Case: Waltons Stores (Interstate) Limited v Maher [1988] HCA 7 ; (1988) 164 CLR 387
Outcome: cited
In Waltons Stores (Interstate) Limited v Maher [1988] HCA 7 ; (1988) 164 CLR 387 (" Waltons") at 423, Brennan J pointed to the difficulty of contending for an estoppel against a party's freedom to withdraw from contractual negotiations. His Honour said that it is only if the first party induces the other to believe that the inducer, ie the first party, is already bound and that there is no freedom to withdraw, that it could be unconscionable for the first party to assert an entitlement to withdraw from the negotiations. 2 Notwithstanding this difficulty, the applicant contends that the respondent is estopped from interfering with its occupation, management and control of a parcel of land comprising about 202,000 square metres and known as the Acacia Ridge Interstate Container Terminal ("the AR terminal") near Brisbane in circumstances in which the respondent withdrew from negotiations for a 30 year lease. The respondent owns an adjoining parcel of land comprising about 86,000 square metres. This is known as the Q-link Terminal. I will describe its location at [194]. The respondent conducts rail freight services from the Q-link terminal. The applicant makes no claim to that terminal. These proceedings are concerned solely with the applicant's claim in respect of the AR terminal. 3 The respondent owns the AR terminal, which is an intermodal terminal enabling the transfer of containers between trains and trucks which service the Brisbane area. The applicant went into possession, and assumed the management and operational control, of the AR terminal on 5 April 1993. It has remained in occupation, management and control ever since. It occupied the AR terminal as a monthly tenant under an expired lease from April 1996 until its tenancy was purportedly terminated in May 2003. It remained in occupation thereafter as explained below. 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. 719 The short answer to the status of documents such as the Task Force Report and the Heads of Government Agreement is that they were superseded by the EA. In an estoppel case, it is possible to put forward an understanding based on communications which preceded the execution of a written agreement: cf Hoyts' Pty Limited v Spencer [1919] HCA 64 ; (1919) 27 CLR 133; see Waltons at 399 403. But it seems to me that here any understandings or assumptions based on pre-contractual reports or heads could not be reasonable. 765 At its highest, Mr O'Rourke's concession, and my view that Messrs Graham and Butcher held a similar assumption, establishes no more than a belief by all concerned that there would be negotiations. That claim runs headlong into the difficulty raised by the Privy Council in Humphreys and reiterated by Brennan J in Waltons . A hope or expectation that an agreement will be reached is not enough. The party asserting an estoppel must go further. 766 The principles are summed up in the following passage from the judgment of Brennan J in Waltons at 423:- "Parties who are negotiating a contract may proceed in the expectation that the terms will be agreed and a contract made but, so long as both parties recognize that either party is at liberty to withdraw from the negotiations at any time before the contract is made, it cannot be unconscionable for one party to do so. Of course, the freedom to withdraw may be fettered or extinguished by agreement but, in the absence of agreement, either party ordinarily retains his freedom to withdraw. It is only if a party induces the other party to believe that he, the former party, is already bound and his freedom to withdraw has gone that it could be unconscionable for him subsequently to assert that he is legally free to withdraw." 767 As I understand PN's claim under this head, it is that QR was under a duty to inform NRC that it did not intend to proceed with the negotiations. The argument is built upon QR's knowledge that NRC was spending large sums on, or in relation to, the AR terminal. 768 However, I cannot see that this claim has any foundation. PN fairly and properly conceded that the negotiations for a new lease in 1996 were conducted in good faith by QR. The position might have been different if QR had not negotiated in good faith because an argument would then have been available that QR had resiled from an assumption which might, at least on one view, have been created by it. But that is not the case here. The assumption was that QR would negotiate in good faith for a 30 year lease. That was what took place, albeit the parties were still at odds on a number of fundamental issues when QR had a change of heart. 777 Priestley JA was there applying, although distinguishing on the facts, the principle stated by the Privy Council in Humphreys . His Honour's approach also reflects the principle stated by Brennan J in Waltons which I have set out at [766] above.