In Crown Melbourne Ltd, the High Court held that a statement that lessees “would be looked after at renewal time” did not give rise to an estoppel in favour of the lessees. The judgments of the majority members of the Court should not distract attention from, or suggest a confinement of, the broad inquiry involved in assessing a claim of promissory (or proprietary) estoppel.

Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2016] HCA 26

Facts

Two tenants leased premises from Crown from which they operated restaurants. They renewed the leases on terms that required the tenants to undertake a major refurbishment of the premises. The new leases were limited to a term of five years and did not contain an option for renewal. The tenants were concerned about the cost of the refurbishment and sought to obtain a commitment from Crown to enable the tenants to continue to trade for a further five years. Crown was unwilling to bind itself to any further term on the leases. However, it was found that a representative of Crown made a statement to the effect that if the tenants undertook the refurbishment, they would be “looked after at renewal time”. Renewal time arrived, and Crown did not renew the tenants’ leases.

The tenants brought proceedings, claiming that as a consequence of the statements that they alleged had been made by Crown (which differed from the statement that was found to have been made), a collateral contract came into existence by which Crown was obliged to offer the tenants further five year leases on the same terms as the existing leases, or an estoppel arose which prevented Crown from denying that obligation.

The focus of this note is on the tenants’ estoppel claim.

The tenants’ representative gave evidence to the effect that he assumed that there would be a renewal of the leases, or an offer of renewal, on the same terms and conditions as the existing leases. However, it was found that, having regard to the statement made by Crown as found, the tenants expected that there would be an offer of a renewed lease on terms to be decided by Crown.

Decision

After a trip through VCAT, an appeal to a single judge of the Supreme Court and an appeal to the Court of Appeal, the High Court held by majority (Gageler J and Gordon J dissenting) that the tenants’ claim should have been dismissed. As to the tenants’ estoppel claim, in essence, French CJ, Kiefel and Bell JJ did so on the basis that the expectation that Crown’s representation engendered in the tenants was not the expectation that the tenants in fact acted upon ([39]-[40] and [43]-[44]). Keane J did so on the basis that the tenants did not act on an expectation that they would be offered new leases on terms corresponding to the existing leases, and further that the statement that was found to have been made could not reasonably have engendered such an expectation (at [77] and [160]). Nettle J expressed the view that the factual findings (and in particular, the disconformity between the tenants’ expectation as claimed and that as found) were not fatal to a claim that an estoppel arose, but held in effect that the tenants’ case as pursued in VCAT ought to have been dismissed, and that the proceedings should not be remitted to VCAT to permit the tenants to advance a lesser case for relief (at [225]-[227]). Gageler J and Gordon J would have upheld the tenants’ claim that there was a collateral contract, and did not address estoppel.

In the course of their reasons, the members comprising the majority addressed matters fundamental to promissory and proprietary estoppel. On some matters, common ground between four members of the Court can be discerned. The resolution of some other matters will have to wait for another day.

Equitable estoppel or distinct doctrines of promissory estoppel and proprietary estoppel?

The argument between the parties proceeded on the assumption that promissory and proprietary estoppel were distinct doctrines; there was no suggestion in argument that proprietary estoppel was a doctrine which was, or ought to be, subsumed within promissory estoppel. It is apparent from Keane J’s reasons that his Honour considered that there are two different equitable doctrines. On the other hand, Nettle J considered that proprietary estoppel was a sub-species of promissory estoppel ([215]), and that both were instances of equitable estoppel, which gave effect to a single foundational principle, and accordingly, that different rules did not govern their application ([216]-[217]). The plurality refrained from expressing a view on the question, but their Honours’ reasons contemplate that there could be a difference in what was needed to be proved to obtain relief under each of the two heads. What, then, must be proved in order to obtain relief under each of the two heads?

Representations capable of founding promissory estoppel

Reasons of four members of the Court support the proposition that for a representation to found a promissory estoppel, it must be such as to be capable of creating in the mind of a reasonable person the assumption or expectation that was acted upon, though it may be open to different constructions.[1] The plurality’s reasons are expressly to that effect ([35] and [39]), and Nettle J’s reasons suggest that a representation of that kind would be sufficient to found an estoppel on his conception of the principle (set out below), which was not as prescriptive and expressed in broader terms ([211] and [221]).

Reliance on an expectation held in fact

Further, the judgments of four members of the Court were to the effect that the innocent party must in fact have acted upon an assumption or expectation fostered by the other party, (necessarily perhaps) being an assumption or expectation in fact held by the innocent party.[2] The remarks that support that proposition were expressed in general terms, and the proposition is as applicable to proprietary estoppel as it is to promissory estoppel.

Nature of conduct capable of giving rise to a proprietary estoppel

One matter upon which no majority view emerges was the nature of conduct capable of giving rise to a proprietary estoppel. For Keane J, a representation relied upon to found a proprietary estoppel had to have the same quality as that described by the plurality as being sufficient to found a promissory estoppel (see above) (at [77], [149], [156] and [160]). Nettle J described the principle in more general terms (and as applicable to both promissory and proprietary estoppel); for his Honour, the question is whether the party sought to be estopped has played such a part in creating an assumption or expectation in the mind of a claimant, in reliance on which the claimant has acted to the claimant’s detriment, that it would be unconscionable for the estopped party to depart from the assumption or expectation ([211], [221]). The plurality refrained from expressing a view on what was sufficient in this respect to ground relief for proprietary estoppel ([36]-[38]).

Comment

When considering the remarks in the judgments relating to the nature of the relevant representation, it is important to bear in mind the factual context in which Crown was decided: the conduct on the part of Crown that was said to give rise to the estoppel was the representation. However, as Nettle J recognises, the doctrine does not confine attention to representations made by the party sought to be estopped, and that is so in the case of both promissory and proprietary estoppel. Rather, the question is whether a departure from the basic assumptions underlying the transaction between the parties would be unconscionable.[3] That is not to suggest some roving inquiry that seeks to identify conduct that can be characterised as ‘unconscionable’ in a loose sense.[4] In the case of promissory estoppel, departure from the assumption will be unconscionable where the party estopped creates or encourages an assumption in the other party that a promise will be performed, and the other party relies on that assumption to his detriment to the knowledge of the first party.[5] That will necessitate a close consideration of the conduct and states of mind of both parties. The conduct will include any representations by the party sought to be estopped made prior to the other party embarking on the course that would occasion detriment; the equivocality of the representations will obviously be relevant to the assessment of the conduct of both parties. But as Waltons Stores itself demonstrates, that question must also take account of conduct of the party sought to be estopped apart from representations that it made, including any inaction, and including after the other party embarks on the detrimental course. In other words, all of that party’s conduct relevant to the formation of and persistence in the other party’s expectation or assumption is relevant to the question whether departure from the assumption would be unconscionable. As in other contexts in equity,[6] the principle cannot be reduced to a series of check-boxes.[7] The plurality’s remarks as to pre-reliance representations in the context of promissory estoppel, which represents a majority view, should not be read to suggest otherwise.