205 Unless subsumed by its claim for equitable compensation, E K Nominees is entitled pursuant to s 82 of the Trade Practices Act to damages of $738,782.98, before interest pursuant to s 100 of the Civil Procedure Act 2005 (NSW). The calculation of damages excludes GST. I assume that E K Nominees does not seek to recover damages inclusive of GST. If there is any dispute about that question, it can be raised when short minutes are brought in.
A Question of Evidence
206 During the hearing, a question arose as to the admissibility of estimates given by quantity surveyors of the estimated cost of construction of the development, and of the construction of the development contemplated by the 2003 development application. The fact that the estimates of construction had been provided to Mr Marcocci was itself a relevant matter, particularly in the second case. It was relevant to Woolworths' defence that E K Nominees had failed to mitigate its damages by failing to pursue the Aldi development. A question of what estimates Mr Marcocci received as the cost of construction was material, irrespective of the accuracy of the estimate. However, E K Nominees also relied on the estimates given by the quantity surveyors to Mr Marcocci as evidence of what the costs of construction would have been. Neither quantity surveyor was called to verify or explain his opinion.
207 I made an order pursuant to s 136 of the Evidence Act 1995 (NSW) that the use to which the evidence could be put was limited to the issue of whether E K Nominees failed to act reasonably to mitigate its damages, and that the documents not be used as evidence of the likely cost of the developments.
208 The quantity surveyors' estimates were no doubt given by qualified persons skilled in such tasks. If the opinion rule applied to their estimates, the estimates would be inadmissible. The estimates did not meet the requirements for admissibility under s 79 of the Evidence Act having regard to the principles in Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705.
209 The opinion rule did not apply to the estimate of the construction cost for the 2003 proposed development. That was because the document was, in any event, admissible for a different purpose (Evidence Act, s 77). There has been recent consideration of the question as to whether the opinion rule applies to documents which are admissible as business records (Australian Securities and Investments Commission v Rich (2005) 216 ALR 320 at 366-369; and see also Hadid v Australis Media (28 October 1996, Sperling J, unreported); Connex Group Australia Pty Ltd v Butt [2004] NSWSC 379). It is not necessary to pursue this question. Whether or not the opinion rule applied, it would have been unfairly prejudicial to Woolworths to have allowed the documents to be used to prove the likely cost of construction (assuming that to be a relevant question). The authors of the documents were not available for cross-examination and the basis of their opinions was not exposed. For these reasons, I limited the use to which the documents could be put pursuant to s 136 of the Evidence Act.
210 In the result, nothing turns on this ruling. The cost of the construction of the Aldi development became irrelevant once the defence of failure to mitigate was dropped. For the reasons I have given, I do not accept that E K Nominees' ability to carry out the Aldi development was relevant otherwise than to the defence of failure to mitigate. The cost of construction of the Woolworths development is only relevant to Woolworths' claim that E K Nominees did not show that it would not have made the same loss had the development proceeded. E K Nominees did not bear the onus on that question. The cost of construction could also be relevant in assessing the maximum fees which Gergely & Pinter were entitled to charge. However, Woolworths did not submit that E K Nominees had failed to show that Gergely & Pinter was owed the amount for which invoices were rendered.
Equitable Compensation for Expenses Incurred from 18 July 2001
211 The steps in E K Nominees' claim for equitable compensation were that:
(a) Woolworths induced E K Nominees to adopt the assumption that Woolworths would enter into an agreement for lease of the Auburn Road site;
(b) in reliance on that assumption, E K Nominees engaged consultants and carried out work and incurred expenditure in so doing;
(c) Woolworths knew that E K Nominees was carrying out work and incurring expenditure on the basis of its assumption that Woolworths would enter into an agreement for lease of the Auburn Road site;
(d) Woolworths failed to inform E K Nominees that its assumption was incorrect;
(e) by refusing to enter into the agreement for lease, Woolworths failed to fulfil E K Nominees' assumption;
(f) as a result, E K Nominees has suffered detriment in the form of the expenditure incurred from 18 July 2001; and
(g) it is thereby entitled to equitable compensation to remedy that detriment.
212 Although not expressly pleaded, the third step in E K Nominees' claim can be expanded. Woolworths not only knew that E K Nominees was doing work and incurring expense on the assumption that an agreement for lease would be entered into, but Woolworths encouraged E K Nominees to do that work and to incur that expense.
213 E K Nominees' claim was put on the basis of an equitable estoppel, where the appropriate remedy was not to compel Woolworths to make good the assumption, but to compensate the plaintiff for the detriment it suffered by a monetary award. E K Nominees' argument assumed that if the requirements for an equitable estoppel were made out, precluding Woolworths from resiling from the assumption made by E K Nominees that Woolworths would enter into an agreement for lease, E K Nominees was entitled to compensation for the expenses which it incurred in reliance on that assumption. Woolworths took issue with the contention that Woolworths was so estopped. It denied that its conduct was unconscientious. But it did not dispute that, as a matter of principle, monetary compensation was an available remedy if the elements of the estoppel claim were otherwise established. It did not take issue with the proposition that a remedy by way of compensation would satisfy the equity necessary to avoid unconscientious conduct by the defendant (Giumelli v Giumelli (1999) 196 CLR 101 at 125).
214 E K Nominees did not plead or argue a quantum meruit claim for reimbursement of expenses or reasonable remuneration. No reliance was placed on cases such as Sabemo Pty Ltd v North Sydney Municipal Council [1977] 2 NSWLR 880 at 901-903; British Steel Corp v Cleveland Bridge & Engineering Co Ltd [1984] 1 All ER 504 at 511; Dickson Elliott Lonergan Ltd v Plumbing World Ltd [1988] 2 NZLR 608 at 513; or Brenner v First Artists' Management Pty Ltd [1993] 2 VR 221 at 258-259, where plaintiffs obtained recovery for work done at the request of the other party, in anticipation of a contract that did not eventuate because of a change of heart of the other party. Although I raised the question whether the facts pleaded supported a claim on the principles in Sabemo Pty Ltd v North Sydney Municipal Council, and the plaintiff's counsel said that they did, no argument was advanced in support of such a claim. It is therefore unnecessary to consider this line of authority, including POS Media Online Ltd v Queensland Investment Corporation [2001] FCA 809, where Wilcox J applied Sinclair v Rankin (1907) 9 WALR 233 in preference to Sabemo, but was apparently not referred to Brenner v First Artists' Management Pty Ltd.
215 Sabemo was more recently considered in the context of work done in anticipation of contracts that did not materialise in this Court in ABB Engineering Construction Pty Ltd v Abigroup Contractors Pty Ltd [2003] NSWSC 665 at [159]-[168] and Australian Securities and Investments Commission v Edwards (2005) 220 ALR 148 at 168-171).
216 In none of these cases is the right to compensation or restitution discussed by reference to the principles of estoppel. However, in K Mason and J W Carter, Restitution Law in Australia, Butterworths, Sydney, 1995 (at [1035]), the learned authors said:
" From a technical perspective, it might be asked why there was a right to 'compensation' in Sabemo . If there was a breach of duty, it arose either under estoppel or a principle of good faith. Compensation on the basis of promissory estoppel was not available at the time, but might now be applicable on the basis of Sabemo's (detrimental) reliance on representations made by the council and the council's arguably unconscionable conduct in breaking off relations. From a compensation perspective, the complaint of Sabemo was that it had relied on the council's conduct, and incurred expenditure.
Sheppard J's (alternative) solution in terms of restitution is also difficult, because he did not adopt an unjust enrichment basis. He may have taken the view that a claim in restitution is a claim for compensation, or held that restitution may be available even though the principle of unjust enrichment does not apply, perhaps on the basis that unjust enrichment applies only in cases of tangible benefit. We do not see either approach as viable today: each has been overtaken by subsequent developments. "
217 S Christensen, in an article entitled "Recovery for Work Performed in Anticipation of Contract: Is Reliance an Element of Benefit?" (1993) 11 Aust Bar Rev 144, drew a comparison between the facts in Sabemo and the facts in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, and argued that the principles in each case operated in the same circumstances, or may be aspects of the same principle. Similarly, A Wyvill, "Enrichment, Restitution and the Collapsed Negotiations Cases" (1993) 11 Aust Bar Rev 93 argued (at 125), in reference to Waltons Stores (Interstate) Ltd v Maher, that:
" By abandoning the requirements that, first, equitable estoppel could only apply between parties who were in an existing contractual relationship and, secondly, it could only be used as a shield not a sword, the High Court of Australia cleared the way for equitable principles based upon unconscionable conduct to allow the recovery of reliance losses from collapsed negotiations. Waltons was a pre-contractual negotiations case and the specific recognition it gave this cause of action based upon unconscionable conduct allows us now to analyse the Sabemo category of case in similar terms. "
218 Having regard to the academic and textwriters' support for such a restitutionary claim being considered according to the principles of estoppel, I am content to proceed along the lines the matter was argued. This is also consistent with the reasoning of Heenan J in Striker Resources NL v Australian Goldfields NL (in liq) [2006] WASC 153 at [126]-[130]. Understandably, Woolworths did not submit that there was no remedy in equity because E K Nominees had an adequate remedy at law.
Equitable Estoppel
219 The starting and finishing point is Waltons Stores (Interstate) Ltd v Maher. There the plaintiff obtained a judgment for damages in lieu of specific performance of a contract which had not been made, but which the defendant was estopped from denying. The parties had settled all the terms of a lease of land, but the contracts had not been exchanged. The lease required the owner to demolish the existing building and construct a new one to the lessee's specification. The owner's solicitor forwarded its counterpart of the executed lease to the lessee's solicitor by way of exchange, but the lessee did not provide its executed counterpart. To the lessee's knowledge, the owner commenced demolition and building work. When the building was partially erected, the lessee advised it did not intend to proceed. There are similarities with the facts of the present case. The most significant difference is that the terms of the lease had been settled. The process of exchanging counterparts had proceeded to such an extent that Deane and Gaudron JJ found that the owner had assumed that a binding agreement had been made and that the lessee was estopped from denying the existence of a binding agreement for lease, by standing by silently and watching the owner act to its detriment, and by failing to inform the owner that exchange might not occur (at 439-440, 443, 445 per Deane J; at 460-461, 463-464 per Gaudron J).
220 In the present case, E K Nominees did not assume that an exchange had occurred, or that a contract had otherwise come into existence. It expected that a contract would come into existence. To the knowledge of Woolworths, and with Woolworths' encouragement, it did work and incurred expense in that expectation, which occasioned it detriment when its assumption was not fulfilled.
221 This directs attention to the basis upon which the lessee in Waltons Stores succeeded in the view of Mason CJ, Wilson J and Brennan J. Mason CJ and Wilson J referred with approval to authorities that treated promissory estoppel and proprietary estoppel, or estoppel by acquiescence, as facets of the same general principle. Their Honours said (at 404):
" One may therefore discern in the cases a common thread which links them together, namely, the principle that equity will come to the relief of a plaintiff who has acted to his detriment on the basis of a basic assumption in relation to which the other party to the transaction has 'played such a part in the adoption of the assumption that it would be unfair or unjust if he were left free to ignore it': per Dixon J. in Grundt (68); see also Thompson (69). Equity comes to the relief of such a plaintiff on the footing that it would be unconscionable conduct on the part of the other party to ignore the assumption. "
222 After considering Attorney-General (Hong Kong) v Humpreys Estate Ltd [1987] AC 114 (which Mason CJ and Wilson J treated as a case of promissory estoppel and not proprietary estoppel), their Honours said (at 406):
"As failure to fulfil a promise does not of itself amount to unconscionable conduct, mere reliance on an executory promise to do something, resulting in the promisee changing his position or suffering detriment, does not bring promissory estoppel into play. Something more would be required. Humphreys Estate suggests that this may be found, if at all, in the creation or encouragement by the party estopped in the other party of an assumption that a contract will come into existence or a promise will be performed and that the other party relied on that assumption to his detriment to the knowledge of the first party. Humphreys Estate referred in terms to an assumption that the plaintiff would not exercise an existing legal right or liberty, the right or liberty to withdraw from the negotiations, but as a matter of substance such an assumption is indistinguishable from an assumption that a binding contract would eventuate. On the other hand the United States experience, distilled in the Restatement (2d, s90), suggests that the principle is to be expressed in terms of a reasonable expectation on the part of the promisor that his promise will induce action or forbearance by the promisee, the promise inducing such action or forbearance in circumstances where injustice arising from unconscionable conduct can only be avoided by holding the promisor to his promise."
223 Likewise, Brennan J enunciated principles of equitable estoppel in general terms. After distinguishing (at 415-416) an estoppel in pais, which compels adherence to an assumption of fact which the opposite party has been induced to adopt but which does not itself create rights, from an equitable estoppel, which is itself the source of rights and obligations, his Honour said (at 428-429):
" In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise. For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will nevertheless be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant's property, a diminution of his rights or an increase in his obligations and he, knowing that the plaintiff's reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs. "
224 Woolworths raised a number of arguments in answer to the claim that it was estopped from departing from the assumption it had induced E K Nominees to adopt that it would enter into the agreement for lease. First, it submitted that nothing it did could reasonably have induced that assumption, as the letter of 18 July 2001 was not "sufficiently specific and unqualified to attract the application of equitable estoppel" (Mobil Oil Australia Ltd v Wellcome International Pty Ltd (1998) 81 FCR 475 at 515; Legione v Hately (1983) 152 CLR 406 at 435-436).
225 Secondly, Woolworths relied on evidence of Mr Marcocci that he understood that Woolworths was free to walk away if it wished to do so. It submitted that there could be no estoppel as the first of the requirements identified by Brennan J in Waltons Stores quoted in para [223] above was not satisfied. E K Nominees did not assume that Woolworths was not free to withdraw from the expected legal relationship. Woolworths submitted that it was not unconscionable for it to withdraw from negotiations when E K Nominees knew that Woolworths considered itself free not to enter into any such lease.
226 Thirdly, it submitted that as not all of the terms of the agreement for lease had been settled, there was no agreement for the estoppel to operate upon.
227 Fourthly, Woolworths submitted that the earliest time at which it could be argued that it had engaged in unconscientious conduct was when it failed to disclose the approach by Markham Corporation.
Clarity of Representation
228 In Legione v Hately, Mason and Deane JJ said (at 436) that the requirement that a representation be clear in order to found an estoppel applies as much to the doctrine of promissory estoppel as it does to an estoppel in pais. The passage in Mobil Oil Australia Ltd v Wellcome International Pty Ltd at 515 relied on by Woolworths concerns a different point, namely, whether there is a sufficient particularity in the legal relationship which E K Nominees assumed would come into existence to found an estoppel, when not all the terms of the anticipated contract had been settled. Mobil Oil is best dealt with in the context of Woolworths' third submission.
229 In my view, E K Nominees' assumption that Woolworths would enter into an agreement for lease was reasonably based on Woolworths' conduct. Woolworths clearly represented its intention to enter into the agreement for lease, even though its intention was conditional.
230 The parties had settled all the terms that were necessary for an agreement for lease, although further and more complete terms were the subject of later negotiation. Woolworths' Property Committee had approved of Woolworths entering into an agreement. For the reasons given in paras [129]-[131], Woolworths' letter of 18 July 2001 contained a clear representation of its intention to enter into the agreement for lease, even though its intention was subject to conditions. As matters proceeded, further issues arose for discussion and agreement. There is no reason to doubt that those issues would have been resolved, as the submission to the Property Committee of 30 April 2002 made clear. (Mr Hunt said that the documents would be ready for execution in the following month.) The assumption engendered by the communication of the Property Committee's approval was reinforced by the work which followed, in which Woolworths encouraged E K Nominees to obtain development consent as soon as possible, supported it in its endeavours to do so, and actively co-operated with E K Nominees and its consultants in seeking to finalise reports, drawings, and specifications for the development. I do not accept the first of Woolworths' submissions.
No Assumption that Woolworths was Obliged to Proceed
231 E K Nominees reasonably expected that Woolworths would enter into an agreement for lease with it on the terms referred to in Woolworths' letter of 18 July 2001, which in turn referred to the terms agreed in previous correspondence, with such additional terms or modifications as might be agreed upon in settling the final form of the agreement for lease. However, E K Nominees, through Mr Marcocci, believed that Woolworths was not legally bound to do so, but was free to walk away if it chose to do so. Woolworths' letter of 18 July 2001 provided that its approval was subject to certain terms and conditions including "agreement to lease and lease". Mr Marcocci gave evidence in cross-examination that he understood that Woolworths was saying that it would not be bound to any agreement with E K Nominees until there was an execution of the agreement for lease and lease. Until then, he understood that Woolworths was free to walk away if it wanted to (T193, 273).
232 The question is whether it is sufficient for E K Nominees to prove that it was induced by Woolworths reasonably to assume that Woolworths would enter into an agreement for lease with it, and acted to its detriment in reliance on that assumption, or whether it is necessary for E K Nominees to have assumed, or expected, that Woolworths was bound to proceed. If it is necessary for E K Nominees to demonstrate an assumption that Woolworths was bound to proceed, that is, to have assumed that Woolworths was not free to withdraw from the expected legal relationship, then its claim based on estoppel must fail.
233 In Attorney-General (Hong Kong) v Humphreys Estate Ltd, an agreement in principle was reached for the Hong Kong government to acquire property of the plaintiff HKL in exchange for the grant of Crown land to HKL with the right for HKL to develop it and adjoining land. The agreement was expressed to be "subject to contract". The government took possession of HKL's buildings, spent money on them and moved a number of government employees from their existing residences into those properties. It allowed HKL into possession of its property and gave it a licence to demolish the existing buildings. A number of the terms of the "in principle" agreement were performed on both sides. The question was whether HKL was estopped from withdrawing from the agreement in principle with the government so that it was entitled to re-take possession of its land. The Privy Council reviewed a number of the authorities on proprietary and promissory estoppel, including the statement of principle in the dissenting judgment of Lord Kingsdown in Ramsden v Dyson (1866) LR 1 HL 129 at 170, and the decision of Robert Goff J in Holiday Inns Inc v Broadhead (1974) 232 EG 951 at 1087. These were reviewed with evident approval. Lord Templeman, who delivered the judgment of the Privy Council, said (at 124):
"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."
234 The Privy Council found that the government failed on both counts. As to the first, their Lordships said (at 124-125):
"Counsel for the appellants submitted that every action of the government and every action of HKL after the date of the agreement in principle served to create or encourage a belief and expectation in the government that the agreement in principle would be carried into effect and that HKL would not withdraw. HKL allowed the government to take possession of Tregunter, to fit out the flats, to rehouse senior civil servants and to dispose of their former residences. HKL prevailed on the government to allow HKL to enter on and to destroy the buildings comprised in Queen's Gardens and adjacent sites and HKL paid in full the price for taking over Queen's Gardens. It was impossible for the government to go back and unthinkable that HKL would not go forward. It was unconscionable for HKL to seek to exercise their legal right to withdraw from the agreement in principle."