Apollo 169 Management Pty Ltd v Pinefield Nominees Pty Ltd
[2009] VSC 281
•16 July 2009
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
No. 4775 of 2009
APOLLO 169 MANAGEMENT PTY LTD
(ACN 128 114 705)Plaintiff v PINEFIELD NOMINEES PTY LTD
(ACN 007 152 132) & ORSDefendant ASSOCIATE JUSTICE:
EVANS
WHERE HELD:
Melbourne
DATE OF HEARING:
22 June 2009
DATE OF JUDGMENT:
16 July 2009
CASE MAY BE CITED AS:
Apollo 169 Management Pty Ltd v
Pinefield Nominees Pty Ltd & Ors.
MEDIUM NEUTRAL CITATION:
[2009] VSC 281
APPEARANCES:
Counsel Solicitors For the Plaintiff Mr T. Bourke GPZ Legal For the First Defendant Mr P. Corbett Ligeti Partners PRACTICE and PROCEDURE – Summary judgment R 23.01, R 23.03 – evidence as to disputed facts inappropriate.
REAL PROPERTY – Mortgage of – Transfer of Land Act 1958 s 42 (2) (e) only preserving right to possession of tenant at time mortgage created.
HIS HONOUR:
The proceeding
1The Plaintiff (‘Apollo 169’) is the manager of a residential holiday resort development at Apollo Bay. It is a tenant in possession of one lot (‘Lot 15’) in the proposed but unregistered subdivision of the development land pursuant to a 10 year lease dated 31 March 2008 from Apollo Resort Pty Ltd (‘Apollo Resort’), the owner of the development.
2Lot 15 is on two levels and comprises a reception area, bar, lounge, conference room, swimming pool, gymnasium, out-of-door deck area, cleaners store room, maintenance room and 10 car parking bays.
3Apollo Resort mortgaged the development land to the first defendant (‘Pinefield’) as second mortgagee on 25 October 2006. The mortgage is registered in the Register of Titles as second mortgage to a mortgage to the second defendant given by Apollo Resort.
4Apollo 169 is a company related to Apollo Resort. It was incorporated on 22 October 2007, a year after the mortgage was given to Pinefield. That mortgage contained an express term that prohibited Apollo Resort from leasing the land without Pinefield’s written consent. That consent was not obtained in respect of the lease to Apollo 169.
5Pinefield has obtained judgment for recovery of possession of that land against Apollo Resort . In this proceeding Apollo 169 seeks various declarations including a declaration that the lease is binding on each of the mortgagees in order to preserve its right to possession conferred by the lease.
6The basis for its claim is that
(i)as Apollo Resort holds its interest in the land subject to the lease by virtue of s. 42 (2(e) of the Transfer of Land Act 1958 so does Pinefield.
(ii)the mortgagees knew and approved of the fact that Apollo Resort and Apollo 169 intended to enter into the lease.
(iii)the mortgagees represented to Apollo Resorts and Apollo 169 that they approved of and consented to the lease.
(iv)Apollo 169 acted on the faith of the representation to its detriment and expended over a million dollars on infrastructure in Lot 15 and throughout the resort.
(v)In the premises the mortgagees are estopped inter alia from denying that they approved of and/or consented to the lease.
(vi)The representation was made in trade or commerce, was misleading or deceptive or likely to mislead or deceive in contravention of s.52 of the Trade Practice Act 1974 and s.9 of the Fair Trading Act 1999.
The Application
Pinefield has applied to have the proceeding against it dismissed pursuant to R. 23.01(a) Supreme Court (General Civil Procedure Rules 2005 on the grounds that the Statement of Claim does not disclose a cause of action against it, or, pursuant to R. 23.03 of those rules on the grounds that it has a good defence on the merits. If those applications are unsuccessful, it seeks an order striking out paragraphs 12 – 16 and 8 – 21 of the statement of claim pursuant to R 23.02(a) of the rules.
The R. 23.01 (a) application
There must be a very clear case to justify the exercise of the power to dismiss a proceeding summarily. (Dey v Victorian Railways Commissioners (1948) 78 CLR 62 at 90). The plaintiff’s case must be ‘so obviously untenable that it cannot possibly succeed; manifestly groundless; so manifestly faulty that it does not admit of argument; discloses a case which the court is satisfied cannot succeed; under no possibility can there be a good cause of action’ (General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125 at 129, 130).
In exercising the power under this rule the court will proceed on the assumption that the plaintiff can prove the facts as pleaded (Hubbuck & Sons Ltd v Wilkinson Hubbard & Clark Ltd (1899) 1 QB 86 at 91, Lonrho PLC v Fayed (1992) 1 AC 448 at 469; Northern Australian Aboriginal Legal Aid Service Inc v Bradley [2000] NTR 1 at [21], a case decided on a rule in identical terms to R. 23.01 (a) unless it can be demonstrated as a matter of incontrovertible fact that the plaintiff’s case cannot as a matter of fact be maintained (Northern Australian Aboriginal Legal Aid Service Inc. v Bradley [2000] NTR 1 at [21] ).
The first basis for Apollo 169’s claim is clearly untenable. s. 42 of the Transfer of Land Act 1958 preserves against a mortgagee only the interests of a tenant in possession at the time of the mortgage (Commonwealth Bank of Australia Ltd v Baranjay [1993] 1 VLR 589 at 598, 599; Maher v Commonwealth Bank of Australia Ltd [2004] FCA 248 at
[24]). It is undisputed that the creation of the plaintiff’s leasehold interest post-dated Pinefield’s mortgage.
The second basis of Apollo 169’s claim, set out in paragraph 14, is that Pinefield knew and approved of the intention to enter into the lease. As it is common ground that under the mortgage Apollo 169 had to obtain written consent to the lease Apollo 169 could have anticipated that Pinefield would rely on that term but it was not necessary to do so.
It was entitled to wait for Pinefield to plead the term as a defence and then by way of reply plead waiver of its contractual and statutory rights (under s. 66(2) Transfer of Land Act 1958) or estoppel from reliance on those rights.
The particulars to paragraph 14 which are relevant to the knowledge and approval of Pinefield are contained in sub paragraphs 14.2, 14.3 and 14.4.
In 14.2 Apollo 169 relies on numerous conversations between Steve Sherman and Mario Charisiou (‘Charisiou’) on behalf of Apollo Resort and Apollo 169 and Peter Spargo on behalf of the first defendant. No particulars have been sought or given as to when those conversations occurred so it cannot be demonstrated on the face of the pleading that they occurred prior to the incorporation of the plaintiff. In these conversations, it is alleged, Sherman and Charisiou gave similar explanations to Pinefield as were given to the second defendant and received similar acknowledgments as the explanations and acknowledgments alleged in sub-paragraph 14.1. One such acknowledgement was made in September 2007, prior to the incorporation of the plaintiff.
One of the explanations was to the effect that Apollo 169, a management company, would occupy Lot 15 pursuant to a lease.
None of the particulars demonstrate Pinefield’s knowledge and approval of the intention to enter into the lease into which Apollo entered. If Apollo 169 cannot provide any such particulars, then it should amend its pleading to allege knowledge and approval of a lease or a lease, on any terms, of Lot 15.
In sub-paragraph 14.3, it is alleged that Pinefield approved 7 pre sales contracts in respect of lots in the development each of which referred to the management role of the plaintiff and contained a copy of a management agreement entered into between Apollo Resort and Apollo 169. No particulars of when the approval (or approvals) was (or were) given and none have been sought. It cannot be demonstrated that on the face of the pleading that approval was given after the lease was entered into by Apollo 169.
Although the particulars do not clearly make out the allegation that Pinefield knew and approved of the lease, I cannot be satisfied that Apollo 169 could not by amendment whether of particulars or material facts allege a viable cause of action based on Pinefield’s knowledge of the intended management structure, of the intention to lease a lot or lot 15 to a management company or to Apollo 169 and approval by it of a lease or the lease for that purpose.
The application fails in respect of this claim.
The third basis for Apollo 169’s claim is contained in paragraph 15 – 20 of the statement of claim. It is alleged in paragraph 15 that Pinefield represented to both Apollo Resorts and Apollo 169 that it approved (‘the representation’) of and consented to the lease and in broad brush fashion repeats the particulars to paragraph 14. The comments made in respect of the pleading of paragraph 14 apply to this pleading.
It should also be noted that some of those particulars go to knowledge of rather than approval of or consent to the lease. The particulars should be confined to the material facts alleged.
It is then alleged (paragraph 16) that Pinefield knew Apollo 169 would rely on the representation and act to its detriment. Apollo 169 acted to its detriment in reliance on the representation (paragraph 17) and is estopped from acting inconsistently with the representation (paragraph 20).
For the reasons expressed in relation to paragraph 18 I cannot be satisfied that Apollo 169 could not by amendment whether of particulars or material facts, allege a viable cause of action based upon estoppel. The application fails in respect of this claim.
The final bases for Apollo 169’s claim is that the representation was conducted in trade or commerce that was misleading or deceptive or likely to mislead or deceive in contravention of s.52 Trade Practices Act 1974 and s.9 of the Fair Trading Act 1999. If the representation is properly particularized, this claim is also one which should also go before a trial judge and not be the subject of summary dismissal.
The R 23.03 Application
As is the case with R 23.01 the exercise of the power under R 23.03 is reserved for cases which are absolutely hopeless (Wilson v Union Insurance Co. (1992) 112 FLR 166 at 181).
The question is whether it would be open on the pleadings to prove facts at trial which would constitute a cause of action (ibid). It is not appropriate to seek to have a trial on affidavit and require the plaintiff to adduce all the evidence it could adduce at trial to meet the defendant’s evidence in respect of issues of fact disputed on the pleadings. The affidavit evidence relied on by the defendant should be confined to facts not in dispute and facts which are indisputable (Northern Australian Aboriginal Legal Service Inc. v Bradley [2000] NTR 1 at [21]) which establish a good defence on the merits. The defendant must demonstrate a good defence to the whole of the plaintiff’s claim to succeed on an application under this rule.
If, for example, the case had rested solely on the basis that Apollo 169 was a tenant in possession under a lease granted after the mortgage was given, the affidavit evidence that no written consent to the lease was given by Pinefield in support of a pleaded defence to that effect would have been admissible for the purpose of the application. But Apollo 169’s claim goes further and pleads facts which if proved, at trial would, arguably provide a basis for preventing Pinefield from relying on its strict contractual and statutory rights.
Pinefield’s evidence went further. One of its directors Peter Spargo, denies the conversation or conversations referred to in sub-paragraph 14.2 of the particulars. That sub-paragraph refers to ‘numerous conversations’ in which he, Steve Sherman, Brian Jennings (another director of Pinefield) and Charisiou took part. Jennings did not swear an affidavit in support of the application. Sherman has no recollection of such conversations to the effect alleged in the sub-paragraph.
Spargo stated that he did not have copies of any pre sales contracts other than for lot 15 (which he received after the lease was entered into). Lot 15 is, curiously, described as an apartment in that contract.
Surprisingly, he did not address the allegation in sub-paragraph 14.3 of the particulars that Pinefield approved 7 pre sales contracts in respect of the lots in the development each of which referred to the management role of Apollo 169 and contained a copy of a management agreement entered into between Apollo Resort and it. As a result Pinefield does not put in issue that allegation in this application.
Charisiou on behalf of Apollo 169 deposed to a specific conversation which occurred when it was seeking the finance from Pinefield and at which he, Spargo, Jennings and Sherman were present. During the conversation, he advised them that there were seven pre sales contracts already entered into in respect of lots in the development which provided for an exclusive leasing and managing authority to be granted in favour of Apollo Resort as manager of the finished development but that ‘it was expected that a related entity to Apollo Resort would take on the role of managing the development and accordingly a lease would be put in place.’
I assume that these contracts related to the sales of the other 7 lots in the development.
He also told them that the additional finance was ‘to further develop lot 15 in anticipation of the ‘in house’ manager being engaged’.
Charisiou also deposed to a previous conversation with Spargo and Jennings in which he advised them that Lot 15 was to have a lease arrangement put in place closer to the completion of the development in which a manager would be appointed .
Charisiou’s evidence, if accepted, would establish that prior to execution of the mortgage, Pinefield knew that Lot 15 was to be leased to a related entity of Apollo Resort for the purpose of that entity managing the resort development. It was indicated in argument that Apollo 169 intended to amend its pleading to rely on the failure of Pinefield to make it clear prior to the execution of the mortgage that its express written consent would be required to any such lease or to say anything at all constituted a representation to Apollo Resort and to its related entity when that came into existence and before it entered into the lease that it approved of such a lease on such terms as they chose to agree to. Although this is not precisely the way in which the case is currently pleaded, it cannot be said that such a case would be hopeless, notwithstanding the express term in the mortgage requiring written consent to any such lease.
Spargo specifically denied knowledge or approval of the lease to Apollo 169 but such denials would not answer a case framed as proposed by Apollo 169. Sherman’s evidence proceeds upon a curious mixture of absence of recollection and specific denial of participating in a conversation with the others in which Spargo or Jennings were told and in which they acknowledged that Apollo 169 would occupy Lot 15.
Pinefield did not produce any evidence on the question of reliance by Apollo 169 on the representation alleged, contenting itself with evidence intended to falsify the allegation that any such representation was made. Charisiou exhibited a quotation which did not appear to demonstrate that there had been reliance by Apollo 169 by incurring the expenditure to which it related. Somewhat ambiguously, he stated that the quotation was accepted and paid for the benefit of Apollo 169. The quote does not on its face relate to Lot 15. The amount of the quote was much less than the sum of ‘over a million dollars’ which is alleged to have been expended by Apollo 169 on Lot 15 and the development.
Pinefields have not as yet sought particulars or discovery in relation to that expenditure. It will no doubt do so before the proceeding goes to trial as it must.
The application pursuant to R 23.03 will be dismissed. The reliance on contentious denials of facts in dispute on the pleadings was inappropriate
Conclusion
The claim based solely on Apollo 169 being a tenant in possession will be dismissed. The applications under R 23.01 and R 23.03 will otherwise be dismissed. As Apollo 169 intends to recast its statement of claim, I will simply order that it has leave to file and serve an amended statement of claim, rather than strike out particular paragraphs.
When the parties have read these reasons, I will hear argument as to the costs of the application.
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