Case: Commonwealth of Australia v Verwayen [1990] HCA 39 ; (1990) 170 CLR 394
Outcome: cited
Thus, whilst denying that NRC has made good the basal elements of its estoppel claim, the respondent points to the following proposition stated by McHugh J in Commonwealth of Australia v Verwayen [1990] HCA 39 ; (1990) 170 CLR 394 (" Verwayen") at 501 as a complete answer to the claim:- "Once the detriment has ceased or been paid for, there is nothing unconscionable in a party insisting on reverting to his or her former relationship with the other party and enforcing his or her strict legal rights." 22 NRC puts its claim under both s 52 of the Trade Practices Act 1974 (Cth) ("the Act ") and estoppel but similar questions arise in each of the claims. 23 NRC also claims that the respondent has engaged in unconscionable conduct in contravention of ss 51AA and 51AC of the Act . These claims turn largely upon strategies put forward by the respondent's middle management, in particular during 2001, for avoiding any obligations on the State of Queensland under the EA and for the use of the AR terminal as a "bargaining chip" in efforts by the respondent to enter interstate markets for the supply of rail freight services. 662 In the Verwayen at 409, Mason CJ described estoppel as a label which covers a complex array of rules spanning various categories. I do not need to set out all of the rules because PN confined its case to three categories. In doing so, PN recognised that the question of whether there is a "single overarching doctrine" or "a general doctrine of estoppel by conduct" was left open by the High Court in Giumelli v Giumelli [1999] HCA 10 ; (1999) 196 CLR 101 (" Giumelli ") at [7]. 668 I will enumerate the propositions as follows:- (1) The object of estoppel in pais is to prevent an unjust or unconscionable departure by one person from an assumption adopted by another as the basis of an act or omission which, unless the assumption is adhered to, would operate to the other's detriment: Thompson v Palmer [1933] HCA 61 ; (1933) 49 CLR 507 (" Thompson ") at 547 per Dixon J; Grundt v Great Boulder Pty Limited (1937) 59 CLR 640 (" Grundt ") at 674 per Dixon J; Legione at 430 431; Waltons at 413 per Brennan J; Verwayen at 409 per Mason CJ and at 500 per McHugh J. (2) Whether a departure from an assumption is unjust depends upon the part taken by the person sought to be estopped in occasioning the adoption by the other party of the assumption: Thompson at 547 per Dixon J; Grundt at 675-676; Legione at 431 432; Waltons at 404 per Mason CJ, Wilson J; Verwayen at 444 per Deane J and at 500 per McHugh J. (3) Accordingly, the reference to an "unjust" departure is not a charter for idiosyncratic concepts of justice and fairness: Legione at 431. That is to say, it requires the party asserting the estoppel to prove that the other party caused him or her to adopt the assumption. (4) The party asserting an estoppel must establish that he or she has relied upon the assumption and that detriment flows from the reliance; that is to say, if the assumption were not adhered to: Grundt at 674 675; Waltons at 413 and Verwayen at 415. (5) It may be possible to divide detriment into the "narrower" and "broader" sense, although this approach, which was stated by Mason CJ in Verwayen at 415, really points to the distinction between reliance and detriment. The narrower sense is reliance on the assumption, whilst the broader sense is the detriment which flows from reliance on the deserted assumption. It is avoidance of the broader or "real detriment" flowing from reliance, from which the law seeks to protect the party who has changed his or her position: Grundt at 674 per Dixon J; Verwayen at 415 per Mason CJ. (6) It is only when the party sought to be estopped wishes to disavow the assumption that an estoppel arises and the question of detriment then falls to be considered: see P Feltham et al (2004) Spencer Bower's Law Relating to Estoppel by Representation (4 th ed) Butterworths, London at [V5.9] and Grundt at 674-675. (7) Although detriment in the broad sense is required to found an estoppel, the remedy the law provides will often be closer in scope to the detriment suffered in the narrower sense, that is to say, reliance: Verwayen at 415 416 per Mason CJ. (8) Avoidance of the detriment may require the party estopped to make good the assumption but this will depend on all the circumstances including the consideration that no more may be required than is necessary to avoid the detriment: see the discussion of Verwayen in Giumelli at [40] [48]. (9) The burden of proof of reliance and detriment lies upon the person asserting an estoppel: Thompson at 549 per Dixon CJ and Verwayen at 416 per Mason CJ. Dixon J's reference in Thompson at 549 to the shift of the burden of proof cannot have been intended to negate the principle stated by his Honour later in that paragraph, ie that the burden lies with the plaintiff. It can only have been intended to be a reference to the shifting evidentiary burden once some evidence of detriment is established: see J D Heydon (2004) Cross on Evidence (7 th ed) LexisNexis Butterworth, Sydney at [7205], [7225]. (10) Estoppel by convention requires proof of an assumption adopted by the parties as the conventional basis of their relationship: Thompson at 547; Con-Stan Industries of Australia Pty Limited v Norwich Winterthur Insurance (Australia) Limited [1986] HCA 14 ; (1986) 160 CLR 226 (" Con-Stan ") at 244. (11) The proposition that the necessary foundation for an estoppel by convention must be an assumed state of facts presently in existence, as stated by the High Court in Con-Stan at 244 245, has been qualified by later authority. The assumed state of affairs may extend to an assumption of law: Eslea Holdings Limited v Butts (1986) 6 NSWLR 175 at 186-189 per Samuels JA; Waltons at 415 and Verwayen at 413 per Dixon J, 445 per Deane J, and at 501 per McHugh J. (12) An estoppel by convention, unlike estoppel by representation, depends upon mutual assumptions. It is consensual in nature and is founded upon an agreed or mutually assumed state of facts (or law): Con-Stan at 244. (13) Conventional estoppel does not extend to assumptions concerning future matters. But an assumption as to a future right may found an equitable estoppel, in particular a promissory estoppel: Waltons at 398 399 per Mason CJ and Wilson J and 459 per Gaudron J and Verwayen at 499 500 per McHugh J. (14) The necessary elements of equitable or promissory estoppel are stated in the following passage from the judgment of Brennan J in Waltons at 428 429:- "In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise." (15) In order to found an estoppel between parties who are in contractual negotiations, it is necessary for the party asserting the estoppel to prove that the other party induced him or her to believe that the other's freedom to withdraw has gone; that is to say, there must be an expectation that the other party is bound to proceed. This is reflected in the first of the six principles stated by Brennan J above and in the decision of the Privy Council in Attorney-General (Hong Kong) v Humphreys Estate (Queen's Gardens) Limited [1987] 1 AC 114 (" Humphreys "). (16) The adoption of any assumption or expectation by the party asserting the estoppel must be reasonable in all the circumstances: Waltons at 406 per Mason CJ and Wilson J, Verwayen at 414 per Mason CJ and at 445 per Deane J and Standard Chartered Bank Aust Limited v Bank of China (1991) 23 NSWLR 164 at 180 per Giles J. (17) A representation or conduct relied upon as founding an estoppel must be clear and unambiguous: Legione at 435 437, Foran v Wight [1989] HCA 51 ; (1989) 168 CLR 385 at 410 411 per Mason J, and Mobil Oil Australia Limited v Wellcome International Pty Limited (1998) 81 FCR 475 (" Mobil Oil ") at 513 per Lockhart, Lindgren and Tamberlin JJ; see also Spencer Bower's Law Relating to Estoppel by Representation at [V111.4.1]. (18) A corollary of the requirement of certainty is that it is a necessary element of the principle that the defendant has created or encouraged an assumption that "a particular legal relationship" or "interest" would arise or be granted: Mobil Oil at 513. (19) A pre-existing contractual relationship is not, under Australian law, a prerequisite to the application of the doctrine of promissory estoppel: Waltons at 399 403 per Mason CJ and Wilson J and 428 429 per Brennan J and Verwayen at 455 per Dawson J. (20) A person who is led to believe that he or she will be granted an interest in land and who acts to his or her detriment in that belief will be entitled to an interest in the land in accordance with the following statement of principle enunciated by Lord Kingsdown in his dissenting judgment in Ramsden v Dyson at 170:- "If a man, under a verbal agreement with a landlord for a certain interest in land, or, what amounts to the same thing, under an expectation created or encouraged by the landlord that he shall have a certain interest, takes possession of such land with the consent of the landlord, and upon the faith of such promise or expectation, with the knowledge of the landlord and without objection by him, lays out money upon the land, a Court of equity will compel the landlord to give effect to such promise or expectation." (21) Lord Kingsdown's statement of principle was approved by the Privy Council in Plimmer v Mayor of Wellington (1884) 9 AC 699 (" Plimmer") at 710 and again in Humphreys at 121: see also the analysis of the authorities by Priestley JA in Austotel Pty Limited v Franklins Selfserve Pty Limited (1989) 16 NSWLR 582 (" Austotel ") at 604 610. Priestley JA's distillation of the principles has been accepted as cogent: Mobil Oil at 512. (22) Subject to a qualification stated below, it is not necessary that the interest to the secured under the Ramsden v Dyson or Plimmer principle be expressly stated or that the terms of the arrangement or understanding to secure that interest be sufficiently certain to be enforceable as a contract. The Court must look at the circumstances of each case to determine the form of relief: Plimmer at 713 714, Inwards v Baker [1965] 2 QB 29 at 37, and Austotel at 607 610 per Priestley JA. (23) The qualification is that where the parties have not reached agreement as to the contractual terms necessary to establish the interest in the land, the Court will exercise caution in coming to a conclusion that it would be unconscionable to prevent a party from insisting upon its strict legal rights: Austotel at 585 586 per Kirby JA and at 620 621 per Rogers AJA. 835 The third category, operational detriment, involves the fulfilment of expectations. It is an aspect of the broader category of detriment referred to in Verwayen. 836 Three principles should be added to those which I included in my summary of the relevant legal principles of estoppel at [668-(5) (9)]; see also propositions (5) and (6) in Brennan J's summary of the principles of equitable estoppel set out at [668 (14)]. 839 Third, the principles of equitable estoppel are concerned with satisfaction of the minimum equity necessary to do justice. Equitable estoppel is intended to relieve against the detriment suffered and not to make good an expectation: see the Full Court's discussion of the principles stated in Verwayen in Mobil Oil at 516 517. 840 Fourth, once the detriment has ceased or been paid for, there is nothing unconscionable in a party insisting upon the enforcement of its strict legal rights: Verwayen at 501. 841 This case is to be distinguished from all of the proprietary estoppel, or estoppel by acquiescence, cases because from the time when QR sought to resile from the alleged assumptions, it offered to negotiate to provide access rights in accordance with the EA. 842 In particular, from the time of the offer of the Terminal Services Agreement in Mr Wilson's seventh affidavit, there was a specific offer of terms which in my view cannot be said to be uncommercial. It seems to me that for PN to succeed in establishing the necessary detriment I would have to be satisfied that the terms offered by QR are so unreasonable that they could not possibly satisfy any rights which might be embedded in the broad terms of cl 5(6)(a) of the EA. In particular, I would have to be satisfied that the proposed Terminal Services Agreement does not confer upon PN the ability to recoup any detriment suffered by the withdrawal of the offer of a long lease. 843 It must be borne in mind that QR has amended the terms of the proposed Terminal Services Agreement to meet some of the objections raised by PN in cross-examination of Mr Wilson. It is also to be borne in mind that QR has undertaken to keep the offer open until 90 days after the delivery of my judgment. 844 Although it is true that the term or period of the amended Draft Terminal Services Agreement is not for so long as NRC continues to carry on interstate freight operations, I do not think that this is an answer to QR's contention that the amended Draft Terminal Services Agreement will overcome any detriment suffered by the withdrawal of the "offer" of a long term lease. Nor is PN's objection that the extensions of the term be at QR's discretion. 845 What seems to me to be the decisive answer to the estoppel claim put by PN is that under the amended Draft Terminal Services Agreement, any detriment alleged by PN will cease for reasons set out below. That is to say the detriment, if any, will cease or be paid for within the principle stated by McHugh J in Verwayen . 846 Even if PN has not recouped the initial expenditure on the AR Terminal or on the East Coast Strategy, it will have ample opportunity to do so under the Terminal Services Agreement. It should be noted that the proposed Terminal Services Agreement incudes an offer by QR to expand the size of the terminal to add two parcels of land comprising an additional 3.25 hectares. This will enable QR to expand the capacity of the AR terminal so as to accommodate PN's existing profitable level of throughput with some increases as envisaged in the latest draft of the Terminal Services Agreement. It must be borne in mind that NRC has already had more than eight years to recoup any detriment said to have been occasioned by QR's change of position in March 1997. 847 PN called evidence from its Financial Controller, Mr Gilchrist. His evidence was that between 1 July 1993 and 30 June 2004, NRC had made a net benefit from its operation of the AR terminal of $104 million before tax and depreciation. He agreed that in calculating the net benefit it was appropriate to disregard depreciation.