Saunders & Anor v Himaly & Ors

Summary judgment should not be granted on a basis inconsistent with the claimant’s pleaded case. Where the claimant pleads an enforceable agreement and relies on its breach, it cannot obtain summary judgment by asserting that the agreement was unenforceable without first amending the pleadings. An unenforceable agreement cannot be breached.

The principles in Cobbe v Yeoman’s Row Management Ltd do not automatically apply where the alleged agreement contains a workable set of terms and the parties may have intended it to be immediately binding. A mistaken belief in enforceability may support proprietary estoppel or a constructive trust only if there was reliance on a representation and substantial detriment. At the summary judgment stage, an arguable case on assumed facts is sufficient.

The claimants, owners of a property, sought possession after terminating the defendants’ asserted licence. The defendants counterclaimed for an equity based on proprietary estoppel and/or constructive trust, alleging that they had entered into an original and amended joint venture concerning occupation, renovation and sale of the property.

Following non-compliance with unless orders, parts of the defence and counterclaim were struck out. When the claimants’ principal witness became medically unable to attend the listed trial, the claimants applied for summary judgment at short notice. Her Honour Judge Melissa Clarke granted summary judgment and made a possession order, with an enquiry as to damages.

The defendants appealed. The issues were whether the summary judgment application should have been heard without an adjournment, whether the case was materially indistinguishable from Cobbe v Yeoman’s Row Management Ltd, and whether the pleaded case supported summary judgment.

1. Summary judgment procedure. The judge had discretion to hear the late application, and there was material supporting her decision. The appellate court therefore declined to interfere. Any prejudice caused by the refusal of an adjournment had also disappeared because the defendants had since had time to consider the case and pursue the appeal.
2. Pleading inconsistency. The claimants’ Particulars of Claim positively alleged an enforceable agreement and relied on breaches of that agreement. It was not open to the judge to treat the parties as having agreed that the arrangement was unenforceable and then grant summary judgment on that footing. The claimants would have needed to amend their pleadings.
3. Error concerning breach. The judge had also assumed that the amended joint venture remained in force and had been breached by the claimants. That finding was inconsistent with the conclusion that the agreement was incomplete and unenforceable. An unenforceable agreement cannot be breached. This was an error of law and principle.
4. Cobbe v Yeoman’s Row Management Ltd. The present case was materially distinguishable. Unlike Cobbe, the assumed facts disclosed a workable agreement without unresolved terms fundamental to its performance. The parties’ sophistication, the timing of the “subject to contract” document and the pleaded possibility of an immediately binding contract also differed. Dowding and Anr v Matchmove Limited supported that distinction.
5. Alternative estoppel and constructive trust case. It was fair to permit the defendants to argue on appeal that they had mistakenly believed the agreement enforceable, because the summary judgment application had been brought without proper notice. That belief alone was insufficient. There also had to be reliance on a representation and substantial detriment, subject to any countervailing benefit. The defendants’ occupation of the property, foregoing alternative accommodation and employment opportunities, was arguably substantial detriment on the assumed facts.
6. The appeal was allowed. The parties were to consider amendments to their pleadings, including any allegation that the agreement was unenforceable and any alternative case based on mistaken belief.

• High Court (Chancery Division): Appeal from the possession order and summary judgment of Her Honour Judge Melissa Clarke dated 9 March 2016. Appeal allowed.