Saleh v Romanous & Ors [2011] HCATrans 101

[2011] HCATrans 101

[2011] HCATrans 101

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S264 of 2010

B e t w e e n -

ROSE SALEH

Applicant

and

HARRIS ROMANOUS

First Respondent

PHILOMENA ROMANOUS

Second Respondent

MICHAEL SALEH

Third Respondent

Application for special leave to appeal

GUMMOW J
CRENNAN J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 8 APRIL 2011, AT 2.25PM

Copyright in the High Court of Australia

__________________

MR B.W. RAYMENT, QC:   May it please your Honours, I appear with my learned friend, MR D.W. RAYMENT, for the applicant.  (instructed by Woods & Day Solicitors)

MR F.G. KALYK:   May it please the Court, I appear for the first and second respondents.  (instructed by Thurlow Fisher)

GUMMOW J:   Yes.  There is no appearance for the third respondent?

MR RAYMENT:   There is not.  We have served the third respondent and I have an affidavit filed in the Registry ‑ ‑ ‑

GUMMOW J:   Yes, Mr Rayment.  The third respondent was the second defendant, I think, in the suit.

MR RAYMENT:   He was, and he was an appellant in the Court of Appeal.  He is the former husband of the applicant and a bankrupt, now.

GUMMOW J:   I see.  Thank you.

MR RAYMENT:   Your Honours, the applicant submits that the issue identified in the outline of argument is worthy of consideration by the Court upon grant of special leave, the question being, really, as follows.  If, in the negotiations between parties which lead to the execution of a written contract, here a contract of sale in standard form, relevantly, if assurances are given by one party to the other, relating to the contract of sale itself, and inconsistent with the terms as finally settled, may the assurances be enforced under the doctrine of promissory estoppel.

It was part of the arrangement negotiated between the lay parties prior to the settlement of the written contract that was relied upon as giving rise to a promissory estoppel.  The matter has, in our submission, not so far been considered in this Court.  Promissory estoppel is not one of the exceptions to the parol evidence rule listed by the Court in the Equuscorp decision.  Your Honours will be familiar with it.  We have included it in the bundle of cases behind tab 3 in paragraphs 32 and 33 of the report of Equuscorp.  At page 482, the Court identified a series of things which might provide an exception.  The Court said just at about the fifth line, of paragraph 32:

it was not said that the written agreement should be rectified.

That was the case here and I want to come back to that in a moment, if I may:

It was not said that a defence of non est factum was available.  It was not said that the written agreement was executed by mistake, or that its execution was procured by misrepresentation as to its contents or effect.

The same kinds of exceptions are identified in the next paragraph.  There was no claim for rectification here and if there had been it would have failed, in our submission, on the findings made below.  That is because of the four parties to the contract of sale – two purchasers and two vendors – none thought that embodied in the contract of sale was this assurance.  Indeed, there was an appreciation admitted by the female respondent that the contract was, as she understood, unconditional.  The judge found that she was not made aware of the discussions that happened between her husband and the third respondent.  That is paragraph 171 of the trial judge’s judgment in the application book, at page 49.  His Honour said just below line 20:

the evidence suggests that Harris –

that is the male respondent -

did not so inform Philomena -

that is his wife, that is, that the discussions had taken place prior to contract.

GUMMOW J:   If there was a grant of leave, Mr Rayment, there would be a fairly hefty notice of contention would there not, looking at page 99, contract abandoned, contravention of the Fair Trading Act, estoppel post contract.

MR RAYMENT:   Right.  The Fair Trading Act – there would, no doubt, be matters of contention as there was in the Court of Appeal.  They were all found to be unavailable.  The relevant Fair Trading Act one, in particular, was abandoned by the other side at the trial.  There were two Fair Trading Act points originally taken, one under a section relating to contracts for sale of land, another in the nature of a section 52‑type point.  The second was abandoned, expressly, in the pleadings.

CRENNAN J:   Were there explanations for matters such as the way in which the date for completion came and went and nothing was done and subsequent to that there was a payment then of $200,000?

MR RAYMENT:   There were varying explanations of it on both sides.

CRENNAN J:   Then, at what seemed like a very late notice to complete, months after the ‑ ‑ ‑

MR RAYMENT:   Series, yes.  That is right.

CRENNAN J:   How was that explained?

MR RAYMENT:   The late notices to complete on the vendor’s side were the subject of cross‑examination.  I do not know that we brought it here, your Honour.  The contract was allowed to drag on for a long period of time on both sides and was finally brought to an end, we say, by our notice to complete and our avoidance of the contract, our rescission of the contract.

CRENNAN J:   Yes.

MR RAYMENT:   The delay is not material to the application that I make, in my respectful submission.  I was just about to say that Mr Romanous, the male respondent, appears to have thought that the assurance he said he was given was embodied in a statutory declaration.  The declaration is at paragraph 60 of the trial judge’s judgment.  Your Honours see it is about an agency arrangement between a third respondent and his brother.  At paragraph 71 of the judgment, at page 21, his Honour found that Mr Romanous:

drew significant comfort from the statutory declaration, believing it to record and confirm –

the verbal assurances that were relied upon under the doctrine of promissory estoppel.  For some reason he apparently he thought that was his confirmation of this promise.  Significantly, it was not the contract that he thought was the confirmation of his promise.  We submit that what that shows is that if there had been a claim for rectification in the case, it would have failed on the authority of Maralinga.  We have included Maralinga in the papers, your Honours behind tab 2.

GUMMOW J:   We remember Maralinga.

MR RAYMENT:   I know, your Honours, yes.  It is the passage at page 351 that I had in mind, your Honour, in Justice Mason’s judgment where the fact that the parties “were not mistaken as to the contents of the written instrument” was critical to the failure to obtain “rectification.”.  It is halfway down page 351.  The decision below – the Court of Appeal – was significantly based upon a view taken of the effect of the decision of the Privy Council in Bank Negara Indonesia.

GUMMOW J:   This is Lord Wilberforce’s judgment, is it not?

MR RAYMENT:   Yes.  For that reason, we have included it in these papers and could I go quickly to it.  Its facts are very much within a narrow compass.  When you examine them, in our submission, it really does not support the view taken below about the effect of the doctrine of promissory estoppel.  Your Honours, the report is, as I say, behind the tab.  On page 4 of it – your Honours remember, perhaps, this was a solicitor who had an occupancy which was protected under the rent control legislation in a building in Singapore.  He had assurances given to him in 1958, and it is on page 4, left‑hand column, just after halfway down the page.  The roof came off the building in October 1958 and they wanted the solicitor to move from his office to other parts of the building so that they could repair it.  Their Lordships say:

Thereupon two representatives of the landlord came to see him and asked him to move to the rear of the first floor so that work could be done in the front.  They told him that, when the new third floor was ready, he could move to the front portion of it.  They gave him an assurance, as the judge found, that he would have same protection under the Control of Rent Ordinance as he had on the first floor and that the appellants would not ask him to leave the premises for as long as he was practising his profession there.

That is the relevant promissory estoppel and that is 1958.  Then, their Lordships note that there was a three‑year lease entered into following the service of a notice to quit in 1961.  Their Lordships find the purpose of that was to bring the rent up.  That is referred to at the foot of that column:

the respondent was served with a notice to quit . . . Negotiations took place, as a result of which he agreed to pay‑

a higher rent

and sign a lease for three years.

From 1961 to 1964 he occupied under that lease.  Then their Lordships note that for the next five years, he held over after the expiry of the lease, as a monthly tenant again.  Those are the surrounding circumstances.

GUMMOW J:   The relevant statement of principle is at page 5, right‑hand column, first paragraph, is it not, “Their Lordships do not overlook the point”?

MR RAYMENT:   Yes.  What their Lordships there refer to is they, in effect, find it is not necessary that there be pre‑existing rights for the purposes of application of the doctrine of promissory estoppel but the way in which their Lordships apply it, in our submission, is important.  Their Lordships say in the left‑hand column on that same page, halfway down, apart from what happened in 1961, “it appears to their Lordships that” this was fully enforceable as a “promissory estoppel”, in effect.  Then they apply it on page 6, really.  They note, I should say, on page 5 that the three‑year lease had “a covenant to yield up” possession at the end of the term, and they say, well, the question is does that in some way…..reliance upon the estoppel arising from the arrangement of 1958.  Over the page, in the conclusion of the judgment, their Lordships say at about line 5:

As regards the covenant to yield up, their Lordships cannot regard a routine provision of this kind as sufficient to displace the vitally important right of the respondent to remain in possession while exercising his profession.  It must have been in contemplation, as in fact happened, that the respondent would continue to hold over after the fixed period of three years;  the estoppel, though perhaps unnecessary during the fixed term, remained as relevant to the legal relations of landlord and tenant, and as essential for the tenant as it had previously been.

It sort of sprang back as a relevant arrangement in place ‑ ‑ ‑

CRENNAN J:   Justice Handley used this – application book 82 at paragraph 68 and his conclusion was really in the last sentence.  Is that what you are complaining about?

MR RAYMENT:   Yes, it is.  We submit you do not get that from Bank Nagara or any of the cases which approved it because in Bank Nagara (a) these were not negotiations for any lease, they were a separate arrangement years before; (b) they were not relevantly inconsistent with the lease because, as their Lordships found, it was contemplated by both parties that he would hold over again afterwards, as in fact happened; and (c), there is no mention of any entire contract clause if that matters.  Really, it is not a case to which the parol evidence rule was applicable.  There is no mention of it.

GUMMOW J:   The parol evidence rule is a rule of evidence not of doctrine.

MR RAYMENT:   It is a rule of evidence but based upon, it would seem, the doctrine of merger, your Honour.

GUMMOW J:   We are talking about ‑ ‑ ‑

MR RAYMENT:   The presumed intention of the parties arising from merger of pre‑contractual discussions into the written contract in a case where the matter is wholly within the written contract, where the agreement is wholly in writing.  It is, yes, a rule of evidence but related closely to the doctrine of merger, in our submission.  The way it is discussed in the current edition of Cross is, in our submission, correct.  Having referred to traditional statements of the rule, the authors say:

Statements of this nature are best regarded as statements of the effect of the substantive law of merger which is now based on the presumed intention of the parties.  If the court is satisfied that they effectively agreed to be bound by a written instrument, they are bound by its terms though unacquainted with them ‑ ‑ ‑

GUMMOW J:   The question is what “effectively agreed” means and that equity starts to meddle.

MR RAYMENT:   Yes.  It does but the parol evidence rule - if I could just read on from Cross because he comes to the relevant matter, in our submission:

and though one of the parties believes that something said in the course of the negotiations is still binding.

He cites Life Insurance v Phillips for that purpose.  Then he really in effect says:

it would be pointless to admit extrinsic evidence with regard to those negotiations because it is irrelevant.

The relevant agreement is to be found because of the doctrine of merger, because of the parol evidence rule in the writing.  Now, the question really in the case becomes, does equity follow the law in this respect or does it not?  Should it not?  We submit that if you look at the foundation of the parol evidence rule and the consequence which it has for the certainty of commercial contracts, in particular, it would be appropriate for this Court to, in effect, set a limit to the doctrine of promissory estoppel so that it does not conflict with it.  That is essentially the issue which we propound in this case. 

It really arises in a number of ways.  We have included Johnson Matthey, upon which we sought to rely by analogy in the Court of Appeal, which is behind tab 1.  At 195D, Justice McLelland, having referred to the question of whether the parol evidence rule might be applicable in a case where there was a conventional estoppel alleged, the conventional estopped, of course, while distinct is related in its content:

It would be a serious threat to the stability of commercial relationships and dealings if parties who, after lengthy and intricate negotiations, deliberately recorded their agreement in permanent written form, were subject to the risk of having that permanent written record yield to the inherently less reliable evidence of oral statements ‑ ‑ ‑

GUMMOW J:   He was talking about estoppel by convention, was he not?

MR RAYMENT:   He is, your Honour, but, the same is true, in our respectful submission, if you look at this doctrine.  His Honour goes on to take the judgment of Justice Kirby – he was President Kirby in State Rail Authority of New South Wales v Heath Outdoor by – instead of that of Justice McHugh who had a different view on the matter.

GUMMOW J:   It was a very conservative judgment.

MR RAYMENT:   Your Honours remember Justice Glass said nothing about this matter; just the President said what is quoted there by Justice McLelland.  Justice McHugh took a different view, again, referring to Bank Nagara.  The first point made by Justice McLelland was that, the parol evidence rule.  The second point, over the page, was based upon the presence of an entire contract clause in the agreement.  Again his Honour made reference to that same case of Life Insurance v Phillips as one of the authorities which are considered in entire contract clauses.  Then, his Honour made the point at page 196D that, “an ‘entire contract’ clause” is itself capable of producing a conventional estoppel, which we submit, is correct.

We have given a reference, your Honours, in the other argument to two old equity cases which have applied the parol evidence rule by following the law, refusing to allow evidence to be given, to vary, add to or qualify a written agreement.  Any view that the parol evidence rule has no application in equity, in our submission, would be wrong in the light of those authorities, the real question is one of principle, ought the court to set a limit to the doctrine of promissory estoppel and allow the parol evidence rule to have full force and effect there.  If not, then commercial contracts might be seriously at risk, in our respectful submission.

Finally, we put that for the law to be coherent – the detriment here was the entry into a written contract.  The same facts were relied upon as a collateral contract and the case was rejected on the basis of Hoyt’s v Spencer.  So really what you would have as a result of the decision below here is a different result produced in equity and at law on the same facts – not equity correcting the law, but a squarely inconsistent result.  If you put

the case in collateral contract you fail on existing authority, Hoyt’s v Spencer and the like, Maybury.

GUMMOW J:   So?

MR RAYMENT:   In our submission, the law is not coherent.  If framed as a collateral contract matter the case must be rejected, but the same facts framed as a promissory estoppel may be accepted.  We submit that does not promote coherence in the law.  If the Court pleases, those are the reasons we respectfully submit special leave ‑ ‑ ‑

GUMMOW J:   Yes, thank you, Mr Rayment.  We do not need to call on you, Mr Kalyk.

Having regard to the evidence and to the range of issues that would arise on an appeal to this Court we are not satisfied that this is an appropriate case for consideration of any of the questions of principle said by the applicant to be raised by the decision of the New South Wales Court of Appeal.  Special leave is refused with costs.

AT 2.48 PM THE MATTER WAS CONCLUDED