear on the evidence that Mark, Kazia and the P&F Trust were (or must have been) aware at the time that the areas subdivided had changed, and that the P&F Trust was now receiving less land than originally provided for. For instance, on 20 February 2006 the solicitor acting for all parties on the sale and subdivision, Mr Laubscher, wrote to Doug, Lesley, Mark, Kazia and Marika following a meeting with them the previous week. The letter summarises the discussions on that occasion, and begins:

The land originally to be retained by Doug and Lesley, as part of the subdivision of the land purchased by Mark and Kaz, is still to be retained by Doug and Lesley, but the subdivisional plans have been amended. The net result of this change is that the area retained by Doug and Lesley is slightly bigger than was originally agreed upon.

As between Mark and Kaz and Doug and Lesley, we will consider the legal aspects of this amendment, and in particular whether there should be any amendment to the acknowledgement of debt signed by Mark and Kaz as being the amount owing to Doug and Lesley. We will correspond with the parties individually about the valuation of the land and whether what has occurred indeed changes the value of the land that has been transferred.

Mark’s evidence is that he and Doug had a discussion about it in February 2006 and that a further deduction from the debt due was agreed. Doug denies such a conversation occurred. We will return to this.

[10] It is also clear that Mark, Kazia and the P&F Trust were (or must have been) aware at the time that the Pollard Trust’s (i.e. Doug and Lesley’s) land now occupied the whole of the road frontage formerly enjoyed by the “small part” land. This meant that the balance land, transferred to the P&F Trust, was now landlocked. That was not necessarily a problem, however. It adjoined the “big part” land purchased by the P&F Trust. The detailed implications were not however explored in the evidence before the Court.
[11] In 2008, the P&F Trust purchased a further 48 ha block of land (known as the “run-off block”) from the Pollard Trust for $750,000. Of that, $650,000 was financed by a bank loan and $100,000 was vendor’s finance from the Pollard Trust, again interest-free but repayable upon demand.
[12] Two misfortunes were then visited on this family. The first is that Lesley died in 2014. The second is that Doug and Mark have fallen out. The Pollard Trust demanded repayment of the amounts owing. It acknowledged receipt of $104,000 from the P&F Trust between 2008 and 2013. Its trustees applied for summary judgment for the balance due. They conceded that payments of $22,800 and $49,375 could be deducted for summary judgment purposes.[6] Accordingly the sum for which summary judgment was sought was some $2,163,825.

High Court decision

[13] Venning J began by referring to the principles that apply to applications for summary judgment summarised by this Court in Krukziener v Hanover Finance Ltd:[7]

The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried. The court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated. The court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable. In the end the court's assessment of the evidence is a matter of judgment. The court may take a robust and realistic approach where the facts warrant it.

[14] The Judge found there was an arguable defence of estoppel raised with regard to most of the sum sought. There was evidence that Doug and Lesley (in the presence of the third trustee) had made representations that the P&F Trust would only be required to repay $500,000 of the remaining indebtedness. It was arguable on the evidence that the P&F Trust was reasonable in relying on those representations, had done so to its detriment, and that it would be unconscionable for the Pollard Trust to now seek payment of the full debt. It was also arguable Doug and Lesley, two of the three trustees of the Pollard Trust, could in the circumstances bind the third trustee. Whether or not any of this was ultimately sustainable could only be resolved at a witness trial.
[15] Therefore, the amount available for summary judgment was $500,000 for the purchase of the farm in August 2005, plus $100,000 for the purchase of the run-off block in 2008. The Pollard Trust conceded that the figure of $600,000 should be reduced to $423,825 for summary judgment purposes for amounts already paid by the P&F Trust allegedly in reduction of the indebtedness.[8]
[16] The P&F Trust sought four further deductions. Only one is material to the appeal. A deduction was sought for the extra 1,840 m2 of land gained by the Pollard Trust from the “small part” when the farm was actually subdivided in 2006.[9] Mark’s evidence was that in or about February 2006 Doug said the extra land could “come off the $500,000”. Exactly what the deduction would be was not quantified, however.
[17] The Judge refused to make that deduction. His reasons were:

[83] Following the subdivision the actual boundary adjustments differed from those contemplated at the time of the transfer in 2005. Mark’s evidence is that, in all, the plaintiffs received an area of 1,840m2 greater than what was intended. He suggests the land might be worth in the region of $140,000 to $160,000.

[84] However, as Ms Whitfield correctly points out, the schedule to the family farm agreement acknowledges that the subdivided land may differ from the proposed plans:

The plan shall be generally in the same form as the plan annexed to this agreement, with such variations as may be required by the Council, the Department of Survey and Land Information or the District Land Registrar.

[85] Further, P&F Trust clearly accepted the result of the subdivision at the time. It is somewhat opportunistic for them to seek to raise a difference in the land area lost as a consequence of the subdivision at this late stage. There is no arguable basis for a further deduction at this stage.

[18] Of the other three deductions the P&F Trust sought, only one was allowed. It was for $50,000 paid by the P&F Trust in 2007, arguably in reduction of indebtedness.[10] It is no longer in issue. There is no appeal against the Judge’s refusal to make the other two deductions.
[19] The overall result was entry of summary judgment for $373,825 together with Judicature Act interest. The balance of the claim is to be determined at trial.[11]

An application for further evidence to be adduced, post-hearing

[20] Shortly after the hearing in this Court counsel for the appellants applied under r 45 of the Court of Appeal (Civil) Rules 2005 for the Court to “receive and consider [a] memorandum of counsel for the appellants dated 15 April 2016”. This followed a discussion between counsel about whether a submission had misled the Court. What was sought to be admitted does not fit easily within r 45. It is itself not sworn affidavit evidence. Rather it is an amalgam of supernumerary submission and some further documentary exhibits. The essence of it is that rather more than an area of 1,840 m2 of additional land may be in issue. The respondents consented to two of the documentary exhibits being produced. Otherwise they opposed the application.
[21] This Court has in three decisions reinforced three principles for the admission of further evidence on a summary judgment appeal:[12]
[22] The real question in this appeal is whether the Judge erred in finding the appellants had not demonstrated an arguable defence that a further sum should be deducted from the summary judgment sum. The basis advanced is an alleged representation made in February 2006 that an allowance for some additional land “could come off the $500,000”.
[23] In this case, as we have already said, everyone was aware that the subdivision had altered. And everyone was aware that the Pollard Trust would be keeping more of the “small part” land than the sale agreement provided for originally. All that is material for present purposes is whether there is an arguable defence based on a representation that further sums might be deducted from the purchase price. The scope of deduction has never been quantified. That also means that the exact dimensions of the additional land are not material for present purposes.
[24] This is not therefore one of those exceptional cases where it is appropriate that further evidence be adduced. Parties have proceeded throughout this proceeding on the basis that the additional land is 1,840 m2 more or less. Whether it is or is not that exact area is not material to the issues on summary judgment, which fasten on the existence or not of an arguable representation conferring a right to some indeterminate deduction.
[25] For these reasons we shall decline the application to adduce further evidence.

Issues on appeal

[26] Two issues arise on appeal:
[27] It is convenient to consider these in reverse order.

Did the Judge err in refusing to make a deduction for the 1,840 m2 additional land transferred on subdivision to the Pollard Trust?

[28] Mr Brant referred particularly to Mark’s evidence that Doug said in or about February 2006 that the additional land “could come off the $500,000”. Reference was made also to Mr Laubscher’s letter, which acknowledged the difference in area and referred to the possibility of an amendment to the acknowledgement of debt.[13]
[29] Based on this evidence, Mr Brant submitted the P&F Trust had an arguable defence for the value of the 1,840 m2, which should also have been deducted from the summary judgment sum. Although Doug denied the concession, that was a credibility issue for trial. The appellants also say Venning J erred in relying on the clause in the sale agreement that referred to variations in the subdivision required by the council or central government because there is no evidence the variation by 1,840 m2 was required by them.[14] The extent of deduction that should be allowed was the upper band of a real estate agent’s appraisal of the value of the extra land, that is $160,000.
[30] We do not accept this argument.
[31] First, the relevant legal principles for summary judgment are settled. We apply the approach taken by this Court in Krukziener v Hanover Finance Ltd, set out at [13] above.[15] The respondents have established a prima facie claim to $373,825. The relevant question for us at this point is whether the appellants have established a reasonably arguable defence based on credible evidence in relation to some further part of that sum.
[32] Secondly, the legal basis for the claimed deduction is unclear. The appellants have filed a notice of opposition, attaching a draft statement of defence. The notice of opposition says, somewhat baldly:

The [respondents] are estopped from demanding the alleged debt for a sum greater than $600,000 less payments and adjustments in reduction of that sum.

The draft statement of defence advances an affirmative defence. Specifically, in paragraph 37 of the draft statement of defence the appellants allege a promise and representation that the defendants were required only to repay $500,000 of the sum indebted. At paragraph 38 reliance is pleaded. And at paragraph 39 it is alleged that this promise and representation was repeated, and specifically:

In February 2006 the additional land transferred from the Small Part to the [respondents] (1840 m2) would be valued and taken off the $500,000 then owing.

Before us Mr Brant was minded to hedge the basis for the claimed deduction. He submitted it was simply a “credit”. That is not a satisfactory basis for deduction. Otherwise any number of intangible donations might be weighed against a debt. Some suggestion was made that the alleged February 2006 representation as to the 1,840 m2 adjustment might be a variation of the Deed of Acknowledgment of Debt. There are, however, difficulties with that given the parties are not identical to those who executed the Deed. In the end, we are satisfied that the best argument available to the appellants is based on promissory estoppel. That of course is the way it was put in the draft statement of defence.

[33] Thirdly, the principles for inference of an equitable estoppel were set out by this Court in Wilson Parking NZ Ltd v Fanshawe 136 Ltd. Four elements must be established by the party asserting such an estoppel:[16]

It is necessary for present purposes only to concentrate upon the first and second of these.

[34] Fourthly, the evidence tendered by Mark on both representation and reliance is profoundly unsatisfactory. (Doug of course denies the representation altogether.) We set out the relevant part of Mark’s evidence:

17.1 Kaz and I (and I believe Doug and Lesley) were confused about the land involved in the subdivision and how that was treated in the transaction. I also believe that Doug remains unclear on the extent of the land that he has retained. I say this because Doug believes that he has retained land up to the duck pond on the property as part of the subdivision and transfer. At the time of the subdivision being undertaken (in approximately February 2006) Doug said to me that the additional land that he was getting (meaning the land over and above what we had agreed to initially) could “come off the $500,000”.

17.2 At the time of the subdivision being completed Kaz, our accountants and I (and I believe Doug, Lesley and their accountants) understood that the land that was transferred back to Doug and Lesley was land that we had paid for and therefore that land was to come off the debt that was payable. This is why all our accountants reduced the debt level in our accounts.

17.3 Having gone through the papers with our lawyers we now understand the position, that is some land was always intended to be transferred back and it wasn’t included in the purchase price.

17.4 However, what we have also now realised is that Doug and Lesley received significantly more land when it was transferred back than we had originally agreed to. I have set out what was intended and what actually occurred at the start of my affidavit.

[35] The first of these paragraphs refers to a representation (by Doug alone) in approximately February 2006 that “the additional land ... could ‘come off the $500,000’”. The second paragraph refers to “land that was transferred back to Doug and Lesley”. Mr Brant acknowledges that this is the same additional 1,840 m2. But as Mr Brant acknowledges, the last sentence of the second paragraph is a non sequitur. There was no accounting adjustment made for the additional land. Rather, the accountants erroneously credited the 5 ha block credit referred to at [7](a) above in 2013/2014, a quite separate piece of land. The third and fourth paragraphs are, as Ms Whitfield submitted and Mr Brant was compelled to acknowledge, inconsistent with the allegation made in the first paragraph. That is, that in February 2006 there was an awareness of extra land being conveyed in the subdivision and an agreement to adjust the alleged $500,000 debt limit downwards in consequence.
[36] Fifthly, the evidence was that the alleged $500,000 debt limit was struck on the basis that that amount of cash was needed by Doug and Lesley for their retirement. As Mark puts it in his affidavit, “Accordingly, we said we were happy to make $500,000 available for their retirement years.” The receipt by Doug and Lesley of an additional undivided half acre of land area could not remotely affect, let alone improve their retirement needs. The notion that the amount to be received by Doug and Lesley for their retirement would be reduced in consideration of this additional undivided land is improbable. And it is inconsistent with Mark’s other evidence.
[37] Sixthly, in 2008 the Pollard Trust sold the 48 ha run-off block to the P&F Trust for $750,000.[18] The P&F Trust managed to secure bank funding of $650,000. The balance was additional vendor finance from the Pollard Trust. Mark says in his evidence:

Accordingly, the settlement of the purchase was on the basis of $650,000 being paid in cash and the balance of $100,000 being added to the total $500,000 that Doug and Lesley could request in the future.

What is notable about that evidence is that, according to Mark the parties were proceeding in 2008 on the basis that the debt was and remained the original $500,000 figure. He does not suggest that that amount had reduced because of the February 2006 representation. He therefore did not rely on that representation in 2008. Yet he now claims a deduction of $160,000 should be made for the additional half acre transferred to the Pollard Trust. It is little wonder Venning J described this stance as “somewhat opportunistic”.[19]

[38] Seventhly, we ask ourselves the question posed by Ms Whitfield: could Mark have been comforted in February 2006 that the debt had been reduced by $140,000 – $160,000?[20] We agree that he could not. The value of this half acre accretion to the “home block” is entirely uncertain. So what deduction was being acknowledged is unknown. Set by valuation? If so, on what basis? The 1,840 m2 of additional land is undivided. It is unclear on the evidence whether it could be subdivided at all, so that it might have the value suggested by the real estate agent’s appraisal. That appraisal is based on the additional 1,840 m2 having its own title (which it does not) and “is obviously subject to the Waipa Council approval”. In contrast the letter sent by Mr Laubscher after the meeting in February 2006 (which we have quoted at [9] above and which presumably represents the discussions summarised) is equivocal as to whether the additional land has any relevant value: “whether what has occurred indeed changes the value of the land that has been transferred”. Despite Mr Laubscher indicating in that letter that further discussions might occur in relation to a consequential amendment to the Deed of Acknowledgment of Debt, there were no further discussions. At least, none other than the alleged discussion between Mark and Doug. No amendment to the Acknowledgment of Debt was made. When in 2008 the $100,000 run-off land vendor finance was added to the indebtedness, no suggestion was made (nor, on Mark’s evidence, is alleged to have been made) that a further adjustment should be made for the extra land. All this suggests, strongly, that the additional land was regarded as immaterial. It also impairs the necessary unequivocality of the alleged estoppel, and the reasonableness of reliance upon it.
[39] Finally and in contrast to the primary estoppel, which involves representations by Doug and Lesley in the presence of the third trustee, there is no suggestion that the alleged representation by Doug in February 2006 was joined in or ratified by either of the other two trustees. That is a further point going to the issue of whether such a representation might reasonably be relied upon by Mark. He was well aware that he was dealing with the Pollard Family Trust in relation to the subdivision.
[40] We conclude, therefore, and consistent with Venning J, that the evidence adduced by the appellants is insufficient to establish a reasonably arguable defence of estoppel based on a further deduction to be given for the additional land.

Did the Judge err in not refusing summary judgment altogether, in the exercise of his residual discretion, because of remaining uncertainties as to what has been repaid to the Pollard Trust?

[41] Mr Brant submitted the Judge should have exercised his residual discretion to refuse summary judgment because otherwise an injustice may occur. That was because, in the context of a formerly close family relationship, the Court could not be confident what has been repaid in reduction of the admitted debt. The discovery process may yet disclose further credits against the debt over the ten years since the sale of the farm.
[42] We do not accept this argument either.
[43] First, an appeal from the non-exercise of discretion (just as does an appeal from an exercise of discretion) engages the principles in May v May.[21] That is, it must be shown that the Judge has proceeded upon an error of principle, has failed to consider a relevancy, has considered an irrelevancy, or is “plain wrong”. That is a high threshold, and is not met in this case.
[44] Secondly, the authorities are clear that where summary judgment is otherwise appropriate, the residual discretion to refuse summary judgment is limited and should only be invoked in exceptional cases.[22]
[45] Thirdly, in this case it is said that the residual discretion should have been exercised because of uncertainty as to exactly what sum (as part of the $500,000 primary estoppel) was repayable. That was because of the potential availability of deductions or “credits”. We do not accept that. Since the entry of summary judgment at first instance, discovery has been given. As Mr Brant acknowledged, no additional deductions or credits have been identified by the appellants as a result. No further or better discovery is sought. The appellants are the debtors in a specific sum. If there were justifiable deductions from the sum indebted, supportable on a legal basis, they should be able to adduce that evidence. Indeed, they have done just that, establishing an arguable basis for a payment in reduction of indebtedness of $50,000 by Mark to Doug in 2007.[23] Mark sought two other deductions which were denied. The fact Mark has recalled and claimed several discrete deductions or credits tells against the existence of further deductions or credits.
[46] It follows that the Judge has not been shown to have proceeded erroneously in not exercising his residual discretion to refuse summary judgment.

Result

[47] The application to adduce further evidence is declined.
[48] The appeal is dismissed.
[49] The appellants must pay the respondents costs for a standard appeal on a band A basis and usual disbursements.



Solicitors:
Edmonds Judd, Te Awamutu for Appellants
Whitfield Braun, Hamilton for Respondents

[1] Pollard v Pollard [2015] NZHC 1140.

[2] The other assets included stock, buildings and equipment and shares in Fonterra Co-operative Group.

[3] In the result the “small part” sold would reduce from 5.0045 ha to approximately 3.7418 ha.

[4] The $3.71 million therefore included the buildings, equipment and Fonterra shares referred to above at n 2. The purchase price for the stock was $223,000 excluding GST.

[5] Subsequent to the hearing before us suggestion was made that the difference may be greater than 1840 m2: see [20] below.

[6] Pollard v Pollard, above n 1, at [20] and [74].

[7] Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26]. Citations omitted.

[8] See [12] above.

[9] See [8] above.

[10] Pollard v Pollard, above n 1, at [86]–[88].

[11] At [92].

[12] Leason v Attorney-General [2013] NZCA 509 at [26]–[28]; Urquhart v Spanbild Holdings Ltd [2010] NZCA 435 at [70]; and Lawrence v Bank of New Zealand [2001] NZCA 375; (2001) 16 PRNZ 207 (CA) at [18].

[13] See [9] above.

[14] See [6] above.

[15] See also Jowada Holdings Ltd v Cullen Investments CA248/02, 5 June 2003 at [28].

[16] Wilson Parking NZ Ltd v Fanshawe 136 Ltd [2014] NZCA 407, [2014] 3 NZLR 567 at [44].

[17] It may be noted that unequivocality is not necessarily a precondition of every equitable estoppel. But it is likely to be in the case of a promissory estoppel: Johnstone v Johnstone [2015] NZHC 2047, [2015] NZFLR 881 at [36].

[18] See [11] above.

[19] Pollard v Pollard, above n 1, at [85]. See [17] above.

[20] This being the deduction range suggested by the appellants. It is based on a real estate agent’s appraisal in 2014. Mr Brant says the deduction allowed for summary judgment purposes should be at the upper bound, $160,000.

[21] May v May (1982) 1 NZFLR 165 (CA) at 170.

[22] Bromley Industries Ltd v Martin and Judith Fitzsimons Ltd [2009] NZCA 382, (2009) 19 PRNZ 850 at [60]–[65]; Inner City Properties Ltd v Mercury Energy Ltd (1998) 13 PRNZ 73 (CA) at 77; Avison v McFarlane [2015] NZCA 409, (2015) 30 FRNZ 480 at [42]–[43].

[23] Above at [18].

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