NETTLE J. This is an appeal from a judgment of the Court of Appeal of the Supreme Court of Victoria. It concerns two leases of restaurant premises in the Melbourne Casino and Entertainment Complex in Southbank, Melbourne. Each lease was for a term of five years with no right of renewal and together the leases required the respondents ("the tenants") to spend in the order of $5 million refurbishing the premises to bring them to what was described as "world class" standard.
Before they entered into the leases, the tenants were apprehensive of being unable to recover the costs of the refurbishments within the term of five years. Accordingly, they attempted to persuade the appellant ("Crown"), the lessor, to include in the leases a right of renewal for a further term of five years. Crown refused to do so. Nevertheless, after the tenants had executed the leases but before they delivered the executed leases to Crown, and shortly before they began to outlay funds on the refurbishments, Crown represented to the tenants that, if they spent the money, they would be "looked after at renewal time".
Acting in reliance on that representation - in the belief it meant that, when renewal time came, Crown would offer to renew the leases for a further term of five years on the same terms and conditions as the existing leases - the tenants delivered the executed leases to Crown and carried out the refurbishment works at a total cost of some $5 million. When it came to renewal time, however, Crown did not offer to renew the leases for five years or at all and the tenants were not otherwise looked after. The tenants immediately became insolvent due to write-downs of more than $2 million in the value of the refurbishments.
The principal question in this appeal is whether the Court of Appeal were correct to remit the matter to the Victorian Civil and Administrative Tribunal ("VCAT") on the basis that Crown was estopped from departing from the tenants' assumption or expectation that Crown would offer to renew the leases for a further term of five years. Due to the way in which the tenants put and conducted their case before VCAT, that question should be answered, no.
There is also an application for special leave to cross-appeal. The principal question in that application is whether the Court of Appeal should have found that Crown's assurance constituted an enforceable collateral contract to renew the leases for a further term of five years. That question should also be answered, no.
The facts
Crown owns the Melbourne Casino and Entertainment Complex. Between 1997 and 2005, two companies associated with Mr Nicholas Zampelis leased and operated two restaurants in the complex, called respectively "Cafe Greco" and "Waterfront". Each lease was due to expire on 7 May 2005. Early in 2005, Mr Zampelis began negotiations on behalf of the tenants with Crown for the grant of new leases of the restaurants. Crown signalled that it was prepared to grant a new lease of each restaurant but only for a term of five years with no option for renewal, and only on condition that the tenants undertake major refurbishment works on each restaurant premises. In May 2005, Crown sent Mr Zampelis comprehensive summaries of the terms and conditions of the proposed new leases.
On 29 June 2005, Crown gave in principle approval to the tenants' refurbishment concept plans for the restaurants and stated that the new leases would start on 1 September 2005, and that the refurbishments would have to be completed and trading would need to commence by 1 December 2005. On 22 July 2005, Mr Zampelis replied by email to Crown confirming "our acceptance of your offer unconditionally". On 2 September 2005, Crown sent unexecuted leases to the tenants which accurately reflected the summary documents ("the Leases"). In November 2005, each tenant executed its Lease, and informed Crown that it had done so, but the tenants did not then deliver the executed Leases to Crown.
Clause 2.3 of each Lease required Crown to give notice to the tenant at least six months, but not more than 12 months, before the expiry of the Lease, stating whether Crown would:
(a) renew the Lease, and if so on what terms (cl 2.3(a));
(b) allow the tenant to occupy the premises on a monthly tenancy after expiry (cl 2.3(b)); or
(c) require the tenant to vacate the premises on expiry (cl 2.3(c)).
Being concerned that the tenants might not recover the refurbishment costs within the term of five years, Mr Zampelis made a further attempt to persuade Crown to extend the term of the Leases to 10 years or to include in each Lease an option to renew for a further term of five years. Once again, however, he met with resolute resistance. Crown was keen to have the executed Leases and for the refurbishments to be completed ahead of the approaching Commonwealth Games in Melbourne, and it put considerable pressure on Mr Zampelis to deliver the Leases and to get on with the refurbishment works. But Crown also made clear that the only basis on which it would deal was on the basis of the executed Leases. The only concession was that at a meeting on 6 December 2005, Mr Boesley of Crown said to Mr Zampelis that the Leases had been limited to a term of five years so that they would align with other Crown leases and that, if Mr Zampelis spent the money required to refurbish the restaurants to a high standard, he would be "looked after at renewal time" ("the assurance").
The tenants began the refurbishment works just over a month later, and the refurbishments were completed two months after that in March 2006. At much the same time, Mr Boesley gave Mr Zampelis an ultimatum that, if he did not deliver the executed Leases to Crown, he would not be allowed to trade. On 7 March 2006, the tenants delivered the executed Leases to Crown.
In October 2008, Crown put out a tender for the grant of leases of the restaurants following the expiration of the Leases and sent the tenants a "request for proposal". The tenants each submitted a proposal but were unsuccessful. In December 2009, Crown gave notices pursuant to cl 2.3(c) of the Leases requiring the tenants to vacate the leased premises upon the expiration of the Leases.
The proceedings in VCAT
On 30 July 2010, the tenants commenced a proceeding in VCAT seeking, inter alia, interlocutory relief to restrain Crown from re-entering the premises. Crown re-entered the premises on 31 August 2010, before the application for an interlocutory injunction was heard. The proceeding continued, however, to a final hearing and, on 24 February 2012, VCAT found that the assurance constituted a collateral contract that, as consideration for the tenants entering into the Leases and carrying out the refurbishment works, Crown would offer to renew the Leases for a further term of five years on such terms and conditions as Crown might choose pursuant to cl 2.3(a) of the Leases.
VCAT also held that, by reason of the tenants having acted in reliance upon the collateral contract to their detriment, Crown was estopped from denying the existence of the collateral contract and thus that the collateral contract was enforceable notwithstanding that it was not evidenced in writing as was thought might otherwise have been required by s 126(1) of the Instruments Act 1958 (Vic).
VCAT found that by failing to offer a further term of five years in accordance with the collateral contract, Crown caused the tenants loss and damage by way of the loss of profits which it was anticipated would have been generated during the further term of five years. VCAT quantified those losses of profits, in the case of the first respondent, in the amount of $467,505 plus interest and, in the case of the second respondent, in the amount of $1,143,167 plus interest.
The appeal at first instance
From that decision, Crown appealed successfully to the Supreme Court of Victoria. The primary judge (Hargrave J) held that VCAT erred in finding that the assurance was sufficiently promissory to constitute a collateral contract and in any event that, because the supposed collateral contract provided for Crown to offer to renew the Leases for a term of five years on such terms and conditions as Crown might choose, it was illusory and unenforceable. His Honour further held that, because a reasonable person in the position of the tenants would not have understood the assurance as meaning that Crown would offer a further term at renewal time on the same terms and conditions as the existing Leases, the tenants' estoppel case failed in limine.
The appeal to the Court of Appeal
The Court of Appeal upheld the primary judge's finding that there was no collateral contract but allowed the appeal in relation to the estoppel claim.
Warren CJ agreed with the primary judge that the supposed collateral contract was so uncertain as to be illusory and unenforceable. Her Honour took a different view, however, concerning estoppel. She referred to authorities supporting the view that a lower standard of certainty is required to establish an equitable estoppel than is necessary to establish the existence of a contract and, on that basis, reasoned that the fact that the assurance was not sufficiently certain to establish a collateral contract did not mean that it was incapable of founding an equitable estoppel. As VCAT had found, the tenants had taken the assurance to mean that they would be offered a further term. By giving the assurance, Crown had induced the tenants to adopt that assumption or expectation. It was not unreasonable for the tenants to adopt that assumption or expectation. On that basis, her Honour held that it would be unconscientious for Crown to be permitted to resile from that assumption or expectation and hence that Crown was estopped. But, her Honour said, it did not follow that the tenants were entitled to relief calculated by reference to the position in which they would have been if they had been granted further leases of five years' duration. The tenants were only entitled to the minimum relief sufficient to satisfy their equity. Her Honour held therefore that the matter should be remitted to VCAT to enable the tenants to establish "what was the lower limit of the representation made to them and then, what they are entitled to in order to achieve equity".
Whelan JA, with whom Santamaria JA agreed, concurred with the primary judge that the supposed collateral contract was so uncertain as to be illusory and unenforceable. Whelan JA was also at one with the primary judge in observing that there was an "irreconcilable disconformity" between the representation which Crown had been found in fact to have made - "to make a renewal offer under cl 2.3(a) on whatever terms Crown chose" - and Mr Zampelis' subjective understanding that the effect of the representation was that Crown would offer to renew the Leases for a further term of five years on the same terms and conditions as the existing Leases. But Whelan JA considered that that was not the end of the matter. In his Honour's view, it was "necessary to address the estoppel issue more widely than the narrow terms of VCAT's conclusion on estoppel", because the tenants had pleaded their case in VCAT in estoppel in wider terms than that; VCAT's findings were expressed in wider terms than that; and ground 8 of the Notice of Appeal was in wider terms than that. It was necessary to consider estoppel on the basis of VCAT's findings "by reference to the 'lower limit' of what was meant by 'looking after' the tenants at renewal".
As Whelan JA noted, however, although a claim couched in those terms may have been within the case as pleaded and, in that sense, as put at VCAT, it had not been adjudicated upon by VCAT. Thus, in his Honour's view, it was necessary for the matter to be remitted to VCAT "for this aspect of the tenants' case to be ruled upon and determined". It remained for VCAT to decide what, if any, equitable relief should be granted to the tenants, consistently with the "lower limit" of what was meant by the assurance.
The appellant's contentions
Before this Court, Crown contended that all members of the Court of Appeal erred in holding that the assurance was capable of founding a promissory estoppel. Crown submitted that it was established by the judgment of Mason and Deane JJ in Legione v Hateley that, for a representation to found a promissory estoppel, the representation must be clear and the representation must have been such as to cause a reasonable person in the position of the representee to have relied upon it as the representee is alleged to have done. In Crown's submission, those principles have been followed in numerous cases since Legione and should continue to be adhered to, especially given that the tenants did not challenge VCAT's finding that the assurance was objectively ambiguous and did not seek to re-open Legione.
Crown further contended that the Court of Appeal erred in treating the arguably lower level of certainty required to found a proprietary estoppel as if it were applicable to promissory estoppel. In Crown's submission, the Court of Appeal were in error in following what Crown characterised as the relatively small number of recent decisions in New South Wales and Victorian courts which have treated the lower standard of certainty applicable to proprietary estoppel as if it were applicable to promissory estoppel.
In any event, in Crown's submission, the notion of some "lower limit" of the "grey area" was misconceived and, on the facts of this case, devoid of application. Since the only case advanced by the tenants was that they assumed the assurance meant they would be offered new leases of five years' duration on the same terms and conditions as the existing Leases, it did not matter if the assurance might reasonably be considered to have had some other meaning less favourable to the tenants. In Crown's submission, since the heart of promissory estoppel is the subjective state of mind of the promisee and the part which the promisor has played in bringing that about, it is not to the point to suppose what a reasonable promisee might reasonably have understood a promise to mean and then to pretend that the actual promisee acted on the basis of that supposed understanding. According to Crown, given that the Court of Appeal found that the assurance was ambiguous, and therefore had no decisive reasonable meaning, it followed ineluctably that the appeal to the Court of Appeal should have been dismissed.
The respondents' contentions
By way of their application for special leave to cross-appeal, the tenants contended that the primary judge and the Court of Appeal were in error in failing to uphold VCAT's decision that there was a binding collateral contract that Crown would offer a further term of five years on the same terms and conditions as the existing Leases, and that the tenants were entitled to damages for breach of the collateral contract equal to the profits which it was said they had forgone.
The tenants further contended that VCAT was correct in holding that Crown was estopped from denying that it promised to offer further leases of five years' duration, and right to award equitable compensation equivalent to the profits which it said were forgone as the result of Crown's refusal to grant a further term of five years to each tenant.
According to the tenants, Crown's reliance on the difference between the degrees of certainty required for promissory estoppel and proprietary estoppel was also misplaced. Crown had not invoked any such distinction when before VCAT or the primary judge or the Court of Appeal, and, in any event, it was submitted, in the circumstances of this case, there was no relevant difference. Properly characterised, the estoppel for which the tenants contended was a proprietary estoppel.
The tenants embraced Warren CJ's conclusion that VCAT was correct in finding that the tenants took the assurance to mean that they would be offered new leases of five years' duration on the same terms and conditions as the existing Leases, and her Honour's finding that the tenants acted in reliance on that assumption to their detriment. But, contrary to Warren CJ's reasoning, the tenants contended that it followed that Crown was estopped from denying that it had agreed to grant new leases of five years' duration on the same terms and conditions as the existing Leases. On that basis, it was submitted, the tenants were entitled to equitable compensation equal to the profits forgone and there was no occasion to consider whether any lesser measure of relief was appropriate or, therefore, to remit the matter to VCAT.
Alternatively, the tenants contended, if the meaning that Crown would offer new leases of five years' duration on the same terms and conditions as the existing Leases or on the same terms and conditions mutatis mutandis was not a meaning that could reasonably be attributed to the assurance, the fact remained that that was the way in which the tenants had construed the assurance and the basis on which they had acted to their detriment, and thus, as Whelan and Santamaria JJA had held, the matter should be remitted to VCAT for determination of the relief to be accorded to the tenants having regard to the meaning which a reasonable person in the position of the tenants would have attributed to the assurance.
The collateral contract
It is a remarkable feature of this matter that, although the tenants' claim before VCAT was essentially one for damages for breach of collateral contract, the claim ultimately upheld in the Court of Appeal was a claim in equitable estoppel for relief not previously sought. It is no less remarkable that, in this Court, the tenants demonstrated very little interest in supporting the Court of Appeal's reasoning or conclusion regarding estoppel and instead devoted the bulk of their submissions to an attempt to establish that the primary judge and the Court of Appeal were wrong to reject their claim for damages for breach of collateral contract, or alternatively in holding that the tenants were not entitled to equitable compensation in the same amount.
No binding promise
As has been noticed, VCAT decided the collateral contract claim on the basis of what it perceived to be the objective or reasonable meaning of the assurance that, if Mr Zampelis spent the money required to refurbish the premises to a high standard, he would be "looked after at renewal time". VCAT found that a reasonable person in Mr Zampelis' position would have understood that to be a promise that, if the tenants delivered the executed Leases and paid the costs of the fit out works, Crown would make an offer to grant a further term of five years on such terms and conditions as Crown might choose in its discretion. VCAT also held that the assurance was a sufficiently certain promise that, once accepted by the delivery of the executed Leases and payment of the fit out costs, it gave rise to a binding and enforceable collateral contract.
The primary judge took the opposite view. His Honour held that VCAT had erred in law in reaching its conclusion by failing to take the following relevant considerations into account:
(1) In October and November 2004, before the expiry of the previous leases, Mr Boesley wrote to Mr Zampelis to enquire about his intentions to enter new leases, and specifying terms on which Crown would allow a holding‑over.
(2) When, by email in reply dated 8 November 2004, Mr Zampelis' personal assistant suggested that Crown had represented to Mr Zampelis that there would be a further term under the previous leases, Mr Boesley expressly denied any such representation by email dated 10 November 2004.
(3) On 11 May 2005, when the time came to negotiate the terms of the Leases, Mr Boesley sent "comprehensive summaries of the terms and conditions of proposed new leases" to the tenants, including the five year term and major refurbishment clause.
(4) On 29 June 2005, Mr Boesley informed Mr Zampelis by email that his concept proposals for refurbishment of the restaurants had been approved "in principle", and sought confirmation from Mr Zampelis that he would accept the proposed terms under the Leases.
(5) Mr Zampelis replied by email to Mr Boesley on 22 July 2005, confirming the tenants' "acceptance of your offer unconditionally". That offer was for two five year leases, with no right of renewal, each commencing on 1 September 2005, under which major refurbishments were to be completed and trading was to commence by 1 December 2005.
(6) By email dated 3 November 2005, Mr Zampelis' personal assistant advised Mr Boesley that the Leases had been signed.
(7) On 23 November 2005, Mr Boesley sent an email to the tenants demanding that the executed Leases be returned to Crown and threatening to lease the restaurants to other restaurateurs if this was not done.
The primary judge reasoned, and the Court of Appeal agreed, that those and other matters revealed a background of commercial negotiations between parties experienced in commercial leasing, in which important matters were documented, against which a reasonable person in Mr Zampelis' position would have understood the assurance as being no more than "some vaguely encouraging words from Mr Boesley about the strength of the parties' relationship and Crown's willingness to see the restaurants prosper beyond the end of the five year term".
Before this Court, the tenants attacked the primary judge's reasoning at a number of levels but principally on the basis that it was not correct that VCAT failed to have regard to the listed matters. It followed, it was said, that the judge was wrong in holding that VCAT erred in law and thus wrong in substituting his own view of the facts for VCAT's findings.
That argument should be rejected. VCAT did not have regard to at least some of the listed factors and did not give adequate consideration to any of them. Whether VCAT had regard to factors (1) and (2) is perhaps debatable. They are described in VCAT's reasons as "features of these cases that would support a view that it is improbable that Crown made the alleged promise to renew for a further term". But there is no analysis anywhere in the reasons of what, if anything, VCAT perceived to so much outweigh those factors that the assurance could objectively be discerned as a binding promise by Crown to offer a further term of five years. The position is even clearer in relation to factors (3), (4), (5), (6) and (7). None of them is described in the reasons as "features of these cases that would support a view that it is improbable that Crown made the alleged promise to renew for a further term". Factor (3) is mentioned later in VCAT's reasons, but only as an historical introduction to statements which Crown was alleged to have made and were found not to have been made. Factors (4) and (5) are also mentioned but only as part of the historical narrative. Factor (7), and implicitly factor (6), are mentioned, but without any consideration of their implication that Crown was not prepared to deal on a basis other than the terms of the executed Leases.
When proper regard is had to each of those factors, it is apparent that the primary judge and the Court of Appeal were correct in holding that a reasonable person in the position of Mr Zampelis could not have construed the assurance as a binding promise to offer a further term of five years. To adopt and adapt the words of Lord Wright in Scammell (G) and Nephew Ltd v Ouston (H C and J G), the parties did not "in intention nor even in appearance" make or accept any promise about a renewal. Such, if any, understanding as they may have come to on the point was inchoate. They might have considered that there should be some form of renewal. But they never went on to make an agreement regarding renewal, by settling between them on what terms the renewal was to be. The furthest point they reached was an understanding that they would agree upon terms of renewal. The words which they used were not "the language of obligation or contract". VCAT's contrary finding was untenable.
That is sufficient to dispose of the proposed cross-appeal on the collateral contract claim. But, given the way in which the matter was argued, it is appropriate also to mention something of the primary judge's and the Court of Appeal's further reasoning that, in the event that the assurance could objectively be regarded as a promise to offer a further term of five years, the promise was not made in sufficiently certain terms to be contractually binding.
Illusory promise
As has been seen, the primary judge concluded, and the Court of Appeal affirmed, that, assuming the assurance were a promise, it was illusory and unenforceable because, apart from the term of five years, it left the selection of the terms and conditions of the renewed leases entirely to Crown's discretion.
That conclusion was correct. Although a lease which leaves the determination of the rent to a nominated third party, or provides for a reasonable rent, may be sufficiently certain to be enforceable, an agreement to lease at a rent to be determined in the discretion of the lessor is not enforceable. And, since a contract to lease on such terms is unenforceable, a promise to make an offer to lease on such terms is illusory.
In this case, the assurance did not provide for the rent to be determined by a third party. Nor was it a case of a right of first refusal in which the requisite certainty is said to be provided by the terms on which the promisor is prepared to deal with a third party. As the primary judge held and the Court of Appeal affirmed, it was not open to construe the assurance as importing reasonable terms and conditions. Nor did it assist that, when VCAT set about assessing damages for breach of the supposed collateral contract, VCAT conjectured by way of what it described as a matter of probability that, if Crown had appreciated it was bound to offer a further term, it would have stipulated terms and conditions that "had reasonable correspondence with those that had appeared in the existing lease". That was not the effect of the assurance. To the extent that the assurance presaged anything about the terms and conditions of the further term, it was implicit that it would be on such terms and conditions as Crown could choose in its discretion.
The primary judge appears to have accepted a submission by the tenants that, because the supposed promise was to offer to "renew" the Leases, it could be inferred that the offer would be to renew the Leases for a term of five years. That was thought to follow from the decision in Lewis v Stephenson, which was later approved by this Court in Trade Practices Commission v Tooth & Co Ltd, that, where a lease of land contains an option to renew which is silent as to the term of the renewal, it is to be inferred that the parties intended the renewal to be for the same term as the lease. That, however, was not correct.
Although it makes no difference to the outcome of this matter, it is to be observed that the principle which informs Lewis v Stephenson and Tooth & Co applies to written contracts. Consistently with the precept that courts should endeavour to construe a formal legal document in order to avoid frustrating the parties' intentions, and therefore should be loath to hold that a written condition is bad for uncertainty, it can often be inferred that parties intended that a provision for "renewal" of a lease on unspecified terms and conditions is a provision for renewal on the same terms and conditions as the existing lease. But that principle has little if any application to the objective interpretation of oral assurances. The latter depends on the words of the assurance and the circumstances in which the assurance is given. If the assurance had been given in terms that Crown would grant a renewal, it might have been inferred that what was intended was a renewal for the same term as the Leases. But, since the assurance was no more specific than that the tenants would be looked after at renewal time, it was not open to infer that it meant a further term of no less than the existing term.
No inconsistency
The primary judge also held that, if the assurance could reasonably be construed as a promise to grant a further term of five years, the promise would be inconsistent with cl 2.3 of the Leases, and therefore unenforceable because of the rule in Hoyt's Pty Ltd v Spencer and the decision in Maybury v Atlantic Union Oil Co Ltd. The Court of Appeal affirmed that view of the matter. But that was not correct either. Although it makes no difference to the outcome in this matter, it is apparent that there would not have been an inconsistency.
Certainly, as was earlier noticed, cl 2.3 of the Leases provided for Crown to give notices at a set period before the expiration of the Leases in one of three possible forms:
(a) in the form of an offer to renew;
(b) in the form of an offer to allow the tenant to remain in possession as a tenant from month to month; and
(c) in the form of a notice to quit.
But Crown's rights to offer to renew the Leases or to permit occupation on a monthly tenancy or to require the tenant to vacate the demised premises, and Crown's discretion to choose between courses, were not created by the Leases. Those rights arose by operation of law as rights in reversion upon the expiration of the Leases. The only effect of cl 2.3 was to require Crown to give notice of its choice. Absent cl 2.3, a collateral promise by Crown to choose among its common law rights as reversioner would not be in any sense inconsistent with the terms of the Leases. Equally, since the only effect of cl 2.3 was to require Crown to give notice of its choice between its common law rights as reversioner, such a collateral promise would not be inconsistent with cl 2.3.
Estoppel
When this matter was before VCAT, the tenants put their claim in estoppel as an alternative to their claim in collateral contract. So put, it was that because Mr Boesley gave the assurance and the tenants acted in reliance upon it to their detriment, Crown was estopped from denying that it was bound to offer to renew the existing Leases for a term of five years on the same terms and conditions as the existing Leases, or at least on the same terms and conditions mutatis mutandis as the existing Leases. By contrast, VCAT's conclusion on estoppel was that Crown was not so estopped but estopped only from denying that it was bound to offer to renew the Leases for a further term of five years on such terms and conditions as it might choose in its discretion.
As will be recalled, the primary judge held that the claim of estoppel failed because, on the facts as found by VCAT, the assumption or expectation which a reasonable person in Mr Zampelis' position would have formed on the basis of the assurance was that Crown would offer to renew the Leases on such terms and conditions as Crown might choose in its discretion, as opposed to the same terms and conditions as the existing Leases, and because there was no evidence or determination by VCAT of whether Mr Zampelis would have been induced to act as he did if he had understood that the assurance meant no more than that Crown would offer to renew the Leases on such terms and conditions as Crown might choose in its discretion.
Each member of the Court of Appeal held that that was not correct, although for different reasons. Warren CJ reasoned that the primary judge was in error in approaching the matter on the basis of what the assurance would have meant to a reasonable person in Mr Zampelis' position. Her Honour considered that the claim was to be determined by a process of four steps. The first was to ascertain what Mr Zampelis took the assurance to mean. The second was to ascertain whether it was reasonable for Mr Zampelis to have interpreted the assurance in that fashion. The third was to determine whether the tenants had acted in reliance on the assurance to their detriment. The fourth was to determine the minimum equity. Her Honour accepted that Mr Zampelis took the assurance to mean that Crown would offer to renew the Leases for a term of five years on the same terms and conditions as the existing Leases. Her Honour also found that, although the assurance was capable of a range of meanings, it was not unreasonable for Mr Zampelis to construe it as he did. Her Honour further found that the tenants had acted in reliance on the assurance and suffered detriment by incurring expenditure on the fit out works. On that basis, Warren CJ held that the matter should be remitted to VCAT for determination of the measure of relief to be accorded to the tenants, which her Honour posited should be at the "lower limit of the representation"; meaning, presumably, in accordance with the least onerous to Crown of the several possible meanings which could reasonably have been drawn from the assurance.
Whelan and Santamaria JJA considered that the primary judge was correct in holding that VCAT made an error in failing to "analyse or consider what [VCAT] had found as to what had been said to Mr Zampelis and as to what that meant". But their Honours were also of the view that VCAT and the primary judge were at fault in that "[n]either VCAT nor the [primary] judge have addressed estoppel on the basis of the factual findings which VCAT made but by reference to the 'lower limit' of what was meant by 'looking after' the tenants at renewal". Like Warren CJ, therefore, although for a different reason, Whelan and Santamaria JJA concluded that the matter should be remitted to VCAT to determine "what equitable relief, if any, should be granted". Their Honours said that the "enquiry [should] involve an analysis of what Crown should do to relieve [the tenants] from the detriment they have suffered because Crown resiled from its representation", but that it should not extend to the grant of new leases or anything in the nature of expectation loss.
Certainty of the representation
Crown attacked the Court of Appeal's reasoning at a number of levels. Its starting point was to contend that the tenants had put their estoppel claim in VCAT as a claim of promissory estoppel and that, because the assurance lacked contractual certainty, the claim was bound to fail. Counsel for Crown called in aid Mason and Deane JJ's statement in Legione that "[t]he requirement that a representation must be clear before it can found an estoppel is ... applicable to any doctrine of promissory estoppel", and their Honours' reference with apparent approval to the statement of Lord Denning MR in Woodhouse AC Israel Cocoa Ltd SA v Nigerian Produce Marketing Co Ltd that a higher standard of clarity is required to found a promissory estoppel than is required to found an agreed variation of contract. In Woodhouse AC, Lord Denning stated that was so because it was clear from Low v Bouverie and Canada and Dominion Sugar Co Ltd v Canadian National (West Indies) Steamships Ltd that a representation must be clear and unequivocal in order to work an estoppel.
Crown's contention should not be accepted. The notion that it takes a representation of contractual certainty to found a promissory estoppel is misplaced. As Warren CJ observed, what is determinative in cases of promissory estoppel 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 before allowing the claimant reasonable time in which to revert to the status quo ante or, in some cases, at all.
Mason and Deane JJ's statement in Legione that the requirement that a representation must be clear before it can found an estoppel is to be understood in that sense. So are Lord Denning's references in Woodhouse AC to Low v Bouverie and Canada and Dominion Sugar Co. Neither of the latter cases supports the proposition that a statement must be objectively unambiguous in order to found a promissory estoppel, still less that it must be more certain in terms than is required to found an agreed variation of contract.
Low v Bouverie was decided in the immediate aftermath of Derry v Peek. The beneficiary of a trust sought a loan from a client of a firm of solicitors on the security of the beneficiary's life interest in the trust and the solicitors sought advice from the trustee as to whether the trustee held any mortgage or knew of any other encumbrance over the beneficiary's interest in the trust. The trustee replied that he held a mortgage from the beneficiary for the charge of interest on money advanced to the beneficiary and two policies of life insurance on the beneficiary's life as security for the moneys advanced to him, both of which were mortgaged, but, in effect, that the trustee was not aware of any other security. Acting in reliance on the trustee's reply, the solicitors went ahead and made the loan to the beneficiary. When the beneficiary later defaulted in repayment of the loan, the solicitors discovered that the beneficiary's interest in the trust was in fact subject to six prior mortgages and that, although the trustee had notice of the prior mortgages, at least in the sense that they were receipted in the deed by which he was appointed as trustee some three years before, the trustee had forgotten of their existence when responding to the solicitors' enquiry. The client sued the trustee for breach of warranty and also for equitable relief on the basis that the trustee was estopped from denying that the only encumbrances on the beneficiary's interest in the trust were those which the trustee had mentioned. It was held that the claim for breach of warranty failed because there was no intention to enter into contractual relations, and that the claim of estoppel failed because the meaning which the solicitors sought to attribute to the trustee's reply went beyond the meaning that it could reasonably bear in the circumstances. Bowen LJ encapsulated the latter point as follows:
"[I]n order to entitle the Plaintiff to relief, we must find here such an estoppel as would justify a claim for relief based upon the hypothesis that the Defendant is precluded from denying the truth of the fact which he is supposed to have asserted. Now, an estoppel, that is to say, the language upon which the estoppel is founded, must be precise and unambiguous. That does not necessarily mean that the language must be such that it cannot possibly be open to different constructions, but that it must be such as will be reasonably understood in a particular sense by the person to whom it is addressed. ... I have come to the conclusion that the Defendant did not make any clear statement of the character which the Plaintiff alleges. I think that his language would be reasonably understood as conveying an intimation of the state of his belief, without an assertion that the fact was so apart from the limitation of his own knowledge; and therefore that no relief here can be granted." (emphasis added)
Canada and Dominion Sugar Co was to a similar effect albeit in a different context. It concerned a "received for shipment" bill of lading in respect of a quantity of sugar shipped on the respondent's steamship which stated that the sugar was received "in apparent good order and condition" but contained on the margin a stamped endorsement "[s]igned under guarantee to produce ship's clean receipt". In fact, the sugar had suffered damage before shipment and the ship's receipt stated "[m]any bags stained, torn and resewn". The appellant, which was the indorsee of the bill of lading, sued the respondent, alleging that it was estopped by the bill of lading from denying that the sugar was shipped in good condition. The claim in estoppel failed, although once again not because of any lack of contractual certainty. To the contrary, as the Privy Council observed with reference to the passage of the judgment of Bowen LJ in Low v Bouverie which is set out above: "[a] question ... of estoppel must be decided on ordinary common law principles of construction and of what is reasonable, without fine distinctions or technicalities". The claim of estoppel failed because "the language of the bill of lading, read fairly, and as a whole" did not bear the meaning which the indorsee sought to attribute to it. As the Privy Council observed, if the statement "[r]eceived in apparent good order and condition" at the head of the bill of lading had stood alone, the bill of lading would have been a "clean" bill of lading and in the relevant context that would have meant that there was no clause or notation modifying or qualifying the statement as to the condition of the goods. But, because the bill bore on its face the qualifying words "[s]igned under guarantee to produce ship's clean receipt", it would reasonably have conveyed to a businessman that the statement as to good order and condition could not be taken to be unqualified.
Additionally, whatever degree of certainty might be necessary to found a promissory estoppel of the kind considered in Legione - and it is to be observed that, although the representation in that case was not certain, it was held by a majority to be sufficient to estop the vendor from rescinding - proprietary estoppels of the kinds exemplified in Dillwyn v Llewelyn and Ramsden v Dyson do not require any particular degree of objective certainty; and proprietary estoppels of those kinds are a form of promissory estoppel. As Lord Scott of Foscote (with whom Lord Hoffmann, Lord Brown of Eaton‑under‑Heywood and Lord Mance agreed) observed in Cobbe v Yeoman's Row Management Ltd, proprietary estoppel is a sub‑species of promissory estoppel:
"The estoppel becomes a 'proprietary' estoppel - a sub‑species of a 'promissory' estoppel - if the right claimed is a proprietary right, usually a right to or over land but, in principle, equally available in relation to chattels or choses in action."
Arguably, the present was a case of proprietary estoppel, because what was alleged was in effect that the tenants had acted to their detriment in carrying out the refurbishment works to a high standard on the faith of an assurance that, if they did so, they would be granted a further term. But, in any event, as Brennan J observed in Waltons Stores (Interstate) Ltd v Maher, unless cases of proprietary estoppel are to be attributed to a different equity from that which explains non-proprietary promissory estoppel, "[i]t does not accord with principle to hold that equity, in seeking to avoid detriment occasioned by unconscionable conduct, can give relief in some cases but not in others". And, although his Honour was there speaking of whether promissory estoppel can apply in cases in which there is no pre-existing legal relationship between the parties, the logic of the proposition applies equally to the degree of certainty required in each case.
The foundational principle on which equitable estoppel in all its forms is grounded is that equity will not permit an unjust or unconscionable departure by a party from an assumption or expectation of fact or law, present or future, which that party has caused another party to adopt for the purpose of their legal relations. Consequently, the notion that there is or should be some a priori distinction between the degree of objective certainty required to found a promissory estoppel compared to a proprietary estoppel runs counter to principle. The idea of "one overarching doctrine of estoppel rather than a series of independent rules" may not yet have "won general acceptance". But, in as much as the recognised categories of equitable estoppel are instances of the operation of the more general foundational principle, the determination of whether it is unconscionable for the charged party to depart from an assumption or expectation created in the mind of the claimant must always depend on the particular facts and circumstances of the case. The recognised applications of established categories of promissory estoppel are not necessarily exhaustive of the cases in which equity will intervene and, even if they were, it would not follow that because it has been found in the context of one relationship that a designated level of certainty was required, the same degree of certainty would be necessary in the context of a different relationship or in different circumstances.
Finally on this aspect of the matter, as Warren CJ emphasised, since the object of equitable estoppel in all its forms is to prevent the detriment which a representee would suffer if the representor were unjustly or unconscionably to depart from the assumption or expectation created in the mind of the representee, relief should be accorded only to the extent of the minimum content of the assumed state of affairs from which it would be unjust or unconscionable for the representor to depart. Frequently, that may not extend to compelling the representor to fulfil the assumption or expectation as opposed to compensating the representee for the detriment suffered. Hence, although an equivocal or objectively ambiguous representation would be incapable of forming a binding contract, it may yet found a promissory estoppel. The equivocal or objectively ambiguous nature of the representation is but one, albeit important, consideration in the determination of whether and to what extent the assumption or expectation is fairly and reasonably to be attributed to the representation and thus the measure of relief which is to be accorded.
Correspondence of the assumption or expectation with the representation
Crown next contended that the claim in estoppel was bound to fail because of the disconformity between what VCAT found to be the objective meaning of the assurance and Mr Zampelis' subjective understanding of the meaning of the assurance.
That contention cannot be accepted in the broad terms in which it was stated. It follows from what has already been said about contractual certainty that it was not necessarily inimical to the tenants' claim in estoppel that VCAT found that Crown's representation could not reasonably have been taken to mean more than that Crown would offer the tenants a further term of five years on such terms and conditions as Crown might choose in its discretion in accordance with cl 2.3 of the Leases.
Certainly, as has been explained, before a party charged can be estopped by representation, the party charged must have played such a part in the adoption of the assumption or expectation on which the other party has acted to the latter's detriment that it would be unconscionable for the party charged to be left free to ignore that assumption or understanding. But it does not follow that, because the claimant has made an assumption or reached an understanding of the meaning of the representation that goes beyond the meaning that could reasonably be attributed to it, the party charged is altogether free to ignore it. Depending on the facts and circumstances of a given case, it may still appear that it would be unconscionable if the party charged were free to depart from the meaning that may reasonably be attributed to the representation.
In cases of proprietary estoppel, the approach which has been taken is that, where the court is satisfied that the level of a claimant's assumption or expectation is genuinely derived from the subject representation but goes beyond what could reasonably be attributed to it, and it appears that it would be unjust or unconscionable if the party charged were free to depart from some lower level of assumption or expectation that may fairly and objectively be derived from the representation, relief may be limited accordingly. As Robert Walker LJ observed in Jennings v Rice, if a claimant's expectations are uncertain or extravagant or out of all proportion to the detriment suffered, the court can and should recognise that the claimant's equity is to be satisfied in another, generally more limited, way. For the reasons already expressed, the common principle which informs all species of equitable estoppel, including non-proprietary promissory estoppel, implies that the same approach should be taken in relation to cases of non-proprietary promissory estoppel.
On that basis, Crown would be chargeable with such assumptions or expectations as might reasonably be attributed to the assurance in the circumstances which obtained. Whether it would be unjust or unconscionable for Crown to depart from that level of assumption or expectation would then depend on whether, if Mr Zampelis had taken the assurance to mean no more than that Crown would offer new leases on such terms and conditions as Crown might choose under cl 2.3, the tenants would have been induced by that more limited assumption or understanding to deliver the Leases and undertake the refurbishment works.
If it were thus established that the tenants would have been induced by that more limited assumption or understanding to act as they did, and acting as they did caused them detriment, it might fairly be said that Crown had played such a part in the tenants' change of position to their detriment that it would be unconscionable for Crown to depart from the lesser assumption or expectation. By contrast, however, if the facts were that the tenants would not have been induced by that more limited assumption or expectation to act as they did, there would be nothing apparently unconscionable about Crown departing from that more limited assumption or expectation.
The conduct of the case before VCAT
As Crown contended, the tenants' case before VCAT was an all or nothing claim of collateral contract or, in the alternative, estoppel preventing the denial of the existence of a collateral contract, with damages for breach of the collateral contract calculated by reference to the profits which it was supposed would have been generated during the renewed term of the Leases. The tenants did not plead or contend or attempt to prove that, if they were not entitled to be put in the position in which they would have been if a further term of five years had been granted, they were entitled to some lesser scale of relief to be moulded according to what might reasonably be regarded as the meaning of the assurance. It follows, Crown submitted, that the tenants cannot now succeed to some lesser measure of relief computed on that basis.
That contention should be accepted, and it is determinative of this appeal. Due to the way in which the tenants put and conducted their case before VCAT, VCAT did not make any findings as to whether the tenants would have been induced by a more limited reasonable assumption or understanding to act as they did. Nor did VCAT make any finding of detriment as such. It found that the tenants were induced by their assumption or expectation of the meaning of the assurance to deliver the Leases and to expend the funds necessary to complete the refurbishments. But there was no evidence or determination of how much of the costs of the refurbishments were not recovered out of profits generated during the five year terms of the Leases. As has been seen, there was evidence that, upon the expiration of the Leases and Crown's refusal to grant a further term, the value of the refurbishments in the tenants' books of account was written down immediately to nil, generating an accounting loss of close to $2 million. But there was no evidence of how much of that would have been recovered if a further term of five years had been granted. Perhaps it could have been contended that it was probable that depreciation during the second five year term would continue at the same rate as during the initial term. But that was not suggested or considered.
Nor was it appropriate for the Court of Appeal to order that the matter be remitted to VCAT for further hearing in order to make up those deficiencies. The tenants chose not to advance a lesser case for relief when the matter was before VCAT, even as an alternative to the claim as it was put, and there is nothing in the way in which Crown conducted its defence which warrants that the tenants should now be given a second opportunity. There should be an end to litigation. Having successfully resisted the tenants' claim in the way in which it was put, Crown should not now be vexed with what, in effect, would be a second proceeding. That would be wrong in principle and it would be unfair.
Conclusion
In the result, the appeal should be allowed with costs. Orders 2-6 of the Court of Appeal should be set aside. In lieu, it should be ordered that the appeal to the Court of Appeal be dismissed with costs. Special leave to cross-appeal should be granted but the cross‑appeal should also be dismissed with costs.