On 11 December 2015, special leave to appeal to the High Court of Australia was granted in the case ofCrown Melbourne Limited v Cosmopolitan Hotel (Vic) Pty Ltd & Anor.

This case will provide the High Court with the opportunity to reconsider the threshold requirement for a promissory estoppel to arise, namely, that there be certainty in the promise or representation.

Background facts

Two companies of which Nicholas Zampelis was a director, Cosmopolitan Hotel (Vic) Pty Ltd and Fish and Company (Vic) Pty Ltd, were offered further leases in respect of separate restaurant premises at the Crown Casino and Entertainment Complex. The further leases were for a period of 5 years each. Neither contained an option to renew. Rather, clause 2.3 of each lease provided that at least 6 months but not more than 12 months before the Expiry Date, Crown must give notice to the Tenant stating whether Crown will:

  1. renew the Lease, and on what terms (in Crown’s absolute discretion);
  2. allow the Tenant to occupy the Premises on a monthly tenancy after the Expiry Date; or
  3. require the Tenant to vacate the Premises by the Expiry Date.

Each of the leases also contained terms requiring the tenants to undertake major refurbishment works at the beginning of the leases.

In discussions with Crown before and after they executed the leases, the tenants contended that that they should have 10 year lease terms, or at least an option to renew the leases for a further 5 year period, so as to give them enough time to recoup the cost of the major refurbishments.

The tenants alleged (and it was ultimately accepted at trial) that a Crown employee stated to Mr Zampelis that the leases had been limited to a 5 year term only because they would thereby be aligned with other tenants’ leases in the Complex; that he should spend money on refurbishment that would result in a high quality finish for the two restaurants; and that if he did so, he would be ‘looked after at renewal time’.

The tenants proceeded to delivered executed leases to Crown and undertake the major refurbishments, which ultimately cost Cosmopolitan about $1.8 million and Fish and Company about $2.85 million.

At the end of the 5 year period of the leases, Crown delivered notices under clause 2.3(c) requiring the tenants to vacate the premises. The tenants did so. They then commenced proceedings against Crown in the Victorian Civil and Administrative Tribunal (VCAT), relying on various causes of action including promissory estoppel.

Applicable principles

In broad terms, the doctrine of promissory estoppel says that equity will grant a remedy in order to prevent unconscionable conduct on the part of the party who, having made a promise to another who acts on it to his or her detriment, seeks to resile from the promise. The remedy is not designed to enforce the promise (as in contract law) but, instead, is moulded to achieve the ‘minimum equity’ required in the particular circumstances of the case.

Subsumed within this broad statement of the doctrine are a number of requirements, the first of which is that a representation or promise must be ‘clear’, or ‘clear and unequivocal’ before it can found an estoppel. The judgment of Mason and Deane JJ in the High Court of Australia in Legione v Hateley (1983) 152 CLR 406 at 436-7 is commonly cited as authority for this requirement. However in Sullivan v Sullivan [2006] NSWCA 312 at [85], Hodgson JA (with whom McColl JA agreed) in the New South Wales Court of Appeal said that:

Generally, a promise or representation will be sufficiently certain to support an estoppel if it was reasonable for the representee to interpret the representation or promise in a particular way and to act in reliance on that interpretation, thereby suffering detriment if the representor departs from what was represented or promised. Generally, if there is a grey area in what is represented or promised, but it was reasonable for the representee to interpret it as extending at least to the lower limit of the grey area and to act in reliance on it as so understood, I see no reason why the Court should not regard the representation or promise as sufficiently certain up to this lower limit.

Issues to be considered by the High Court

In the present case, there could be little doubt that the promise in question that the tenants would be ‘looked after at renewal time’ was too ambiguous or uncertain to give rise to a contractual obligation owed by Crown to the tenants. As the majority in the Victorian Court of Appeal said at [183] (per Whelan JA, with whom Santamaria JA agreed):

A tenant might be ‘looked after’ by an offer [to renew the lease] under cl 2.3(a) or it might not. It depends entirely upon the terms of the offer. Indeed, the exclusive association with cl 2.3(a) in itself is unwarranted. A tenant might be ‘looked after’ by a notice under cl 2.3(b) if the period of occupation was long enough, or even under cl 2.3(c) if the tenant was, for example, offered compensation for fixtures and fittings left behind.

Mr Zampelis, the person to whom the promise was made on behalf of the tenants, gave evidence at trial that he understood the promise as meaning that Crown would renew the lease for a further 5 years on the same (or similar) terms.

The trial judge in the Victorian Supreme Court (Hargrave J) held that the sense in which Mr Zampelis understood the promise was ‘wholly unreasonable’, with the result that the estoppel case ‘falls at the first hurdle’.

The majority in the Victorian Court of Appeal, however, took a different approach based upon the ‘grey area’ concept introduced in the above extract from the judgment of Hodgson JA in Sullivan. Whelan J held that:

“Neither VCAT nor the trial judge have addressed estoppel … by reference to the ‘lower limit’ of what was meant by ‘looking after’ the tenants at renewal. … As no submissions have been heard upon the claim formulated in that way, it seems to me that the matter must be remitted to VCAT for this aspect of the tenants’ case to be ruled upon and determined.”

At the hearing of Crown’s application for special leave to appeal to the High Court on 11 December 2015, counsel for Crown, Bret Walker SC, submitted that the Victorian Court of Appeal had entirely misconceived and erred in applying, in the circumstances of the present case, “Justice Hodgson’s mooted idea of a grey area”. Mr Walker submitted that this presents as an “ideal case to consider and, if thought appropriate, to vindicate the requirement in promissory estoppel for sufficient clarity [to the promise] which, after all, is a matter of the policy of the law … bearing in mind that it is the law of contract to which this is ancillary or which it outflanks”.

Counsel for the tenants, Michael Pearce SC, confirmed that even though the representee, Mr Zampelis, did not have in his mind an assumption or expectation of something less than a renewal of the lease, the tenants intend to argue that Crown can be estopped from departing from an assumption or expectation which Mr Zampelis never subjectively held as a result of the representation, and can be held to the reasonable terms of the crucial representation that the tenants would be “looked after”.

The High Court will likely hear this matter sometime during the second half of 2016.