Is it necessary for CTA to have been induced to adopt an assumption that the defendants were legally obliged to grant it a right of occupation?
151The question whether a party claiming an equity arising by estoppel must have adopted an assumption about a matter of binding legal right can arise both in cases where commercial parties are negotiating the terms of a contract which they propose to enter into and in cases where a party to a domestic or familial relationship assumes that an interest will be granted without there being any negotiation as to the terms of a contract. This was a point made by Lord Walker of Gestingthorpe in Cobbe at [68] where his Lordship said:
"It is unprofitable to trawl through the authorities on domestic arrangements in order to compare the forms of words used by judges to describe the claimants' expectations in cases where this issue (hope or something more?) was not squarely raised. But the fact that the issue is seldom raised is not, I think, coincidental. In the commercial context, the claimant is typically a business person with access to legal advice and what he or she is expecting to get is a contract. In the domestic or family context, the typical claimant is not a business person and is not receiving legal advice. What he or she wants and expects to get is an interest in immovable property, often for long-term occupation as a home. The focus is not on intangible legal rights but on the tangible property which he or she expects to get. The typical domestic claimant does not stop to reflect (until disappointed expectations lead to litigation) whether some further legal transaction (such as a grant by deed, or the making of a will or codicil) is necessary to complete the promised title."
152But the cases do not neatly fall into two such separate categories. This is a case involving commercial parties, but one where there was also a familial relationship between the parties through Mr Hogan's family relationship with three of the owners. Despite there having been early discussions about terms of an agreement for lease and although there was discussion and agreement about some terms of the lease, CTA did not expect to get a contract. Moreover, many cases between commercial parties where a plea of equitable estoppel has succeeded are cases where the plaintiff's focus was on intangible rights, such as a right to possession or a right of way.
153Further, as Dr Silink argues in her article "Equitable Estoppel in 'Subject to Contract Negotiations'" (2011) 5 Journal of Equity 252, similar issues arise in cases of contractual negotiation which are "subject to contract" as in domestic proprietary estoppel cases including inter vivos testamentary dispositions. In both classes of case the parties are taken to be aware of the right of the other either not to proceed with a contract or to change his or her testamentary intentions.
154Across the entire field of cases of promissory and proprietary estoppel there is support for both the narrower view reflected in the first of the criteria stated by Brennan J in Waltons Stores and a broader view reflected in the judgment of Mason CJ and Wilson J in Waltons Stores and the formulation of principle by Priestley JA in Austotel. Dr Silink concludes that:
"The broader view of the scope of equitable estoppel, both in relation to commercial negotiations and more generally is preferable to the narrower test with its rigid requirement for a belief as to legal entitlement. As has been developed, it is submitted that the broader view of the scope of equitable estoppel is not a weaker test, simply a less prescriptive one, and one that is consistent with the scope of proprietary estoppel as it has developed both prior to and since the development of equitable estoppel in Waltons v Maher."
155I came to the same conclusion in EK Nominees Pty Ltd v Woolworths Limited [2006] NSWSC 1172. One issue is whether there is now binding Court of Appeal authority to the contrary.
156Before Ramsden v Dyson there were authorities that required that a party asserting an estoppel have a mistaken belief as to his rights, take steps in reliance on the mistaken belief, and that the party estopped know of that mistake and belief as to rights (East India Company v Vincent (1740) 2 Atk 84; 26 ER 451; Pilling v Armitage (1805) 12 Ves Jun 78; 33 ER 31). There were other cases in which an estoppel by encouragement was found where there was no indication that the plaintiff was acting to his detriment in a mistaken belief as to his rights (Stiles v Cowper (1748) 3 Atk 692; 26 ER 1198; Jackson v Cator (1800) 5 Ves Jun 688; 31 ER 806; Powell v Thomas (1848) 6 Hare 300; 67 ER 1180). In Rochdale Canal Co v King (No. 2) (1853) 16 Beav 630; 51 ER 924, Sir John Romilly MR expressed the principle in terms that did not require a mistaken belief as to rights (at 633-634, 925). His Lordship said:
"The principle on which the Defendants rely is one often recognised by this Court, namely, that if one man stand by and encourage another, though but passively, to lay out money, under an erroneous opinion of title, or under the obvious expectation that no obstacle will afterwards be interposed in the way of his enjoyment, the Court will not permit any subsequent interference with it, by him who formally promoted and encouraged those acts of which he now either complains or seeks to obtain the advantage. This is the rule laid down in Dann v Spurrier (7 Vez 231), Powell v Thomas (6 Hare 300), and many other cases, to which it is unnecessary to refer, because the principle is clear." (emphasis added)
157The same divergence appears in the reasoning of the majority of the House of Lords in Ramsden v Dyson and the speech of Lord Kingsdown in dissent.
158In Ramsden v Dyson the plaintiff (Thornton) held two parcels of land as a tenant at will. He and his mortgagee (Dyson) contended that he was entitled to be granted a lease for 60 years with a right of perpetual renewal at the expiration of every 20 or 40 years on certain well-understood terms. He was successful before the Vice-Chancellor. No written lease had been entered into. Ramsden was the owner of land that was managed for him by his steward or agent who kept a book of tenants. A person desiring to take land for the purpose of building a house would apply to the agent for the land he wanted. The area of land was determined, a ground rent fixed and the name of the tenant entered on the roll. If the tenant wished to sell his house, he and the purchaser attended on the agent and the name of the purchaser was substituted for that of the original tenant. The same course was followed on the granting of a mortgage or on the death of a tenant where the legatee or the next of kin was substituted for the deceased. Persons holding land in this way from Ramsden were described as holding by "tenant right". There were other tenants who were given formal 60-year leases at higher rents. Thornton took possession of two parcels of land, one in 1837 and the other in 1845. His tenure depended on what was said to him, and what he assumed his rights to be, when he took and then built on the first parcel.
159Thornton alleged that after the area and location of the first grant of land was agreed on and a ground rent fixed he commenced building his house. He alleged that whilst the building of the house was in progress and was nearly completed, he consulted an agent of Ramsden as to the prudence of taking a lease, but was told it would be folly to take a lease as he was equally safe without one and that he could get a lease whenever he wanted it (at 138).
160The plaintiffs relied on two representations: first, that persons taking land without a lease would never be disturbed so long as they paid their rent, and secondly that persons taking land without a lease might have a lease whenever they chose to call for it (at 145). The second representation was not made to Thornton, but to other tenants from which Thornton may have been led to believe that he had a right to call for a lease whenever he should think fit (at 150).
161The majority of the House of Lords held that the successor in title to Sir John Ramsden was not precluded from insisting on his rights at law and was not required to provide the perpetual lease as claimed. Lord Cranworth LC stated the general principle (at 140-141):
"If a stranger begins to build on my land supposing it to be his own, and I, perceiving his mistake, abstain from setting him right, and leave him to persevere in his error, a Court of equity will not allow me afterwards to assert my title to the land on which he had expended money on the supposition that the land was his own. It considers that, when I saw the mistake into which he had fallen, it was my duty to be active and to state my adverse title; and that it would be dishonest in me to remain wilfully passive on such an occasion, in order afterwards to profit by the mistake which I might have prevented.
But it will be observed that to raise such an equity two things are required, first, that the person expending the money supposes himself to be building on his own land; and, secondly, that the real owner at the time of the expenditure knows that the land belongs to him and not to the person expending the money in the belief that he is the owner. For if a stranger builds on my land knowing it to be mine, there is no principle of equity which would prevent my claiming the land with the benefit of all the expenditure made on it. There would be nothing in my conduct, active or passive, making it inequitable in me to assert my legal rights.
It follows as a corollary from these rules, or, perhaps, it would be more accurate to say it forms part of them, that if my tenant builds on land which he holds under me, he does not thereby, in the absence of special circumstances, acquire any right to prevent me from taking possession of the land and buildings when the tenancy has determined. He knew the extent of his interest, and it was his folly to expend money upon a title which he knew would or might soon come to an end."
162His Lordship added (at 142):
"... and if I had come to the conclusion that Thornton, when he erected his building in 1837, did so in the belief that he had against Sir John an absolute right to the lease he claims, and that Sir John knew that he was proceeding on that mistaken notion, and did not interfere to set him right, I should have been much disposed to say that he was entitled to the relief he sought. But a full consideration of the evidence has not led me to any such conclusion. It has failed to satisfy me, first, that Thornton supposed that he had against Sir John any absolute right beyond that of a tenant from year to year; or, secondly, that Sir John knew or believed that Thornton was expending his money in the mistaken belief that he possessed such a right.",
and further (at 145-146):
"If any one makes an assurance to another, with or without consideration, that he will do or will abstain from doing a particular act, but he refuses to bind himself, and says that for the performance of what he has promised the person to whom the promise has been made must rely on the honour of the person who has made it, this excludes the jurisdiction of Courts of equity no less than of Courts of law.
...
What he is represented to have said to them is, that so long as they paid their ground rents, neither they nor their children after them would be molested; not that they could not, but that they would not be molested." (emphasis in original)
163Lord Wensleydale gave a concurring speech and Lord Westbury also agreed. It was critical to the reasoning of the majority that the tenant in Ramsden v Dyson failed because he did not believe he had acquired an absolute right (that is, a legal right as distinct from an expectation) that an interest would be granted beyond that of a tenant at will or a tenant from year to year, but was depending on the family's honour.
164It is Lord Kingsdown's dissenting speech in Ramsden v Dyson which has generally commanded acceptance. Lord Kingsdown stated the principle as follows (at 170-171):
"The rule of law is applicable to the case appears to me to be this: 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.
...
If, at the hearing of the cause, there appears to be such uncertainty as to the particular terms of the contract as might prevent a Court of equity from giving relief if the contract had been in writing, but there had been no expenditure, a Court of equity will nevertheless, in the case which is above stated, interfere in order to prevent fraud, though there has been a difference of opinion amongst great Judges as to the nature of the relief to be granted ... but I do not understand any doubt to have been entertained ... that, either in the form of a specific interest in the land, or in the shape of compensation for the expenditure, a Court of equity would give relief, and protect in the meantime the possession of the tenant.
If, on the other hand, a tenant being in possession of land, and knowing the nature and extent of his interest, lays out money upon it in the hope or expectation of an extended term or an allowance for expenditure, then, if such hope or expectation has not been created or encouraged by the landlord, the tenant has no claim which any Court of law or equity can enforce." (emphasis added)
165What is absent from this statement of principle is any requirement that the tenant believe that the landlord is legally obliged to confer an interest in the land on him. In Plimmer v The Mayor of Wellington (1884) 9 App Cas 699 the Privy Council said (at 711-712) that there was no disagreement among the judges in Ramsden v Dyson about the principles of law applicable to that case, only on the inferences to be drawn from the facts. That is not so. Critical to the reasoning of the majority was that the tenant never believed that he had any legal right beyond that of a tenant at will, but was relying on the honour of the landlord's family not to disturb his possession and did not suppose that he could compel the family to grant a lease as a matter of right (at 150). Not only was this distinction absent from Lord Kingsdown's statement of the general principles, but it was also absent from his analysis of the facts.
166Lord Kingsdown accepted the respondent's evidence that:
"... those who built and entered on their land without leases, at lower rents, did so on the assurance that they might have leases whenever they required them, and that in the meantime they should not be disturbed in their possessions, or at all events, not without full compensation." (at 172)
Lord Kingsdown did not inquire whether the tenant considered that that assurance gave him legally enforceable rights, notwithstanding that it was an important part of the reasoning of the majority that the tenant did not have that belief and in any event, even if he did, Ramsden did not know that the tenant was building on the land in the belief that he had such legally enforceable rights.
167In Cobbe Lord Walker said (at [64]):
"[64] On this point the language of Lord Kingsdown's much-quoted statement in Ramsden v Dyson at p 170 is not without ambiguity:
'. . . 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 . . . .'
But an expectation of an interest is the same thing as a contracted interest only if it can be relied on. The rest of the speech indicates (at p 172) that Lord Kingsdown's reading of the facts was that the tenants believed (wrongly) that they had a legal right to a long lease, and that that was of critical importance. So he seems not to have differed, as to the law on this point, from Lord Cranworth (at pp 145-146, a passage I have already quoted) and the rest of the majority. Reliance on the Ramsden family's honour was not enough."
168With respect, that is not correct. It is a misreading of Lord Kingsdown's speech that by an "expectation" he meant a belief in a legally enforceable right. As Dr Silink points out:
"... an expectation of an interest in land 'amounts to the same thing' as a verbal agreement for the disposition of an interest in land because neither can be relied upon in a legal sense, both being unenforceable at law. Hence the role for equity in the circumstances Lord Kingsdown described - creation or encouragement by the defendant of an expectation in the plaintiff that he shall have an interest and knowledge of the detrimental reliance."
169This is even clearer from the last of the passages quoted at [164] above where Lord Kingsdown says that a tenant who has a "hope or expectation" will have no claim if such hope or expectation has not been created or encouraged by the landlord. Clearly if the hope or expectation has been so encouraged the tenant could have a claim.
170Also, with respect, Lord Kingsdown did not say anything to indicate that on his reading of the facts the tenants wrongly believed they had a legal right to a long lease. Lord Kingsdown merely referred to the evidence of the giving of the assurance. He made no reference to the distinction which was critical to the reasoning of the majority. As that distinction forms no part of Lord Kingsdown's statement of principle, the better conclusion is that he did not regard it as relevant.
171In Plimmer v The Mayor of Wellington, Plimmer constructed a jetty on public land. At the instance of the government he extended the jetty and subsequently allowed the government to cut away the shore end of the jetty in order to reclaim land, but at the same time permitted Plimmer to connect the remaining portion of the jetty with a new quay. The Privy Council held that Plimmer was entitled to a perpetual licence to use the land for the purposes of the jetty having been encouraged, indeed requested, by the government to incur expense on extending the jetty over the government's land for its benefit. It was argued that no such equity could be raised unless the occupant who improved the land believed it to be his own and the owner of the improved land knew of that mistake and belief (at 711). Of this argument the Privy Council said that:
"It is difficult to suppose that a person who is so using the seabed, and the Government who are its owners, can go on dealing with one another in the way stated in this case for a series of years except with a sense in the minds of both that the occupant has something more than a merely precarious tenure." (at 712)
172This was not a finding that Plimmer mistakenly assumed that he had a legal right to a perpetual licence over the land. There was no finding that he had a belief as to his legal rights as distinct from an assumption that his licence to use the seabed for his jetty would not be revoked. As Oliver J said in Taylor's Fashions Limited v Liverpool Victoria Trustees Co Limited at 148, the stated case showed that Mr Plimmer knew the state of the title at the date when he incurred the expenditure and there was simply a common supposition that he would not be summarily turned out (see 9 App Cas at 701).
173Other 19th century cases insisted on the party claiming the benefit of an estoppel to have been mistaken as to rights (Crampton v Varna Railway Company (1872) LR 7 Ch App 562 at 568). In Willmott v Barber (1880) 15 Ch D 96, Fry J listed five requirements for a proprietary estoppel as follows (at 105-106):
"A man is not to be deprived of his legal rights unless he has acted in such a way as would make it fraudulent for him to set up those rights. What, then, are the elements or requisites necessary to constitute fraud of that description? In the first place the plaintiff must have made a mistake as to his legal rights. Secondly, the plaintiff must have expended some money or must have done some act (not necessarily upon the defendant's land) on the faith of his mistaken belief. Thirdly, the defendant, the possessor of the legal right, must know of the existence of his own right which is inconsistent with the right claimed by the plaintiff. If he does not know of it he is in the same position as the plaintiff, and the doctrine of acquiescence is founded upon conduct with a knowledge of your legal rights. Fourthly, the defendant, the possessor of the legal right, must know of the plaintiff's mistaken belief of his rights. If he does not, there is nothing which calls upon him to assert his own rights. Lastly, the defendant, the possessor of the legal right, must have encouraged the plaintiff in his expenditure of money or in the other acts which he has done, either directly or by abstaining from asserting his legal right. Where all these elements exist, there is fraud of such a nature as will entitle the Court to restrain the possessor of the legal right from exercising it, but, in my judgment, nothing short of this will do."
174Later cases show that these requirements need not always be met. In Inwards v Baker a son was encouraged by his father to build a house on the father's land. In contrast to Dillwyn v Llewelyn (1862) 4 De GF & J 517; 45 ER 1284 there was no promise from the father that the son would have any interest in the land. After building the house the son moved into it and remained there until after his father's death. The trustees of the father's estate sought the son's eviction. The Court of Appeal rejected that claim. The trustees argued (at 34) that it was not sufficient that the father encouraged an expectation by the son that he would not be turned out, but that there must be some expectation of the creation of some legal right rather than merely reliance on the father's goodwill, citing Ramsden v Dyson. The Court of Appeal applied the statement of law of Lord Kingsdown in Ramsden v Dyson that had been applied in Plimmer v The Mayor of Wellington in holding that it was sufficient that the son had been induced to give up his project of building a house on other land to build on the father's land on the expectation that he would be able to remain there (at 37, 38).
175In Crabb v Arun District Council a landowner had discussions with his adjoining neighbour (the council) whereby it was agreed in principle that he would have access at a particular point on the boundary to then use a road on the council's land to obtain access to a public road. Whilst there was an agreement in principle, there was no firm undertaking. There was no promise. But the council encouraged the landowner in that belief by installing a gate at the agreed point and allowing the landowner to use the proposed right of way. In the belief that "he had or would be granted a right of access" the landowner sold off part of the land so that the balance of the land held was landlocked unless he could use the right of access for which there had been an agreement in principle. The council argued in reliance on Ramsden v Dyson that to found a proprietary estoppel, there has to be an encouragement of belief in a right, not in an expectation of a right in the future. That argument was rejected. Although at one point Lord Denning MR said that the plaintiff thought that he already had a right of access at the point where gates had already been erected (at 186), his judgment proceeded on the basis that the defendant's conduct led the plaintiff to believe that he had, or would be granted, a right of access at that point (at 188). This was sufficient to satisfy the equity explained by Lord Kingsdown in Ramsden v Dyson who spoke of "an expectation, created or encouraged" (at 188). Scarman LJ expressly stated that it was not a correct statement of the law that in order to establish an equity by estoppel there must be a belief by the plaintiff in the existence of a right created or encouraged by the words or actions of the defendant (at 193). His Lordship said that the law had developed and was correctly stated by Lord Kingsdown in his dissenting speech in Ramsden v Dyson (at 193-194).
176The agreement in principle did not cover all of the terms on which a right of access would be given. Scarman LJ said (at 196):
"The nature of the legal right to be granted had to be determined. It might be given by way of licence. It might be granted by way of easement. Conditions might be imposed. Payment of a sum of money might be required."
177This indefiniteness of the nature of the right did not prevent there being an estoppel. Scarman LJ said (at 198):
"There being no grant, no enforceable contract, no licence, I would analyse the minimum equity to do justice to the plaintiff as a right either to an easement or to a licence upon terms to be agreed. I do not think it necessary to go further than that. Of course, going that far would support the equitable remedy of injunction which is sought in this action. If there is no agreement as to terms, if agreement fails to be obtained, the court can, in my judgment, and must, determine in these proceedings upon what terms the plaintiff should be put to enable him to have the benefit of the equitable right which he is held to have ... Since Ramsden v Dyson the courts have acted upon the basis that they have to determine not only the extent of the equity, but also the conditions necessary to satisfy it, and they have done so in a great number and variety of cases."
178Because the defendant's conduct in removing the gates and erecting a fence had sterilised the plaintiff's land for some years, the Court of Appeal held that the plaintiff was entitled to a right of way without being required to pay money. Otherwise, according to Scarman LJ, reasonable terms should be agreed, or if not agreed, determined by the court (at 199).
179In Taylor's Fashions Limited v Liverpool Victoria Trustees Co Limited, Oliver J rejected an argument that to establish a case of proprietary estoppel by acquiescence the plaintiff must show an erroneous supposition of his legal rights and that the error was known to the other party. Oliver J did not accept that all of the five probanda enunciated by Fry J in Willmott v Barber were necessary applicable to every case of estoppel by acquiescence (at 151). His Lordship said (at 151-152):
"Furthermore the more recent cases indicate, in my judgment, that the application of the Ramsden v. Dyson, L.R. 1 H.L. 129 principle - whether you call it proprietary estoppel, estoppel by acquiescence or estoppel by encouragement is really immaterial - requires a very much broader approach which is directed rather at ascertaining whether, in particular individual circumstances, it would be unconscionable for a party to be permitted to deny that which, knowingly, or unknowingly, he has allowed or encouraged another to assume to his detriment than to inquiring whether the circumstances can be fitted within the confines of some preconceived formula serving as a universal yardstick for every form of unconscionable behaviour."
180His Lordship said that there had been a "virtual equation of promissory estoppel and proprietary estoppel or estoppel by acquiescence as mere facets of the same principle" (at 153). The influence of these views is manifest in Waltons Stores v Maher.
181Oliver J repeated these views as Oliver LJ in the Court of Appeal in Habib Bank Limited v Habib Bank AG Zurich [1981] 1 WLR 1265 at 1285; [1981] 2 All ER 650 at 666. Watkins and Stevenson LJJ agreed.
182A similar approach was taken by Goff J in Holiday Inns Inc v Broadhead where the principle was stated thus:
"The authorities clearly establish that there is a head of equity under which relief will be given where the owner of property seeks to take an unconscionable advantage of another by allowing or encouraging him to spend money, whether or not on the owner's property, in the belief known to the owner that the person expending the money will enjoy some right or benefit over the owner's property which the owner then denies him. The authorities also establish that this relief can be granted although the agreement or understanding between the parties was not sufficiently certain to be enforceable as a contract, and that the Court has a wide, albeit of course judicial, discretion to what extent relief should be given and what form it should take."
183This was cited with evident approval of the Privy Council in Attorney-General (Hong Kong) v Humphreys Estate at 122. The relevant principle of law stated by the Privy Council (at 124) was:
"Their Lordships accept that the government acted to their detriment and to the knowledge of HKL in the hope that HKL would not withdraw from the agreement in principle. But in order to found an estoppel the government must go further. First the government must show that HKL created or encouraged a belief or expectation on the part of the government that HKL would not withdraw from the agreement in principle. Second, the government must show that the government relied on that belief or expectation." (emphasis added)
184Importantly, the principle as stated was that the party estopped must create or encourage a belief or expectation on the part of the other that it would not withdraw from the agreement in principle, not that it could not withdraw. This stands in contrast to what Lord Cranworth said in Ramsden v Dyson at 146 quoted at para [162] above.
185On the other hand the Privy Council appeared to proceed on the basis that it was necessary for the government to show that it acted to its detriment on the basis of an assumption induced by HKL that HKL could not withdraw from the agreement in principle. But this was a factual finding made on the basis that because the government knew HKL asserted its right to withdraw from the agreement in principle and had asserted its own right to do so, HKL did not induce the government to believe that HKL would not do so.
186In Waltons Stores (Interstate) Limited v Maher, Brennan J took the Privy Council in Attorney-General (Hong Kong) v Humphreys Estate to have decided that it was not sufficient to show that the government expected that, as a matter of probability, HKL would not withdraw from the agreement, but that it was necessary to show an expectation that HKL was bound to proceed (at 422). Brennan J said (at 422-423) that:
"... an assumption or expectation by one party which does not relate to what the other party is bound to do or not to do gives no foundation for an equitable estoppel, though the assumption or expectation relates to the prospect of the other party conducting himself in a particular way. The risk that the other party who, being free to conduct himself in whatever way he chooses, may choose to conduct himself in a way different from that assumed or expected rests with the party who adopts the assumption or expectation.
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 recognise 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."
187That was not the view of Mason CJ and Wilson J. Their Honours described Attorney-General (Hong Kong) v Humphreys Estate as turning on a finding that the Hong Kong Government had failed to show that HKL had created or encouraged a belief or expectation on the part of the government that it would not withdraw from an agreement in principle reached with the government.
188EK Nominees Pty Ltd v Woolworths Limited was a case in which an owner of land was both encouraged and required by an intending lessee to incur considerable expenditure to obtain development consent for a proposed shopping centre. Its negotiations with the intending lessee were made subject to contract. It did not consider that the intending lessee was contractually bound to it or (if there is a difference) was legally obliged to enter into a contract with it. Nonetheless, I held that it was unconscionable for the intending lessee to deny its assumption that it would proceed to enter into the agreement for lease. In so concluding I applied the statement of principle of Mason CJ and Wilson J in Waltons Stores (Interstate) Limited v Maher and the formulation of the principle by Priestley JA in Silovi Pty Ltd v Barbaro at 472 and Austotel Pty Ltd v Franklins Self-Serve Pty Ltd rather than the first of the criteria stated by Brennan J in Waltons Stores. I said (at [258], [259] and [261]):
"[258] Nor, with respect to Brennan J in Waltons Stores, need it always be the case that 'so long as both parties recognise 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.' Whether it is unconscionable for one party to withdraw will depend on what was the nature of the risk of his or her withdrawal which the other party was induced to assume, and the extent to which the other party acted to his or her detriment on the basis of that assumption, to the knowledge, or with the encouragement, of the first party.
[259] In Baird Textile Holdings Ltd v Marks & Spencer plc [2001] All ER (D) 352, where the parties were in a close and long-term business relationship and refrained from entering into legally binding contracts, Mance LJ said (at [96]):
'They must be taken to have been well aware of the legal significance of contracting or not contracting. [Counsel] accepted that the question was ultimately one of risk. In my view, these considerations indicate that the risk fell on [the appellant] in the present situation.'
However, it is not the law that parties cannot find relief on the principles of equitable estoppel merely because they have not entered into contractual relationships. The fact that a party might rely upon a non-contractual representation or promise to his detriment is the very reason for the doctrine of equitable estoppel. The doctrine affords relief against people acting to their detriment on unenforceable promises, if all of the circumstances make it unconscionable for the estopped party to resile from the assumption which he or she has induced the other to make. The fact that the parties have not entered a contractual relationship provides the occasion for considering the doctrine of estoppel. It is not the end of the inquiry. In Baird Textiles, the Court of Appeal found that the High Court's decision in Waltons Stores went beyond the limits of equitable estoppel provided for in English law. Their Lordships accepted that their decision in that case may have been different if it were open to them to apply the principles in Waltons Stores.
...
[261] ... the recognition by one party that the other party is not legally bound by a contract, or is not legally bound to enter into a contract, (if there is a difference), cannot in all circumstances mean that it is not unconscionable for the opposite party to withdraw if it has induced the first party to act to its detriment in the belief that a contract will eventuate. Whether the first party is relying on the other's contractual intentions, whether it is doing so reasonably, and whether it has accepted the risk of the allegedly estopped party not proceeding in any circumstance, are questions of fact depending upon particular circumstances."
189EK Nominees Pty Ltd v Woolworths Limited was referred to with apparent approval in Young, Croft and Smith "On Equity" (Lawbook Co. 2009) at [12.290] who stated that as an element of promissory estoppel:
"It is not necessary that the assumption of the party seeking relief was that the other party was legally bound to do, or abstain from doing, something. It is enough that the party claiming relief was induced to act to its detriment on the basis that the assumption would be fulfilled: EK Nominees Pty Ltd v Woolworths Ltd (EK Nominees)."
This endorsement was in the context of a discussion of the principles of promissory estoppel. But in Waltons Stores (Interstate) Limited v Maher Brennan J, as well as Mason CJ and Wilson J, treated cases of proprietary and promissory estoppel as raising the same principles. In EK Nominees I saw no need to differentiate between promissory and proprietary estoppel. In my opinion, the view expressed in Young, Croft and Smith "On Equity" is equally applicable to proprietary estoppel.
190In Barnes v Alderton Young CJ in Eq said (at [58]) that in the ordinary case of a testamentary promise it is very difficult to establish a proprietary estoppel because the circumstances must show that the promise was given and understood to be irrevocable. However, in Thorner v Major [2009] UKHL 18; [2009] 1 WLR 776 a claim of proprietary estoppel was upheld in the context of assurances about testamentary intentions with no stipulation of a requirement of irrevocability, that is, of an express or implied representation or belief that the deceased would not be entitled to withdraw from his assurances (at [5], [17], [26], [60], [89] and [97]). Dr Silink argues:
"It is suggested that the apparent move away from requiring 'irrevocability' of representations in testamentary cases in Thorner v Major lends further support to the argument against requiring a belief as to an absolute legal right in 'subject to contract' cases. It is undoubtedly true that there are significant contextual differences between domestic testamentary disposition cases and commercial negotiation cases. But should contextual differences warrant different tests for the nature of the assumption required? It is suggested that these differences are able to be accommodated in the assessment of the reasonableness of the reliance in the circumstances without the need for different requirements at law. Dealing with the contextual differences by way of assessment of the reasonableness of the reliance avoids what is arguably a risk to doctrinal clarity posed by requiring different tests for the nature of the assumption in relation to all different categories of proprietary estoppel."
191In Cobbe the plaintiff was a property developer who reached an oral agreement in principle with the owner of property for its sale. In reliance on the agreement in principle the developer incurred considerable expense in pursuing planning permission. Whilst the House of Lords held that he was entitled to a quantum meruit for the value of the services provided, it rejected his claim to hold the owner to the agreement in principle. The relief granted at first instance on the basis of a proprietary estoppel was that the developer be awarded half the increase in value of the property brought about by the grant of planning permission. This was overturned in the House of Lords.
192Lord Scott with whom Lords Hoffmann, Brown and Mance agreed, rejected the claim based on a proprietary estoppel on the ground that the plaintiff spent his money and time in the knowledge that he had no binding agreement with the property owner and that although she encouraged in him a belief that she would abide by an agreement in principle, he knew she was not legally bound (at [27]). Lord Scott also rejected the claim on the ground that there was insufficient clarity as to the claimed interest in the property (at [28]). Lord Walker, with whom Lord Brown also agreed, also held that the claim based on proprietary estoppel failed because the plaintiff did not make any mistake as to his rights, but understood that the agreement in principle would be binding in honour only, as distinct from being legally binding. His Lordship said that the Court should be very slow to introduce uncertainties into commercial transactions by the over-ready use of equitable concepts such as equitable estoppel and that this applied to commercial negotiations, whether or not they were expressly stated to be subject to contract (at [81]). Cobbe is consistent with the requirement that there be a mistake as to current rights for there to be proprietary estoppel, which is consistent with the narrower view of proprietary and promissory estoppel as formulated by Brennan J.
193In Franklins Pty Ltd v Metcash Trading Limited [2009] NSWCA 407; (2009) 76 NSWLR 603 Campbell JA (with whom Allsop P and Giles JA agreed on this point) applied the first of the criteria stated by Brennan J in Waltons Stores (Interstate) Limited v Maher in rejecting the submission that a party to an agreement for the supply of products was estopped from relying on a contractual term by reason of precontractual representations. His Honour accepted that equitable estoppel potentially had a role to play in such a case, even though the parties had made a contract that could not be rectified and was not sought to be avoided for misrepresentation. His Honour held that on the facts the first of the stated criteria was not satisfied (at [557]-[564], 734-737). No question was raised as to whether the first of the criteria stated by Brennan J was a necessary requirement. The appellant accepted that it was a requirement that had to be satisfied.
194In DHJPM Pty Ltd v Blackthorn Resources Limited [2011] NSWCA 348; (2011) 285 ALR 311 the plaintiff sought equitable compensation to vindicate an equity said to have arisen from the defendant's failure to fulfil an assumption or expectation which it induced the plaintiff to adopt. The plaintiff negotiated for the defendant to take a sublease of part of premises that the plaintiff proposed to lease. The plaintiff claimed that the defendant had given its assurance that it would take a sublease at a rent that had been agreed and promised that it was committed. In reliance on the assurance the plaintiff entered into the head lease. The head lease contained a term against a subletting or parting with possession or granting any licence without the owner's written consent. The defendant declined to proceed. The Court of Appeal rejected the claim for equitable compensation. Meagher JA with whom Macfarlan JA agreed held (at [48]) that the estoppel claimed, if made out, could be supported as an orthodox proprietary estoppel.
195Meagher JA endorsed Brennan J's propositions in Waltons Stores (Interstate) Limited v Maher. His Honour expressed two qualifications. Relevantly, one qualification was that "any general formulation of the relevant principles must necessarily, in its application in particular circumstances, be subject to qualification and refinement reflecting or giving effect to the broad equitable principles which underlie its application" (at [47]). That suggests some flexibility in the application of Brennan J's propositions. Nonetheless, Meagher JA went on to describe its being "essential" that the plaintiff's expectation be as to a legal relationship expected to exist between the parties where the expectation is as to something which the party estopped is bound to do or not to do. His Honour said (at [49] and [67]):
"[49] The reference in Brennan J's proposition (1) to an expectation that 'a particular legal relationship would exist' and that the party said to be estopped 'would not be free to withdraw' from it, draws attention to two essential aspects of the expectation. The first is that it must be as to a legal relationship which is expected to exist between the parties. The second is that the expectation be induced by a promise which is intended by the promisor and understood by the promisee to affect their legal relations with the result that it is treated between them as something which the party estopped is 'bound to do or not to do'. This appears from Brennan J's analysis at 421, 422.
...
[67] The primary judge found that Mr Hannon himself was unclear as to what had been agreed following the conversation on 13 May 2006: [39]. Mr Hannon's evidence was that he believed that following that conversation he had a legally binding agreement for sub-lease. That belief provided a basis for an expectation that AIM would take a sub-lease. It was not, however, induced by any conduct of Mr Flory on behalf of AIM. In the conversation on 13 May 2006 he indicated that he was 'going ahead with the leasing arrangements' and was 'committed'. These were promises but there was not in the circumstances any objective basis for concluding that there was a binding contract. Nor was there any communication by which AIM indicated that it regarded itself as bound to proceed notwithstanding that there was no agreement as to all of the relevant commercial terms of any right of occupation. In the language of Mason CJ and Wilson J in Waltons Stores v Maher (at 406), the 'something more' was not present. To adopt the words of Lord Walker in Cobbe v Yeoman's Row Management Ltd (at [65]), all that AIM encouraged DHJPM to have was a 'hope' or 'confident expectation'. Neither was sufficient to give rise to an equitable estoppel."
196In DHJPM Pty Ltd v Blackthorn Resources Limited Meagher JA said (at [91]) that he agreed with the reasons of Handley AJA for rejecting the appellant's claim formulated as one to a proprietary estoppel. Macfarlan JA must be taken also to have agreed. Handley AJA said (at [97]-[99]):
"[97] Mr Flory told Mr Hannon that the respondent was 'going ahead', and was 'committed'. However there was no oral contract, let alone one evidenced in writing which satisfied s 54A of the Conveyancing Act. The chief executives 'agreed on' a sublease of the area for 5 years at a rent of $10,000 a month plus GST, and left it at that.
[98] The other terms to be expected in such a sublease were not mentioned, let alone agreed. They would have to be settled by negotiation in due course.
[99] This 'transaction' fell outside the established boundaries of a proprietary estoppel by encouragement. What the respondent did was to create or encourage an expectation that an executory contract would come into existence on terms to be negotiated. The case is unlike Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 428-9 ; 76 ALR 513 at 542 ; [1988] HCA 7 (Waltons Stores) where the terms had been agreed and reduced to writing awaiting exchange.
...
[124] In these circumstances Waltons Stores is not binding authority for the recognition via proprietary estoppel of an executory contract where the content of that contract is not known."
197The reference to an "executory contract" appears to be to a future contract. In Riches v Hogben at 300-301 McPherson J said that:
"... the equitable principle has no application where the transaction remains wholly executory on the plaintiff's part. It is not the existence of an unperformed promise that invites the intervention of equity but the conduct of the plaintiff in acting upon the expectation to which it gives rise."
198It is not in that sense that Handley AJA was referring to an "executory contract". His Honour did not doubt that the plaintiff had already acted in reliance on its expectation that a contract would come into existence.
199Handley AJA also said:
"[104] Estoppels by encouragement have been applied in a wide variety of factual situations. Most fall into one of two categories; those where the parties are in a domestic or family relationship, and those where the relationship is commercial. Parties in the latter category typically contemplate a legal relationship and frequently intend to enter into a contract or otherwise formalise their expectation.
[105] In domestic or family cases, the parties are not at arm's length and usually have no intention of entering into a contract or formalising their expectation. The party encouraged will frequently expect to receive a gift, inter vivos or testamentary.
[106] Estoppels by encouragement have a long pedigree and the cases have considered the problems created when parties in a commercial context act to their detriment before negotiations have been successfully concluded. There are only two such cases, to my knowledge, where an estoppel by encouragement has been held to create an executory contract: Waltons Stores and Metropolitan Transit Authority (Vic) v Waverley Transit Pty Ltd [1991] 1 VR 181; (1989) 10 MVR 361. As will be apparent from these reasons, I respectfully differ from the finding of the Appeal Division in the latter case that Waltons Stores could support by estoppel an executory contract for the supply of services where the terms had not been agreed.
[107] In some commercial cases the court has enforced an existing proprietary right. In Taylor's Fashions one of the plaintiffs enforced its option of renewal against a successor in title of the original landlord.
[108] In other commercial cases the court has enforced a new proprietary right. In Plimmer the plaintiff who had been encouraged to erect a wharf and warehouse on Crown land in Wellington harbour was held entitled to a perpetual, irrevocable licence equivalent to the fee simple. In Crabb v Arun DC [1976] Ch 179 ; [1975] 3 All ER 865 (Crabb) a land owner, in the belief encouraged by the council that it would grant him a right of way, sold the land over which he had enjoyed access, and was held entitled to the right of way.
[109] Where the court has enforced a new proprietary right it has not done so by making an executory contract for the parties. In some cases, such as Plimmer and Crabb, the owner was not entitled to compensation as a condition of the grant of relief."
200This reasoning is similar to the reasoning of Lord Walker in Cobbe at [68] in distinguishing between cases where a party intends to obtain an interest and cases where a party expects to enter into a contract.
201With respect, the cases do not fall so neatly into such separate categories. Crabb v Arun District Council was a case in which the parties expected that a contract for the grant of a right of way would be entered into. The reason the Court of Appeal granted the right of way without terms for the payment of compensation was because the defendant council's action in erecting the fence had deprived the plaintiff of the use of his land so that the council could no longer justly ask for appropriate compensation for the grant. But it is clear that the equity to which the council's conduct gave rise would have been enforced immediately after the plaintiff had acted to his detriment by selling the portion of his land that fronted the road. The Court if necessary would have settled the terms, including terms as to compensation.
202EK Nominees Pty Ltd v Woolworths Limited was a case where the plaintiff was encouraged to expect that a contract would come into existence. In that case the terms of the agreement for lease had been substantially but not completely settled.
203If the objection is that the Court cannot settle the terms of a contract for the parties, the objection would seem to be met by what was said by McPherson J in Riches v Hogben at 300-301 quoted at [144] above. As McPherson J said, what gives rise to the equity is the conduct of the plaintiff in acting upon the expectation induced by the defendant, even though there is no enforceable contract for want of certainty or absence of some other essential element.
204For the reasons at [230]-[234] below the reasoning of Priestley JA and Rogers AJA in Austotel is not consistent with a requirement that terms of an expected contract must have been fully settled before rights can arise based on a proprietary estoppel arising from an expectation of entry into a contract.
205Nonetheless, I am bound by the decisions in Franklins Pty ltd v Metcash Trading Limited and DHJPM Pty Ltd v Blackthorn Resources Limited.
206There are two strands of reasoning in those cases. First, that where the plaintiff expects to enter into a contract, proprietary estoppel cannot be invoked unless all of the terms have been settled. Secondly, that the plaintiff's expectation must be as to the parties' current legal relationship or as to something which the party estopped is bound to do or not to do.
207In this case although there were early discussions about an agreement for lease, the parties did not expect to enter into an agreement for lease. CTA expected that it would be granted a lease. Through Mr Hogan it expected that it could have exclusive possession of Area B and could use the shared areas for a period of five years with the option to extend the period. That amounts to an expectation that a grant would be made. But it did not expect to negotiate and settle the terms of the lease and formalise the relationship by entering into a contract. Accordingly, the reasoning of Handley AJA in DHJPM, although binding, is not determinative.
208The question then is whether the estoppel claim must fail because Mr Hogan did not consider the defendants were bound to grant CTA a lease as distinct from assuming that they would do so.
209In both Franklins Pty Ltd v Metcash Trading Limited and DHJPM Pty Ltd v Blackthorn Resources Limited the Court of Appeal applied the first of Brennan J's criteria for an equitable estoppel without analysis of relevant conflicting authorities. The Court of Appeal did not say that it was intending to depart from Priestley JA's formulation of the relevant principles in Silovi Pty Ltd v Barbaro and Austotel Pty Ltd v Franklins Self-Serve Pty Ltd, notwithstanding that Priestley JA did not adopt Brennan J's first criterion in Waltons Stores. A case is authority for what it decides, not what it assumes. But the endorsement of Brennan J's formulation went beyond mere assumption. Notwithstanding that that endorsement was given by default, as it were, I think it is binding, subject to any later binding authority.
210In Tadrous v Tadrous [2010] NSWSC 1388 and [2012] NSWCA 16 two brothers were associated in property developments. They reached a consensus, that was not intended to give rise to binding legal relations, that one brother (Charlie) would contribute funding for a property development being undertaken by the other (Michael) on terms that the funds advanced would be repaid from sales of the developed properties and that one of the properties would be transferred at cost to Charlie and his wife. Charlie's widow as executrix of his estate sought to enforce the claim. Michael contended that the advances (of over $500,000) were provided by Charlie as a gift, the motive for which was said to be that Michael had made earlier similar gifts to Charlie. Charlie's widow's claim in contract was rejected because there was no intention to enter binding legal relations. Michael's allegation that the advances were a gift was also rejected. Charlie's widow would have been entitled to a claim on a common money count for money paid to the defendant's use and at his request. But she was held entitled to a greater remedy on the basis of a proprietary estoppel. Pembroke J at first instance held that she was entitled to repayment of the moneys advanced with compound interest secured by way of charge over the development. The Court of Appeal upheld this finding, save as to the award of compound interest, which was set aside only for lack of an evidentiary basis.
211Pembroke J's reasons included the following:
"4. ... the essential bargain in relation to the development of the defendant's property was arranged between the two brothers, Michael and Charlie. The evidence made clear that the brothers had a close relationship, that each trusted the other implicitly and that the social customs and cultural characteristics to which they adhered included a strong ethic of mutual assistance between family members. ...
...
6. As the evidence proceeded, it became more and more apparent that whatever fraternal obligation there may have been between the brothers, neither intended it to result in a binding legal agreement. ... A witness called for the plaintiff ... remarked on how trusting Charlie was towards his brother and that 'he was kind of laughing at the suggestion that I would suggest that he would have a written contract'. Even the plaintiff was initially inclined to characterise the circumstances in which the arrangement was made as a 'discussion' rather than as an 'agreement'. This explains why neither brother saw the need for any written record of the arrangement. It also explains its loose and relatively informal formulation. In my view the arrangement was founded on trust, not on enforceable contractual obligation."
212In rejecting the appeal Meagher JA (with whom Young JA and Handley AJA agreed) said:
"[37] The appellant argues that it follows from the primary judge's conclusion that the arrangement was 'founded on trust not on [an] enforceable contractual obligation' ([6]) that there was no sufficient expectation to give rise to an equitable estoppel. That argument must be rejected.
[38] One feature that distinguishes the equitable principle from the enforcement of a contractual obligation is the absence of a legally binding promise. What attracts that principle is an assurance or encouragement which creates an expectation that a interest will be granted and conduct in reliance upon that expectation: Giumelli v Giumelli [1999] HCA 10 ; (1999) 196 CLR 101 at [35] quoting McPherson J in Riches v Hogben [1985] 2 Qd R 292 at 300-301. It is sufficient to give rise to the equity that between the parties the expectation is created and acted upon on the basis that it will be made good: Ramsden v Dyson (1866) LR 1 HL 129 at 170 per Lord Kingsdown.
[39] An equitable estoppel can be established notwithstanding that the expectation contains elements that would not be sufficiently certain to amount to a valid contract or is formed on the basis of vague assurances: Gillett v Holt [2001] Ch 210 at 226 per Robert Walker LJ This is particularly so in circumstances, such as in the present case, where the estoppel arises in a domestic or family context."
213Thus, the Court of Appeal did not say that it was necessary for Charlie to have assumed that he had a legal right to enforce Michael's promise to repay the money advanced and transfer a property at cost. It was enough that he expected that Michael would do so. It was enough that the promise was binding in honour.
214The Court of Appeal did not apply Brennan J's first criterion.
215What is it that distinguishes Tadrous v Tadrous and DHJPM Pty Ltd v Blackthorn Resources Limited as to the required expectation?
216Professor McFarlane (The Law of Proprietary Estoppel) might say that in Tadrous v Tadrous the defendant made a promise that induced Charlie to alter his position to his detriment, and it was therefore sufficient that Charlie relied on his belief as to what his brother would do, not what he was bound to do, whereas if the estoppel were based on acquiescence, or representation of fact or mixed law and fact, then a mistaken belief as to current rights would be essential. DHJPM Pty Ltd v Blackthorn Resources Limited might be characterised by saying that by the defendant's representing it was committed to taking the sub-lease, it was merely representing its then intention and not making a promise.
217A number of things may be said about that. First, it is not how the Court of Appeal has reasoned. Secondly, the analysis introduces refined distinctions that do not address equity's fundamental concern with conscionable conduct (e.g. Waltons Stores per Mason CJ and Wilson J quoted at [133] above). If A is induced to alter his position by B's encouragement and knowledge of the assumption on which A is acting, and A would suffer detriment from the change of position if the assumption is not adhered to, why should it matter whether B's encouragement is characterised as a representation or a promise? A statement that "we are committed" is as likely to encourage the other party to act to its detriment whether it is later characterised as a promise (unenforceable at law) or merely a representation of current intention. There is no clear reason why equity should grant relief in one case and not the other. Thirdly, whilst in England the result of Ramsden v Dyson may well be that it is only where the defendant has promised to give the plaintiff a proprietary right that it can be sufficient that the plaintiff relies simply on a belief as to how the defendant will act in the future, as distinct from having a mistaken belief as to his current rights, that is not consistent with the reasoning of Lord Kingsdown. It is Lord Kingsdown's dissenting judgment that commanded general acceptance, including in England before Cobbe. Fourthly, Professor McFarlane's analysis is not supported by Plimmer v Mayor of Wellington, nor Inwards v Baker, nor Crabb v Arun District Council. It is not consistent with the formulation of principle of Priestley JA in Austotel, nor that of McPherson J in Riches v Hogben approved in Giumelli v Giumelli that it is not the promise itself but the expectation created that attracts the equity.
218Nor is it a point of distinction that in DHJPM Pty Ltd v Blackthorn Resources Limited the parties expected to negotiate and enter into a contract, whereas in Tadrous v Tadrous they did not. That was the ground of Handley AJA's judgment in DHJPM but not that of the majority.
219The ground of distinction adverted to in the reasons of the Court of Appeal in Tadrous v Tadrous (at [39]) is that the estoppel there arose in a domestic or family context, albeit in the context of a commercial property development.
220My own view as expressed in EK Nominees, and confirmed by Dr Silink's article, is that the broader formulation is to be preferred and a belief as to current rights, or as to whether the defendant is legally bound to proceed, should not be a separate requirement for the establishment of an equitable estoppel. Commercial cases are adequately dealt with by the requirements of reliance on the defendant's conduct as inducing an assumption that it would proceed, and that the reliance be reasonable. As Priestley JA said in Austotel (at 164):
"...the reason why it is in general unlikely that there will be an estoppel in circumstances where parties are negotiating by reference to a document expressed to be 'subject to contract' or 'subject to exchange', is that the circumstances are likely to show that neither party is relying on the contractual intention of the other, and thus the reliance element of any estoppel will usually be absent."
221It was on this ground that the plaintiffs failed in Attorney-General (Hong Kong) v Humphreys Estate, Barnes v Alderton, Walsh v Walsh and BBB Constructions Pty Ltd v Aldi Foods Pty Ltd [2012] NSWCA 224.
222A domestic or family context will be relevant to the establishment and reasonableness of reliance.
223The reasonableness of reliance is relevant to, but not decisive of, the question whether permitting departure from the assumption would be unconscionable (Commonwealth v Verwayen (1990) 170 CLR 394 per Deane J at 445). In an oft-quoted passage, Deane J said:
"Ultimately, however, the question whether departure from the assumption would be unconscionable must be resolved not by reference to some preconceived formula framed to serve as a universal yardstick but by reference to all the circumstances of the case, including the reasonableness of the conduct of the other party in acting upon the assumption and the nature and extent of the detriment which he would sustain by acting upon the assumption if departure from the assumed state of affairs were permitted."
224In Milling v Hardie [2014] NSWCA 163 it was only to the extent the defendant's encouragement reasonably gave rise to an expectation by the plaintiffs that they would acquire an interest in the defendant's property that the defendant was estopped from asserting his title. Reasonableness of reliance was directly related to whether it was unconscionable for the defendant to depart from the assumption the plaintiffs adopted.
225In DHJPM Pty Ltd v Blackthorn Resources Limited the assurance given to the intending sublessor was that the proposed sublessee would go ahead with the leasing arrangements and was committed to them. But the proposed sublessor needed the owner's consent in writing to the grant of either a sublease or a licence and had not procured that consent when it signed its lease of the premises. It was the absence of the owner's consent that was the sticking point in the negotiations between the plaintiff and the defendant before the defendant decided not to proceed. It was not reasonable for the plaintiff in DHJPM Pty Ltd v Blackthorn Resources Limited to act in reliance on the assumption that the defendant would enter into the sublease, the terms of which save as to rent, were still to be negotiated, when it had no certainty that it could provide the proposed sublease. That lack of reasonableness went directly to whether it was unconscionable for the defendant to deny the assumption.
226However, I do not think I am free to act on my own view. I must take the law as most recently stated by the Court of Appeal. I do not think that in Tadrous v Tadrous the Court of Appeal intended to depart from what had been said earlier in DHJPM Pty ltd v Blackthorn Resources Limited, except in a domestic or family context. (See also Milling v Hardie at [50]-[51] where, however, this issue did not arise.)
227In my view, the differences of outcome in cases in a purely commercial setting and cases in a domestic of family setting are to be explained not by applying different principles to those different classes of case, but by the different application (in some, but not all, cases) of the same requirements of reliance and reasonable reliance that are applicable to all cases. I respectfully doubt that equitable principles should be fragmented in the way indicated in Tadrous v Tadrous. Nonetheless, I think I am bound by DHJPM unless the present case is in a domestic or family context.
228Partly it is and partly it is not. Mr Hogan was related by marriage to three of the owners. But he had no familial connection with Mr Doueihi. He had no shareholding in or involvement in the business of Marble Plus and he was not the sole shareholder or director of CTA. There was no familial connection between the other directors and shareholders of CTA and any of the defendants. Nonetheless, as explained at [44] the family connection was close. It also explains the conduct of those who were not family. I infer that it was because of Mr Hogan's marriage to Ms Hogan and connection to Mrs Vatselias and Ms Scott that Mr Doueihi was content to allow Mr Hogan to take the lead in designing the premises and supervising the construction. The absence of formal documentation is not explained merely by the familial connection, because Marble Plus and Better Build Kitchens did not have formal documentation for their occupation. But I infer that Mr Hogan's familial connection with the owners is the reason the other directors of CTA permitted matters to proceed as they did. Mr Hogan's family connection over a considerable period also explains why not all terms that would usually be expected to be agreed upon were discussed between Mr Doueihi and Mr Hogan.
229My mind has fluctuated on the question whether it is open to me to find that a proprietary estoppel could be established, notwithstanding that Mr Hogan did not believe that the defendants were bound to grant CTA the lease he expected. I conclude that this case falls within the "domestic or family context" and that means I am not bound to follow DHJPM, so that that conclusion remains open.