Grace v Peter Harrison Designs & Signs Pty Ltd [1998] QSC 27

Supreme Court of Queensland|1998-03-17|Before: Thomas J

This is a trial of limited issues in three actions, following an order by Moynihan SJA (under O.39 r.12) directing that the trial of liability issues be heard separately from the trial of quantum issues. On 19 December 1997 further directions were given as to whether certain issues were or were not embraced by the direction, and the trials have proceeded on the issues as defined in that further order. The trial has taken 15 days.

Similar questions arise in each case, and most of the evidence is admissible in all three cases. In this judgment I shall set out at length the relevant common evidence and findings thereon[1], and then proceed to make additional specific findings applicable to these particular plaintiffs. In the other cases I shall adopt these common findings, and proceed to further findings with respect to those claims.

In about mid-1996 the defendant purported to terminate the concessions, in most instances on about six months' notice, and required the concessionaires to vacate their respective premises. The plaintiffs deny the defendant's right to do so, advancing their case on alternative bases. These include an estoppel based upon oral promises, in effect of continued renewals of their terms provided that they were not in breach. The plaintiffs claim to have relied upon such statements, to have moved to the island and to have invested their money and their effort on the faith of them. They claim that they would suffer detriment if the defendant were allowed to depart from the assumptions that arose from the promises. The plaintiffs also alternatively allege the existence of collateral contracts and seek rectification of the relevant licences.

In my view the most relevant area upon which attention should be focussed is the question of estoppel.

This was originally a private company (Hamilton Island Enterprises Pty Ltd) under the sole control of Mr Keith Williams. After that company encountered financial difficulty and went into receivership in 1992, a public company (Hamilton Island Ltd) was floated in late 1993 which purchased from the Receiver the private company's two ordinary shares for $117 million. The private company was then converted into a public company with the name Hamilton Island Enterprises Ltd. That company has continued to conduct the business on Hamilton Island. The defendant is one and the same as the old company run by Mr Williams. It will generally be convenient to refer to the defendant as HIE irrespective of the time to which reference is made.

There has been a continuity of administration, although the control of management can be seen to fall into four distinct periods:

(a) 1983 to 11 May 1992: HIE was under the sole control of Mr Keith Williams;

(b) 11 May 1992 to 3 December 1993: HIE was under the control of Mr Alan Taylor as receiver-manager, appointed by Citibank. Having attempted unsuccessfully to sell "the island" (I assume HIE's assets), attention was turned to raising the necessary capital by a public float to raise $115 million. In the result, on 3 December 1993 the issued capital of the former company was transferred by the Receiver to the new public company, and HIE was itself converted into a second public company which has continued to conduct the relevant business;

(c) 3 December 1993 to 16 January 1996: HIE traded over this period at a loss. Shares fell to 49 cents. Eventually, Bankers Trust Australia (a foreign corporation based in the United States) successfully made a part A takeover offer which was sufficient to give it control of the company;

(d) 16 January 1996 to the present day: The takeover produced "very great"changes to the board[2] and senior management, and thereafter the business has continued to be run under that management.

The acquisition of tenure of the island, and the establishment of the resort was Mr Williams' personal project which he accomplished by means of HIE. During the period of his management he took a considerable interest in the work of each concessionaire, applying a system and methods which he had found successful in former enterprises including Sea World. The concessionaire system, soon to be described, was largely his own creation. It seems to have been designed in part to avoid the intrusion of union power, and in part upon a belief that carefully selected persons and families working their own businesses would give better service and present a better image on behalf of the island than could be obtained from employed staff. While the evidence suggests some despotic and sometimes idiosyncratic practices on Mr Williams' part, there is no evidence to suggest that he acted otherwise than honourably, and on the whole paternally, towards those with whom he dealt on the island.

Mr Brown was in effect Mr Williams' deputy chief executive officer from mid-1987 until the time of the receivership. Inter alia he was authorised to negotiate licence agreements with potential concessionaires.

Mr Brown is now deceased, but affidavits filed by him in earlier proceedings were received.

Mr Taylor acted as receiver-manager between May 1992 and December 1993.

Mr Kelly was a member of Mr Taylor's staff. He was on the island for about five days in May 1992, when he made various enquiries on the Receiver's behalf concerning existing concessionaires. He made further enquiries from Brisbane between May and September 1992.

Mr Plever was originally an employee with Citibank who had some early dealings on its behalf concerning the loan to HIE. In November 1992 Citibank reemployed him and sent him to the island where he was known as the "owner's representative" (the word "owner" being then regarded as Citibank). No doubt he was the liaison point between Citibank and the Receiver. Subsequently he was appointed chief executive officer of HIE, and remained in that position until 15 January 1995, that is to say after it became a public company but before the Bankers and Traders' takeover.

Mr Palmer was on the island between March 1993 and April 1995. His title was general manager/concessionaire and general manager/finance. In effect he reported to Mr Plever. He had dealings with the concessionaires and was expressly authorised to tell them (and did so) that any contractual arrangements would be adhered to.

Mr Ellett was engaged by HIE as general manager/concessionaire between 2 April 1995 and 31 July 1996. In some respects he replaced Mr Palmer, and his general function was to report to his superiors on the position concerning concessionaires. He developed what I identify as sympathy with the position of the concessionaires and a disapproval of an intransigent attitude he perceived superior management to be taking. In the event he resigned when requested to do so by his immediate superior, Mr Tallent.

Mr Tallent was part of the managerial team appointed in the period after the Bankers and Traders' takeover. His designation was director of operations and development, a position which he occupied between February 1996 and October 1997. He had an important part in the development and implementation of a "business plan" that was devised for the future operation of the island, which was largely inconsistent with the continuation of the plaintiffs' interests as concessionaires. His immediate superior was Mr Kirkpatrick.

Mr Kirkpatrick joined the new HIE board in January 1996 and became HIE's chief executive officer on 29 April 1996. He may be described as an expert trouble-shooter who had been sent to rescue various high profile resorts when they have fallen into financial trouble, and he boasts miraculous turnarounds on each occasion. He, with the assistance of Mr Tallent, was the chief executive agent in introducing and implementing the new business plan. Inter alia he gave directions for the termination of many of the concessions, including those of the three remaining plaintiffs.

Mr Pherhad is the concessionaire to whom the Outrigger Restaurant was granted in 1986. When his concession was renewed in 1992 it was issued in favour of the Pherhads' company (which has the awkward name ACN 055 389 725 Pty Ltd).

Ms Wright, formerly a journalist commenced residing on Hamilton Island in 1987 and in 1990 became the concessionaire in respect of the Airport Bar.

Mr Grace became the concessionaire of a business known as the Health and Racquet Club in 1986. In July 1993, with HIE's consent, he assigned his interests to Mr Harrison and Mr Harrison's company. That company (the second plaintiff - "Peter Harrison Designs") thereafter became the concessionaire with respect to that business.

Having acquired Land Act tenure to the whole island, Mr Williams' company HIE was in a position to establish a community and to control and influence virtually any aspect of life on the island. The particular qualities sometimes attributed to a "company town" were even more pronounced in an island community. In 1982 work commenced on various buildings, including the creation of the resort. It opened in 1983 in a relatively small way with one block of apartments and fifty "bures" (huts). Mr Williams had very clear notions on how the island was to be run, and some of these were directly derived from his experience in successfully running his Sea World business. This involved the provision of services by a considerable number of independent concessionaires rather than by staff employed by HIE.

The developed part of the island may conveniently be divided into two main areas - the resort side and the harbourside. They are about 500 metres apart. The resort contains accommodation facilities where guests reside and where various services and activities now commonly associated with such resorts are available. This area includes the main beach at Catseye Bay. The harbourside contains a harbour, a marina and an air terminal and there are residents who have purchased houses or units, along with various shops and businesses. Those who stay at the resort often choose to dine or engage in other activities at harbourside, appreciating what was described as the village atmosphere.

At the resort many activities normally provided by a central resort or hotel management were conceded to private individuals. These included the various restaurants and bars at and around the resort. The resort did not even run its own dining room. At one stage even the mini-bar service was provided by an outsider. The persons (or families) who were engaged to provide these services came to be known as concessionaires. The system was not confined to activities at the resort. In the harbourside area commercial activity and development were controlled, not by a local authority and town plan, but largely by HIE's assertion of control in the issue of concessions which contractually gave the concessionaire an exclusive but limited right to engage in certain activities. These ranged very widely, including such things as a welding business, restaurants, shops, bars, buggy hire, recreations for guests, and many others. When Mr Williams' control came to an end, there were about 85 concessionaires.

As will be seen, Mr Williams did not make exactly the same arrangements with all concessionaires. But with a significant number of them there was an identifiable uniformity of arrangement that could fairly be described as a system, and a consistency of application of what could fairly be described as a policy. The system was based upon mutual cooperation. HIE expected that a high standard of service from such persons would enhance the experience of the guests and in turn promote the prosperity of the venture. The concessionaires were in a sense captives, in that their only customers were such persons as HIE could persuade (by advertising or otherwise) to come to the island. Each concessionaire was expected to provide a specialised service in a unique complex. The concept of teamwork was placed at the forefront. Inter alia the concessions were based upon payment by the concessionaire of a prescribed percentage of gross receipts, and it was expressly recognised that both parties had an interest in the goodwill of the concessionaire's business. The arrangements did not amount to joint ventures, but they shared many features commonly associated with a joint venture.

This background is relevant to an understanding of the arrangements that were made and to an application of the statements upon which relevant concessionaires are said to have relied in commencing and continuing their businesses.

The plaintiffs claim that an estoppel arises both out of the particular representations made to them (estoppel by representation) and out of the conduct of HIE in administering a known policy such that the plaintiffs would expect to rely on it being carried out (estoppel by convention).

There is no doubt that Mr Williams explained his system to a considerable majority of the concessionaires prior to engagement, including the present plaintiffs Mr Grace, Ms Wright and Mr & Mrs Pherhad. There were of course variations in the expressions used from time to time, and the defendant produced evidence from a number of concessionaires[3] to whom representations were not made concerning any right (as distinct from a hope) of renewal.

It is hardly surprising that different words were used on different occasions. Sometimes there was some verbosity, such as "if you operate your business in a proper manner keeping the goodwill of the island to the fore and providing the right service to your guests, then you can be absolutely assured that your licence will be extended and will continue to be extended".[4] This was reduced, in the case of one of Mr Williams' conversations with Ms Wright, to a promise of renewal provided licensees "ran their businesses well, didn't commit any serious breach and they wanted to continue".[5] However the essential promise in each case depends upon the substance of multiple conversations. The essential promises are well described in the evidence of Mr Brown.

There is an observable consistency in the substance of the representations made to many concessionaires, including the present plaintiffs. Quite apart from the evidence of the plaintiffs themselves such promises are substantiated by Mr Williams himself and also by Mr Brown.

These then are cases where the representations are substantially confirmed by both representors and representees.

Mr Brown had a long association with Mr Williams including in the running of Sea World, was familiar with Mr Williams' system, and was authorised to negotiate licence agreements with potential concessionaires. He described his standard offer to concessionaires as an offer of a five-year licence which would be automatically renewed after termination date on the same terms and conditions provided that the concessionaire was not in breach of the licence when the renewal was due.[6]

The plaintiffs worked for substantial periods on the island. Mr and Mrs Pherhad and Mr Grace commenced their respective concessions in 1986, and Ms Wright in 1990. They were greatly disturbed by the terminations that HIE issued without warning in July-August 1996. In September 1996, having received intimations of resistance from various concessionaires, HIE's chief executive officer (Mr Kirkpatrick) saw fit to approach Mr Williams on the subject of verbal assurances that might have been given to the concessionaires regarding licences. Mr Kirkpatrick's own diary note records Mr Williams' immediate confirmation that he did indeed make such promises.

I raised with Keith the fact that his name and David Brown's had been mentioned in a solicitors letter to us on behalf of Concessionaires asserting that he Keith and David had given various verbal assurances that upon expiry licences would be renewed.

Keith was uncomfortable at the prospect of becoming involved in this matter and indicated that in fact he had given such assurances to various people.

He respects our right as new owners of Hamilton Island to plan and manage our business as we feel appropriate. But if it got to the point where he was subpoenaed to appear in court he would have to say that he did indicate that these people could reasonably expect to stay on."

Mr Williams' evidence confirms in greater detail that this was so. There is really no evidence to the contrary, although the defendant has presented a considerable amount of material to the court designed to show that since 1992 the various managements of HIE have made enquiries to ascertain the legal rights of each concessionaire, and that these failed to produce any clear allegations of such promises prior to the time of purported termination in 1996. There are, I think, reasons why these enquiries by various officers between 1992 and 1996 failed to produce a clear articulation of the case on which the concessionaires now rely. However it will be necessary to recount the circumstances in considerably greater detail before such questions may usefully be discussed.

During the early years the arrangements were mainly oral. In time, however, a fairly standard licence agreement was prepared for concessionaires, recognising that some variation was unavoidable considering the diversity of businesses involved. These covered most of the matters which Mr Williams had orally explained to the early concessionaires.

The licences were drawn as a grant "for a term of five years commencing on the [blank] day of [blank] (hereinafter called `the commencing date') and terminating on the [blank] day of [blank] (hereinafter called `the terminating date')" subject to the covenants and conditions therein set out. The licence went on to provide for the following:

* a right on HIE's part to audited statements showing business turnover and a percentage of the turnover (usually 22½%);

* HIE's control over the exhibiting of advertising posters;

* HIE's control over the installation of fixtures and fittings;

* obligations on the concessionaire to keep the premises open for certain periods;

* provision by HIE of special rates for accommodation and victualling of the concessionaire's staff and to transport free of charge to the premises the concessionaire's goods including stock in trade;

* obligation of the concessionaire to ensure that all persons employed in the business wore a uniform approved by HIE. (There was even a clause, "HIE may require the concessionaire to dismiss any of his employees when in the opinion of HIE the actions, attitude, appearance or general behaviour of such employee is detrimental to the general image and reputation of Hamilton Island");

* the placing of special emphasis upon the dress, grooming and attitude of employees towards the public and of the need, even outside working hours, for employees to comply with all "rules and regulations in force on Hamilton Island to which they are subject";

* an obligation upon the concessionaire not to sell any merchandise which "in the opinion of HIE is of inferior quality, pornographic or in bad taste or detrimental to the general image and reputation of Hamilton Island as a holiday resort";

* competitive prices - "the concessionaire shall as far as it is able sell goods in the premises at a price equal to that at which the same or similar goods are available at other resorts in the Whitsunday region, or in restaurants and other retail outlets in the Airlie Beach area";

* the power to HIE to relocate a concessionaire to other premises on Hamilton Island, with a provision for compensation to the concessionaire if detriment were suffered.

Other clauses enabled an appropriate cash register system to be employed so that the concessionaire would have the benefit (without any deduction for administration or commission) of guests charging purchases to their accounts with the resort. The arrangement was that the resort would collect the accounts and promptly reimburse the concessionaire. There was a further provision that the licensee should conduct the business personally and should become a "permanent resident of Hamilton Island" within three months of commencement of his or her becoming a licensee. A permanent resident was a person who was not absent from Hamilton Island for a greater average of more than 70 days per calendar year, and not more than 105 days in any one year.

There were "exclusivity" provisions limiting the business of the concessionaire to a specified purpose (e.g. sale of groceries, buggy hire etc.). For "exclusive rights" there was an obligation on HIE not to grant similar rights to any other person. Differences of view over exclusivity rights were a fertile field for dispute and litigation, but no such issue arises in the present cases.

Special provision was made for the event of assignment by the concessionaire. The consent of HIE was necessary, though it was not to be arbitrarily or capriciously withheld. Upon assignment it was provided that goodwill should be divided between the concessionaire and HIE in specified proportions. If the premises were bare and vacant at commencement, all goodwill initially belonged to HIE. A sliding scale was provided in the case of businesses already established when the concessionaire commenced, with HIE being entitled to 100% of the goodwill during the first year, 75% during the second and 50% during the third and subsequent years.

Upon prescribed defaults of the concessionaire, HIE was given the right to give a notice of determination of the licence.

The licence included the following holding over clause (usually article 14):

"On the expiration of this Licence and in the absence of any contract in writing binding the parties thereafter the Concessionaire if permitted by HIE to continue in possession of the Premises shall hold the same from HIE as Concessionaire on the basis that that new Licence may be cancelled at any time on the giving of six months written notice by either party to the other and otherwise on the terms and conditions of these presents."

Leaving the question of tenure to one side, the written licence fairly accurately expressed the system which HIE (through Mr Williams) had already established, mainly through oral arrangements with concessionaires.

Some time after Mr Brown's arrival an effort was made to obtain more written concession agreements to achieve greater uniformity, and to work towards uniform renewal dates. The usual grant (whether oral or in writing) was of five years (although there were a few cases where ten-year periods were granted). In each case the concessionaire was assured by Mr Williams or Mr Brown that it would be renewed at the end of the five-year period provided he or she ran the business in the manner required of them and provided they did not breach their agreement. There would be a review every five years, but provided they satisfied those requirements they could be assured of an extension.

They were told this notwithstanding that the written licence contained no such promise, and was on its face limited to a five-year period with a limited holding-over provision.

The promises were quite deliberate. As both Mr Williams and Mr Brown explained, they believed it would be very difficult to entice quality concessionaires to relocate to Hamilton Island without such an assurance. They were also conscious that without such an expectation, concessionaires would be likely to run down their businesses as the time of expiry of the licences approached, with consequential loss of service and of image for the island.

I turn then to the evidence concerning the representations that were made to the respective plaintiffs.

Mr Grace and Mr Harrison and the Health and Racquet Club

In 1985, Mr Grace, who at that time ran a tennis centre at Noosa, and who observed that "there was no way that I was going to leave a business in Noosa to come to an island to establish something for the short term" was spoken to by Mr Williams about establishing a sports complex. He was told of Mr Williams' general method and that the other concessions all ran on five-year increments and that if he established such a business he could have it for as long as he wanted. This was later repeated in the presence of his accountant to the effect that he could have it for as long as he wanted it and it would be recorded in five-year periods. Eventually arrangements were made for him to commence such a business from 1 July 1986. The arrangement was entirely verbal and was made on a handshake. Subsequently, after the first five years had elapsed, further arrangements were made with Mr Brown which resulted in a written licence for a further five and a half years up to 31 December 1996. Mr Brown confirms that in this instance (as in others) he informed the concessionaire that the licence would be renewed automatically on its expiry provided he was not in breach of his licence at that time.

By 1993 Mr Grace was anxious to leave the island. Mr Harrison was willing to take over his concession, but was not willing to do so unless he had adequate assurance concerning tenure. During negotiations with Mr Grace, Mr Harrison upon seeing the licence agreement was concerned to note that the expiry date was 31 December 1996. Not surprisingly Mr Grace responded by informing Mr Harrison of the oral representations and his belief that the tenure was ongoing and renewable provided that trading was profitable and conduct was satisfactory.

As Mr Harrison observed in evidence, it was not that he did not trust David Grace, but he wanted some assurance about this "from the horse's mouth". He had some business experience and regarded tenure as a paramount issue. He went to the island and with Mr Grace spoke with both Mr Plever and Mr Palmer about the terms upon which HIE would consent to the proposed assignment. There is no doubt that the question of future tenure was raised - all four witnesses agree on this. With one reservation I accept in substance what Mr Grace and Mr Harrison have described in relation to these meetings. Mr Palmer was more involved in the discussions than Mr Plever. Mr Palmer was already well aware of very many assertions by various concessionaires of the promises Mr Keith Williams had made in relation to automatic renewals of concessions. He did not say whether he believed them or not, but at least he was aware of a common belief on the part of concessionaires that such promises had been made. I accept that Mr Harrison was concerned about what would happen at the end of the period shown on the document and that he explicitly raised this question. It is difficult to accept the case Mr Hampson was instructed to put on behalf of HIE, namely that they (Mr Plever and Mr Palmer) were "just administrators" and that their response was limited to indicating that if something was in writing they would honour it. Mr Harrison's concern was that something of vital interest to him was not in writing. As a matter of probability Mr Plever and Mr Palmer certainly went at least as far as expressing their instructions that all agreements would be honoured. They did not in my view limit "agreements" to written agreements and I find that Mr Harrison received some reassurance of his expectations of renewal.

Mr Harrison's account is, I think, assisted by the inclusion of a somewhat unusual clause in the assignment document that was eventually produced by HIE's solicitors. I accept that Mr Harrison insisted that he wanted something in writing confirming his rights of renewal and that he was informed that a clause would be put in the deed of assignment which would be prepared in Brisbane later. The subject was mentioned in a guarded memorandum written by Mr Palmer to Mr Harrison on 24 June 1993 which included "We will consider granting an option to extend the existing tenure of the agreement beyond December 1996 at a later date".

I do not accept that Mr Grace or Mr Harrison (or for that matter any other of the plaintiffs) were ever told by Mr Palmer or Mr Plever that the company would honour only written contracts. The only reservation I have with respect to Mr Grace's and Mr Harrison's accounts of these conversations is that I do not think that Mr Plever or Mr Palmer would by their responses have purported there and then to bind the company. In other words, although I accept that they gave favourable indications when Mr Harrison raised the requirement of a written assurance of future renewals, these were probably couched in terms that they would recommend along those lines.

Mr Harrison represented himself at the Receiver's office in Brisbane on 13 July 1993, expecting Mr Palmer's indications to be the basis of the documents. He had no contrary indication. There is to some extent a conflict of evidence between Mr Harrison and Mr Taylor as to what ensued, but Mr Taylor was not able to deny Mr Harrison's version. In the event, the deed of covenant contained the following clause:

"8. Prior to the expiration of the licence, the parties may hold negotiations with respect to the terms and conditions of any further licence which the licensor may be prepared to grant."[7]

It would be obvious to any lawyer that such a clause is valueless. However it is not unknown in commerce that favourable indications given by negotiators are followed without warning by documents with an entirely different effect at settlement.

The evidence does not permit any findings of the actual processes of HIE which eventually produced a deed of assignment that contained a mere placebo clause on the subject of future tenure.[8] Mr Harrison was invited to attend at the Receiver's office in Brisbane in order to sign the necessary deed. The meeting was probably on 12 or 13 July 1993. Mr Grace's evidence is that at that meeting Mr Taylor told them that the necessary clause on tenure requested from Mr Plever and Mr Palmer had been inserted. Mr Harrison raised the question of future tenure and told Mr Taylor what he regarded Messrs Plever and Palmer as having agreed to. Mr Taylor probably made contact by telephone with Mr Palmer during that meeting, when Mr Harrison noticed that the clause dealing with his future expenditure of $25,000 did not fully represent what had been agreed between himself and Mr Palmer. The document shows that a handwritten amendment initialled by Mr Taylor was made to give effect to this. Mr Taylor agrees that he would have checked with someone on the island before doing so. At some stage during the conversation about rights of renewal, Mr Taylor pointed out clause 8 as the clause that Mr Harrison had wanted. I accept that Mr Harrison mentioned his understanding of a right to automatic renewal and that he was in substance reassured that what he had been told by Mr Palmer and Mr Plever was in order. Mr Harrison unwisely failed to study clause 8 and assumed that the document would give him what he had been led by prior discussions to expect.

Mr Taylor had no real recollection of the meeting and was unable or unwilling to deny the accounts given by Mr Grace and Mr Harrison. I accept then that Mr Harrison was informed that the document gave Mr Harrison the rights that Mr Palmer and Mr Plever had told him they would recommend.

The document was signed by all parties on or about 13 July 1996.

Curiously, neither Mr Palmer nor any other servant or agent of HIE entrusted with the task of discovering the true extent of the rights of concessionaires on the island ever checked with Mr Williams or Mr Brown to find out the true position. The excuse was offered that Mr Williams was in bad odour with the administration at that time and that Mr Brown was seen as "tarred with the same brush", but that is a poor reason for the total absence of any checking of these commonly asserted claims. Mr Palmer and Mr Plever both say that the policy of their superiors at material times was to rely only on the written word, and that the company could not accept a handshake between Keith Williams and a particular concessionaire.[9] That probably was the case from the internal company point of view but such an attitude was never made known to the concessionaires. Instead, from very early in the receivership public statements were made, for example at meetings specially called by the Receiver to give information to concessionaires, that any contractual arrangement made between HIE and a concessionaire prior to the appointment of the Receiver would be adhered to by the Receiver.[10] At other times assurances that the status quo would be preserved were given. The inherent ambiguity of such statements is now painfully obvious. No one ever grappled with the question whether oral contracts or promises were included within the assurance or not. It was in the Receiver's interests to retain effective concessionaires and to keep their allegiance, and such statements undoubtedly served to quell the unrest of concessionaires at that time and to keep them working to their capacity. They were a very major source of revenue to the Receiver and HIE.

The Receiver (Mr Taylor) was prepared to accept a rather servile role and to take instructions from Citibank which had appointed him. As Mr Palmer observed, Citibank were trying to take money out of the island, not put it back in, and there was during the receivership no great desire to buy out concessions. On the contrary the aim was to try to keep business running as usual. That attitude changed later after the receivership had ended, and the company formed the idea that many of the businesses of the concessionaires could be taken over profitably by the company.

In summary, Mr Palmer confirmed that the Receiver would honour all agreements, and accepted that (unless rejected by Mr Palmer's superiors) the licence should be ongoing and renewable, subject to default, and that this would be in writing; and that if Mr Harrison was prepared to spend $25,000 on further equipment and improvements, the licence would be renewed on that basis. In due course the Receiver told Mr Harrison that clause 8 was the clause that he had asked for. Mr Harrison, who was not at that stage legally advised, proceeded to sign the deed. I accept that he would not have signed the document had he not thought that it gave him the right of automatic renewal.

Further findings of relevant representations appear in the table at p 33 below.

Mr Louis Pherhad, an experienced chef with reasonable prospects in Melbourne and his wife Vivienne Pherhad, a qualified schoolteacher with reasonable career prospects, were induced to sell their Melbourne interests and move to Hamilton Island to take over the strategically placed Outrigger Restaurant on Hamilton Island. Plainly the representations which I regard as standard representations were made to Mr Pherhad on 12 March 1986. Mr Williams confirms this[11], acknowledging that it was in his interests to assure Mr Pherhad in regard to continuity and he did that. This is confirmed by Mr Pherhad's accountant (Mr Schoenfeld), including the statement "If you operate in an appropriate manner you can stay as on as you wish"; and by Mr Pherhad[12] who recalled words to the effect that as long as they had the interests of the resort at heart and provided a good restaurant and paid their accounts on time, the licence was "ongoing".

These details were relayed to Mrs Pherhad and assisted her in joining in the decision to move. At that stage the concessionaire was Mr Pherhad.

At a later stage Mr Pherhad expressed a desire to operate the licence by means of a family company (with the perplexing name ACN 055 389 725 Pty Ltd). Similar represen-tations were repeated by Mr Brown to Mrs Pherhad when that licence agreement was eventually produced for signature. Mr Brown confirms that in 1991 he prepared a licence in order to formalise the renewal of the Pherhads' licence for a further five-year period. In fact the extension was for a period slightly greater than five years, so that the next renewal period would be brought into line with others at 31 December 1996. There had been no formal request for extension by the Pherhads, and Mr Brown prepared the document as an automatic extension. His evidence continues:

"Although the licence agreement was drawn to include a termination date, I informed Mr Pherhad that the licence term was to be ongoing and would be renewed automatically for further five-year terms into the future on the same terms and conditions as the written licence document which existed at the time of such renewals as long as Mr Pherhad performed his obligations under the licence."

Mr Hampson QC, counsel for HIE, referred to a letter of 14 March 1986 written by Mr Pherhad in confirmation of arrangements after the initial discussion, and pointed out that that letter is silent on the question of tenure (other than the mention of 21 April 1986 as the opening date). That is true, but this does not convince me that the question of tenure was unimportant to Mr Pherhad, or that it was not the subject of discussion. The letter was drawn up by Mr Pherhad primarily to confirm his understanding of the way in which operations would be conducted.

Other evidence was given by Mr and Mrs Pherhad concerning meetings they had with Mr Taylor, and later with Mr Palmer, in which they understood some further confirmation to have come from those persons of an awareness of Mr Williams' promises, followed by an assurance that the status quo would remain. I am satisfied that these persons gave assurances that they would honour existing contractual arrangements and that they would preserve the status quo.

Further findings of relevant representations appear in the table at pp 34-35 below.

I have no doubt at all that the representations described above were made respectively to Mr and Mrs Pherhad. Their consequences in law will be later considered.

Ms Wright had worked on the island in various capacities for a number of years prior to being offered the airport bar concession by Mr Williams in December 1990. Indeed, Mr Williams had explained his policy and practice to her as early as 1987 in Sydney. She had earlier been offered a concession for another business (The Sportsman's Lounge) and Mr Williams had told her about the standard concessionaire agreement, describing it as for five years with automatic renewal for a further five and further five and so on, providing she did not commit any serious breach of the agreement and so long as she wished to continue operating her business. That concession did not eventuate, and she remained on the island working for others, usually in a managerial capacity. His discussion with her when she was offered the airport bar concession was that "as previously discussed" there would be a licence agreement with a five-year term which would roll over automatically for another five and another five. Mr Williams gave evidence to similar effect, describing the period as "a five year period with extensions for as long as she required them".

She operated initially under the oral agreement. In 1992, when Mr Brown was endeavouring to obtain written agreements, he sent her the standard licence. She saw that it had only one five-year term with an expiry date, and telephoned Mr Brown who confirmed her understanding that the licence would be automatically renewed. I have no hesitation in accepting Ms Wright's evidence and in accepting that these representations induced her to establish this particular business and refrain from pursuing other activities which were open to her. Further findings of relevant representations appear in the table at p 34 below.

Counsel on both sides agree that the essential issues in these cases are of fact, involving questions of credibility and assessment of the evidence as a whole.

The main submission for the defendant is that the evidence fails to prove the allegations upon which the plaintiffs rely. The alternative argument is that if the representations are proved, they are too uncertain for the grounding of any estoppel. It is further contended that the evidence fails to show that the respective plaintiffs altered their position to their detriment in reliance upon such statements. These are the principal issues on which the cases have been fought.

Mr Hampson QC for the defendant called a good deal of evidence designed to show the history of dealings affecting concessionaires on the island, especially after the commencement of the receivership, and the enquiries that had been conducted by the successive managements of HIE to ascertain the nature and extent of the interests of the concessionaires. The result, he submits, is an absence in all contemporaneous documents of any allegation or assertion by any plaintiff of any right of automatic renewal, when one would reasonably have expected such claims to have been raised. It is true that for the most part, the case on which the plaintiffs now rely was not clearly articulated until the crisis arose from the extensive number of notices of termination issued by HIE in July/August 1996. Those affected then met, raised a fighting fund of $5000 and obtained legal advice. Very quickly the present claims were made and statements of claim drawn, followed in due course by applications for injunctions to protect the concessionaires from eviction until determination of the trial. The suggestion is that the plaintiffs, and others who support them, have consciously or unconsciously converted such statements as were actually made into something more than they really were.

It is perhaps initially surprising that despite enquiries from and direct dealings with concessionaires by persons such as Mr Todd Kelly, Mr Max Ellett (who was relatively sympathetic with the position of the concessionaires) and others to whom they reported including Mr Tallent and Mr Kirkpatrick (who were less sympathetic) failed to produce any convincing written evidence that records claims equivalent to those that are here litigated.

All this must be seen against the background that the plaintiffs' claims are based upon oral promises inconsistent with the written documents recording their licences, and their rights would not have been particularly easy for non-lawyers to articulate. Also, apart from times when renewal had to be considered, when there might be a review of breach or alleged unsatisfactory performance, their occupancy would not be an issue unless placed under threat. It only became a serious issue when to the dismay of the concessionaires the new management, in its application of a new policy (pursuant to a business plan) attempted to evict them.

I accept that Mr Todd Kelly made bona fide enquiries into the status of concessionaires and that these turned up no relevant claims of extended tenure arrangements. His method was to gather any written agreements that existed and to compile reports on all concessions identifying details such as the percentage of turnover payable, ownership of fixtures and fittings, and his basic summary documents included a final heading "Other claims by concessionaire contrary to written agreement".[13] Under this heading he included the replies that were given to his oral question "Is there anything else outside of the written licence agreement which you would like to advise us now?". I do not find it particularly surprising that this failed to elicit a statement of the present claims.

In July 1992, the Receiver sent a circular to concessionaires containing a summary of the licence details as then understood by the Receiver.[14] Mr Kelly's impression was that about eighty percent of the concessionaires responded to his circular and that only one of them alleged an entitlement to an option or renewal not mentioned in the Receiver's summary. However the documents evidencing the actual replies from those concessionaires who responded have been lost or mislaid, and Mr Kelly was only able to recollect his impression. Even so this is a factor that must be weighed in evaluating Mr Hampson's submission of a "deafening silence" from the concessionaires prior to August 1996.

Various procedures, described in the jargon "due diligence" were followed during the management of the Receiver, and subsequently by the boards of HIE. Such exercises were apparently conducted when schemes were afoot to obtain "equity funding from the market" or when it was intended to "sell the island". The process of "due diligence" was not fully described in evidence, but it apparently involves the presence of solicitors, accountants and others who endeavour to find out whether there are any problems, contingent liabilities or other matters that should properly be taken into account before a prospectus is issued, or in the case of a potential purchaser, to gather information that will give a fair picture of hidden liabilities and the like. Such exercises were conducted in 1992 when the Receiver was hopeful of selling the island, prior to the floating of the public company in 1993, in 1995 for the purposes of the Bankers and Traders' takeover, and again in about April 1996 when, under its new management, HIE wished to raise a further $45 million from existing shareholders.

Between November 1995 and May 1996 Mr Max Ellett was given the responsibility of investigating the position concerning concessionaires and reporting to HIE's solicitors. He says that his enquiries from concessionaires made him well aware of the promises of Mr Williams and Mr Brown, and of a widespread belief on the part of concessionaires of a right of renewal. However the consecutive written summaries which he produced for the consideration of his superiors, and ultimately for their solicitors[15] fail to contain any truly specific statement of the plaintiffs' cases. They do however contain some statements which are at least consistent with those cases. Thus in his "sign off" report[16] in May 1996, he reported that:

"Many concessionaires produced to me letters from Keith Williams, David Brown and John Palmer granting various changes to the terms of the written concession licences. Claims were also made to me about verbal changes and arrangements."

With respect to Ms Wright's airport bar, he reported "Concessionaire alleges five-year option for which there is no documentation." He annexed further particulars including:

The agreement expired 31.12.95. The concessionaire alleges she was granted a 5 year option by a former CEO of Hamilton Island Enterprises Pty Ltd although there is currently no documentary evidence of that. It is thought that the concessionaire would be supported in this contention by the former CEO and could probably obtain a statutory declaration or similar from the former CEO.

HIE wishes to terminate the licence and take back management of food and beverage at the airport.

It is likely that HIE is legally bound to grant the further option. HIE therefore either proceeds with a new five year licence or buys out the concessionaire.

Provided an allowance for the buy back of the licence has been made in the Business Plan, this issue should not affect the planning process."

In the "estimated liability" column of the report, there appeared a figure of $100,000. The items "Opinion" and "Recommendation" were prepared by Minter Ellison after consultation with Mr Ellett.

The report includes details of other concessionaires. In the part dealing with the Outrigger Restaurant (Louis and Vivien Pherhad) there is a reference to "a potential for a claim against the company because of that failure to renew". The report goes on to say that the Tennis and Health Centre "will be terminated on 31.12.96. Management are not aware of any potential claims arising out of the termination . .". Mr Ellett continued however that this concessionaire "could well be difficult" and he flagged a query in the "estimated liability" column.

Mr Ellett was called by the plaintiffs and his evidence is useful to them in that it confirms that assertions of the promises made by Mr Williams and Mr Brown were commonplace, and that they were frequently mentioned to him. However I think it likely that he exaggerated the extent to which they were known by persons within the management and by persons advising HIE, and in particular that he was in error in attributing such knowledge to Ms Withnell and Mr Thomas. The apparent discrepancy between his belief that such oral promises had been made and his failure to include them in his reports may to some extent be explained by an awareness of the company policy (mentioned by Mr Palmer and Mr Plever and others) that it was only intended to recognise written agreements. It is important to note that no one on behalf of HIE ever made this clear to the concessionaires. It seems to me that a belief or fear on Mr Ellett's part that the company would not recognise oral promises helped to explain his advice to Ms Wright that she might establish an option of renewal by other means than the oral promises.[17] I perceive that Mr Ellett was torn between his sympathy with the position of the concessionaires and his loyalty to the company.[18] In the end it led to a virtual demand by Mr Tallent for his resignation. With the reservation that has been mentioned above, I regard him as a truthful witness.

In the end I consider the defendant's submission of a "deafening silence" with respect to allegations on the part of the plaintiffs or other concessionaires at material times to be somewhat overstated. Mention has already been made of such allegations having been made to Mr Palmer from 1993 onwards.[19] There is evidence to similar effect from Mr Ellett.[20] There is also the letter written by Mr and Mrs Pherhad dated 21 July 1996[21] to the local Chamber of Commerce. It was precipitated by HIE's unexpected demand for possession, and was given before the concessionaires sought legal advice from Barker Gosling later in August 1996. It includes the following statements-

"We entered into this agreement with Mr Keith Williams whereby he promised continuity based on high performance and a quality product, we covered our part of the bargain and he covered his part by extending our licence without even needing to ask for it.

Since the island went into receivership it has always been verbally stated by H.I.E. executives that our licence would be ongoing and in good faith we have maintained the enthusiasm, commitment and standards in the restaurant . . ."

This was a clear enough assertion of the right to continuity promised by Mr Williams. There is also Ms Wright's statement in her letter to Mr Wynn of 28 August 1996[22]:

"When I was allocated this licence to operate the Airport Bar by Keith Williams in 1990, he clearly and specifically represented that when the initial 5 year term was over, I would be automatically granted an extension of my licence so long as I operated the Airport Bar to his very high standards".

Mr Wynn also has recollection of an earlier occasion (probably 12 August 1996) when Ms Wright made allegations of this kind to him.[23]

There is also evidence of statements by Mr and Mrs Pherhad supporting the existence of promises creating their expectation of renewals. Mr Harrison's letter of 29 August 1996[24] which precedes the first solicitor's letter on behalf of the concessionaires[25] is a clear assertion of his reliance upon relevant promises.

There are also, minutes of a report of a meeting held between the steering committee of the Chamber of Commerce and HIE representatives on 31 July 1996[26] as follows, under the heading "Tenure of Licence Agreements".

"Discussion: Steering Committee held meeting with HIE concerning the renewal of licence agreements that are nearing expiry in light of the recent events that have transpired with the termination of the licence for the Outrigger Restaurant. The primary concern is what security exists for a concessionaire to have a reasonable expectation to have their Licence renewed given full compliance to all the terms and conditions of the said Licence particular to that concessionaire and that they have conducted their business in a proper manner at all times.

The consensus of the members present believe that a concessionaire should have a `reasonable expectation' of renewal of their Licence given the above conditions as highlighted.

The Steering Committee reported that they understood the current management of HIE do not share this view of a `reasonable expectation' of a renewal of a Licence Agreement, despite the above conditions as highlighted and that each case will be judged on its merits.

The consensus of the members present believe that in the event of a termination of a Licence despite the conditions as highlighted above that the agreement with previous management was that some sort of compensation for the termination of the Licence would be expected for goodwill."

In short, whilst confirmatory evidence at stages before the obtaining of legal advice is less than might be expected, it is by no means non-existent.

In the end, notwithstanding the criticisms advanced on behalf of the defendant, I am prepared to accept the evidence of each of the plaintiffs, and of Mr Williams, Mr Brown, Mr Schoenfeld, Mr Cherry, Mr Sobels, Mr Mansbridge and Mr Shaw. Some of this evidence conflicts with some evidence given by defence witnesses, for example concerning intimations to Mr Kirkpatrick early in 1996 of relevant oral promises. On such matters I prefer the evidence of the plaintiffs' witnesses. I accept a good deal of the evidence of Mr Palmer and Mr Plever, but not where that evidence conflicts with that of Mr Pherhad, Mr Grace and Mr Harrison. I generally accept the evidence of Mr Todd Kelly. I have earlier indicated my partial acceptance of Mr Max Ellett's evidence.[27] I accept in substance the evidence of Mr Lewis, Mrs Ferrall, Mr Adams, Mr Brian Kelly (with some reservations as to the accuracy of his recollection), Mr Hogg, Mr Pentecost and Mr Cogar, but on analysis do not consider that the evidence of these persons materially advances the case of either party. The conflict between Mr Gull and Mr Cherry is in my view more apparent than real, but to the extent that there may be a conflict I prefer Mr Cherry's evidence. Mr Wynn, Mr Tallent and Mr Kirkpatrick are loyal corporate executives, and much of their evidence is not contentious. I would however not be prepared to act on their versions where they conflict with other evidence. Their evidence does succeed in making it plain that the business plan which they participated in developing included the notion that there should be a Japanese restaurant at the Outrigger site, and that HIE should take over all food and beverage outlets on the resort side of the island. They also made it plain that they were prepared to give absolutely no effect to promises such as those upon which the plaintiffs rely. A retail strategy had been prepared by November 1995 but it was supplanted by the new business plan, devised largely I infer by Mr Kirkpatrick with the support of the board, after he came to the island early in 1996.

The general issue of what to do with concessionaires was a "very significant matter" in the business plan.[28] For the first six months of 1996 matters were basically on hold until the plan was finalised. Nothing was said to particular concessionaires during the preparation of this plan about their likely future.[29] In July and August 1996 a considerable number of letters were sent to concessionaires terminating their rights to remain, and for the most part giving them six months' notice on the footing that their only rights were those upon holding over. Mr Tallent and Mr Kirkpatrick met with concessionaires who protested, and their protests were dismissed by what I can only describe as their application of an intransigent attitude of HIE. When mention was made of Mr Williams' promises it was made clear that as far as HIE was concerned, they stood for nought. Mr Kirkpatrick's response was that that was a "different era", that Mr Williams had gone, that "we own the island now" and that "we'll run it how we want to."[30]

Mr Hampson went on to submit that the representations should be construed as limited in time to such period as Mr Williams was in charge of HIE. It is true that he exercised a very personal control over the concessionaires' activities. But the powers he exercised were those of the company. Sometimes he would address letters to concessionaires which had an orderly room flavour, in effect directing them to "smarten up". Quite simply, the construction sought by the defendant is inconsistent with the central theme of the representations which were for "a long-term arrangement" for an "ongoing licence" and for a series of extensions so long as the concessionaire was not in breach. The conversations which introduced subjective concepts such as having the interests of the resort at heart, or of operating "in an appropriate manner" should be regarded as Mr Williams' attempts to describe what he wanted to achieve, and to give the concessionaire an indication of what he would be likely to regard as a breach. It will be remembered that there were quite strict requirements contained in the licence in relation to wearing uniforms and even in relation to conduct outside the business.[31] Mr Williams may have put things in a personal way, but he spoke on behalf of the company. Inter alia the licence agreements show that relevant performance requirements are requirements of the licensor, HIE. Further, the representations confirmed by Mr Brown as having been made by him to each of the plaintiffs are in quite objective terms, and do not require the subjective satisfaction of Mr Williams. In my view if there were to be a termination for breach of the condition, the company would have to prove it objectively, even if the condition were expressed in terms of maintenance of Mr Williams' high standards.

I do not accept the argument that the promises were limited or should be construed as limited to such period as Mr Williams happened to remain in control of the company.

It was then submitted that the representations were no more than "statements providing a measure of comfort to licensees concerning the present intention of HIE management" and that they were not intended to affect any legal relationship. The submission continues that the plaintiffs could not have understood and the defendant should not be taken to have intended the plaintiffs to understand that such statements would bind HIE indefinitely or even for ever. Having regard to the personal residence requirements for individual concessionaires, and similar requirements from designated persons in the case of a company concessionaire, the outer limit of tenure would seem to be measured by a life rather than eternity, and of course such licences could always be brought to an end if a breach could be established. I do not find the above submissions persuasive.

Another important submission is that the expectations of the plaintiffs are not different to those of tenants in a shopping centre who are commonly told by managing agents that they need good operators and that their tenancies are likely to be renewed if they perform well. However I do not think that the analogy between the position at Hamilton Island and that in a shopping centre is a valid one.

Finally it was submitted that, in each case, the evidence of particular representations does not sufficiently conform to the representations pleaded. So far as the cases rely upon an estoppel by convention, the evidence sufficiently establishes the policy that is pleaded, at least in relation to these plaintiffs and many others to whom the same policy was explained. Although practice was not uniform, there is evidence that it was commonly known to a sufficient extent for it to be relied on by persons such as the plaintiffs. So far as the specific representations to particular plaintiffs are concerned, in each instance the substance of the words pleaded has been made out. The fact that additional words and conversations are included in the evidence does not detract from this.

This conclusion is perhaps best illustrated by supplying short tables[32] referring first to the words pleaded and second to short statements of the evidence actually given. The evidence in my view makes out the allegations in each pleading. If any divergence were thought to make any amendment necessary, having regard to the litigation as conducted I would be prepared to allow any necessary amendments to be made. I do not however consider this necessary.

1. In 1986 to Mr Grace by Keith Williams and David Brown -

(b) for five year periods to be automatically renewed for further such periods as long as the concessionaire was not in fundamental breach of the terms of the concession or licence agreement at the time of each such renewal.

1. Mr Grace was told by Mr Williams that he "could have the business for as long as he wanted" (transcript pp 430, 433) and that the licence would be automatically renewed (transcript p 437). At a further meeting, this was repeated and Mr Williams further stated that it would be recorded in 5 year periods. Mr Williams' evidence confirms that he assured Mr Grace that he would have an initial period of 5 years and further extensions to that period (transcript pp 300, 442-3).

(a) orally, that the early 1992 licence agreement was intended to renew the 1986 licence agreement regarding the concession or licence in respect of the Health & Racquet Club;

(b) impliedly, that the early 1992 licence agreement was intended by the defendant to give effect to the assumption and to reflect its agreement to automatically renew the first plaintiff's concession for further five year periods;

(d) orally, that whilst the draft written licence agreement was expressed to terminate after five and one half years, the defendant intended that the licence was to be ongoing on a permanent basis and for an indefinite term;

(e) orally, that consistent with the 1986 representation the early 1992 licence agreement would be automatically renewed for further five year periods into the future; . . .

2. Mr Brown (exhibit 3, paras 8(e) and 9) confirms the occasion of the grant of the concession in January 1992 to Mr Grace and confirms that in the stated instances (including that of Mr Grace) "I informed the respective concessionaires and/or their representatives prior to the granting, or the renewal of the concession licence that the licence would be renewed automatically on its expiry provided that the concessionaire was not in breach of the licence at that time".

3. That in 1993, the defendant by John Palmer and Alan Taylor represented to Mr Grace, Mr Harrison and Mr Harrison's company

(a) orally, that the early 1992 licence agreement would continue to be automatically renewed for further five year terms into the future provided that the concessionaire was not in breach of the terms of the concession or licence at the time for such renewals and further provided that the second plaintiff expended a sum of $25,000 in the purchase of equipment and improvements in use for connection with the Health & Racquet Club concession on Hamilton Island in accordance with the terms of the deed of assignment; and

(b) impliedly, and subject to the terms of the deed of assignment, the terms of the early 1992 licence agreement would otherwise remain unaltered.

3. In meetings with Mr Palmer and Mr Plever, Mr Palmer said that "everything was to be continued on" (transcript p 437) and that "the agreement that he had with Williams would be honoured" and that the deed of assignment would contain this in writing. The relevant evidence is more fully set out above at pp 14 to 19.

In 1990, prior to execution of December 1990 licence, by Keith Williams and David Brown - that when the initial five-year term was over Ms Wright would automatically be granted further five-year extensions of her licence so long as she operated the airport bar to Keith Williams' very high standards.

(Evidence is also stated in Reasons for Judgment in Wright action)

(Evidence of Ms Wright) When Mr Williams offered her the Sportsman's Lounge concession he told her that the general standard concessionaire lease agreement was for five years with automatic renewal for a further five and a further five and so on, providing she did not commit any serious breach of the agreement and wished to continue operating her business. Later, in December 1990 when he offered her the airport bar concession, Mr Williams told her that as previously discussed there would be a licence agreement with a five-year term which would roll over automatically for another five and another five.

(Evidence of Mr Williams) He told Ms Wright that she would be given a licence for a five-year period plus extensions for as long as she required them.

(Evidence of Ms Wright) When a written licence agreement was received in 1992, she saw the five-year term with an expiry date, and telephoned Mr Brown who confirmed that the licence would be automatically renewed.

(Evidence of Mr Brown) Ms Wright, who was granted a licence dated 20 March 1992, was one of the concessionaires who, prior to granting or renewal of the licence, was informed by him "that the licence would be renewed automatically on its expiry provided that the concessionaire was not in breach of the licence at that time".

(ACN 055 389 725 PTY LTD, AND WINSTREAM PTY LTD)

In 1986 by Keith Williams to Mr and Mrs Pherhad, that -

(a) the 1986 licence would be for an initial term of five years; and

(b) the 1986 licence would be automatically renewed for further five-year periods as long as Mr Pherhad was not in breach of the licence at the time it was to be renewed.

On 12 March 1986 at a meeting on Hamilton Island, representations were made, with accounts given by all four persons present, Mr Pherhad, Mr Schoenfeld, Mr Williams and Mr Shaw (general manager of the resort).

Mr Williams confirms that he told Mr Pherhad "We will start off with a five-year period and it will be extended from there".

Mr Schoenfeld recalls that it was to be "a long-term arrangement" and that Mr Williams "effectively indicated to Mr Pherhad that so long as he operated the restaurant in an appropriate manner he could remain there as long as he wished".

Mr Pherhad said Mr Williams told him "As long as we had the interests of the resort at heart, as long as we performed a very good restaurant and that we were never late in terms of our city ledgers and paid our accounts on time, the licence was ongoing".

Mr Shaw recalls Mr Williams saying that the licence would be perpetual on the basis that there were no breaches of the agreement and that Mr Pherhad continued to uphold the goodwill of Hamilton Island.

David Brown to Mr & Mrs Pherhad and their companies, prior to execution of the 1992 licence agreement -

(a) that the 1992 licence agreement was intended to replace the 1986 licence regarding the concession in respect of the business;

(b) that the reason for executing the 1992 licence agreement was to formalise the concession or licence arrangements in respect of the business;

(c) that the reason for the 1992 licence agreement to have a term greater than five years was to bring the term of the licence or concession for the business into line with the terms of licences or concessions for other businesses on Hamilton Island;

In late 1991 or early 1992 Mr Brown presented Mr and Mrs Pherhad with a written licence agreement. They sought to change it, noting that it was for five years without renewal. Both Mr and Mrs Pherhad gave evidence to the effect that Mr Brown said that the licence agreement was a standard form and could not be changed. He assured the Pherhads that Mr Williams' agreement of permanent tenure would be upheld and that the licence would be automatically renewed.

Mr Brown confirms his preparation of a licence for a period slightly greater than five years in order to bring the period of the licence into line with other existing licences. In due course, after presenting Mr Pherhad with the agreement, he informed Mr Pherhad that the licence term was to be ongoing and would be renewed automatically for further five-year terms into the future on the same terms and conditions as the written licence document which existed at the time of such renewals as long as Mr Pherhad performed his obligations under the licence (exhibit 4, paras 8-11).

(d) that the 1992 licence agreement would be automatically renewed for further five-year periods as long as ACN was not in breach of the licence agreement at the time it was to be renewed;

(e) (impliedly) that the 1992 licence agreement was intended by HIE to give effect to the assumption and to reflect its agreement to automatically renew ACN's concession for further five-year periods.

From this point forward, I shall address matters that arise specifically in the action brought by Mr Grace and Mr Harrison (No. 8976 of 1996).

Mr Harrison's company, Peter Harrison Designs and Signs Pty Ltd ("Harrison Designs") was the assignee of Mr Grace's original concession. Curiously, although as between Mr Grace and Harrison Designs the assignment was of the whole of the business, the deed of assignment prepared by HIE transferred to Harrison Designs only a sixty percent interest in the licence. This seems to have been a device to preserve some form of recourse by HIE against Mr Grace. Irrespective of this, the legal reality remains that Mr Grace remains the holder of a bare interest of forty percent in the licence although in equity, as between himself and Harrison Designs he has retained no interest. However as a party with a subsisting legal interest in the licence Mr Grace is a proper party in the present claim which seeks to preserve that licence from extinction. I do not think that he has any interest entitling him to damages in due course (for example if it were eventually held that the minimum equity or estoppel could be satisfied by damages) but he might be entitled to an order protecting him against further claims by HIE. Without some such protection, Mr Grace might be able to show the necessary detriment to ground an estoppel on his own behalf. The defence submission was that Mr Grace no longer has any interest in the business such as to support an estoppel claim. However in my view, on the limited footing mentioned above he is a proper party to the making of the present claim.

It may be noted that although the whole of Mr Grace's business was transferred to Harrison Designs, there was an interim arrangement under which some of the income from the business continued to be paid to Mr Grace. That was an arrangement in respect of payment of the balance of purchase moneys. These have been fully paid and the transaction has been completed. In the course of the transaction, $11,000 was attributed to goodwill, and half of that sum was paid to HIE as its share. It also became a condition of HIE's consent to the assignment that Mr Harrison's company should agree to expend $25,000 on the purchase of equipment and improvements, and this requirement was fulfilled by Harrison Designs.

The plaintiffs assert an equitable estoppel and an estoppel by convention preventing the defendant from denying the existence of an agreement for renewal of the subject licence agreements. It is convenient to consider firstly the estoppel based upon representations. I am content to adopt the defendant's submissions as to the applicable principles, namely that the necessary elements of such an estoppel are:

"(a) 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 unexpected legal relationship;

(b) the defendant has induced the plaintiff to adopt that assumption or expectation;

(e) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled;

(f) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise."[33]

The further need for unconscionability in permitting a defendant to depart from the necessary assumption is well stated in the following passage:

"For equitable estoppel to operate there must be the creation or encouragement by the defendant in the plaintiff of an assumption that a contract will come into existence or a promise be performed or an interest granted to the plaintiff by the defendant, and reliance on that by the plaintiff, in circumstances where departure from the assumption by the defendant would be unconscionable".[34]

On the view I take of the evidence in this case there can be no doubt that elements (a), (b), (c) and (d) are fully established.

I turn to the question whether Harrison Designs' actions (based on the assumption arising from the representations) will result in detriment if the assumption is not fulfilled. This requires an assessment of the alteration in the position of the company relying on the representations. Indeed, in the older cases the term "alteration of position" was the main focus of the court's attention.[35] The abbreviated reference to detriment emerges in the more recent High Court statements such as in Waltons Stores.[36] This is a shorthand description of "the detriment which would flow from a party's change of position if the assumption (or expectation) that led to it were deserted".[37]

If HIE were now permitted to go back on the representations on which Harrison Designs relied, that company would be dispossessed, with apparently no future on Hamilton Island. It moved its business there in 1993 with the intention of establishing a long-term business, and other interests and opportunities were sacrificed. The company was at material times a vehicle for whatever potential business Mr Harrison would be capable of pursuing. I am satisfied that such prospects were reasonable when Mr Harrison opted to confine his business activities to the Hamilton Island project. If the licence is now terminated, there will not only be a loss of goodwill (regarded as substantial by Mr Manning whose evidence is not contradicted[38]), but also a wastage of capital expenditure invested in the business. The consequential displacement and need for reestablishment, quite apart from the above, must also be a not inconsiderable detriment.

In my view element (e) above is amply established in the present action. So is element (f).

I have no doubt that in the circumstances, HIE's termination of the licence was "unconscionable". That is an awkward word, but I take it to convey something that is against conscience. In my view, for the company to go back on the expectations that it actively promoted would be dishonourable, even if HIE is now of the view that it would be economically advantageous. I find the unconscionable factor exists in this case.

The estoppel based on representations is made out. There should be a declaration that the defendant is estopped from denying the existence of an agreement for renewal of the 1992 licence agreement, the rights under which are currently held by Mr Grace and Harrison Designs and Signs Pty Ltd.[39]

There remains however (for determination if necessary in the trial of the so-called "quantum" issues) the question whether the "minimum equity" needed to avoid the relevant detriment will be by continuation of an injunction, or by the payment of damages.[40] To use the phrases of McHugh J in Verwayen, should HIE be permitted to pay for the detriment, or should the detriment be avoided by enforcing the promise?[41] The pre-trial direction given on 19 December 1997 reserved this question to the quantum trial, as it would be desirable to have some notion of the likely quantum before finally determining the appropriate form of relief. The plaintiffs have succeeded in this trial in establishing their right to a declaration which entitles them to the enforcement of an equity by one or other of these means. Until such time as that question and the further deferred issue of alleged breach by Harrison Designs are resolved by the court or by the parties, there should be an injunction restraining HIE from terminating the licence or dispossessing the plaintiff.

An amendment was made shortly before commencement of the trial adding Mr Harrison as a plaintiff. The representations of course were made to him, but at material times he was acting on behalf of his company in whose favour the assignment was made. As is the case in many corporate activities, real persons, usually the directors, do the work and move their homes to the place where the company operates. This is so in the present case, and I have little doubt that Mr Harrison, along with his company, would suffer detriment if HIE were permitted to terminate the licence. However it does not follow that Mr Harrison, as an individual, has an equity to assert, or that he can maintain a cause of action based on estoppel.

The submission for the defendant is that Mr Harrison's claim is misconceived. I understand counsel for the defendant to concede that tortious claims might be brought by such a person, such as deceit, negligent misrepresentation, or deceptive conduct under s.52 of the Trade Practices Act. But no such claims have been litigated before me. The defendant submits that only the concessionaire is entitled to claim an estoppel that will prevent the other party from asserting rights that would otherwise arise from the defendant's agreement or negotiations with the concessionaire. The assertion of such an estoppel is said to arise from a proprietary or quasi-proprietary interest in the concessionaire.

Counsel for the plaintiffs placed reliance upon the following statement by Deane J in Verwayen[42]:

"While the ordinary operation of estoppel by conduct is between parties to litigation, it is a doctrine of substantive law the factual ingredients of which fall to be pleaded and resolved like other factual issues in a case. The persons who may be bound by or who may take the benefit of such an estoppel extend beyond the immediate parties to it, to their privies, whether by blood, by estate or by contract. That being so, an estoppel by conduct can be the origin of primary rights of property and of contract."

Apart from that rather general observation, no authority was cited either by counsel for the plaintiffs or counsel for the defendant on this difficult point. Taking the statement at its highest, in dealings by a company through its director it is difficult to describe the director as a "privy". The trend of authorities in Australia is against lifting the corporate veil unless a transaction can be seen as a mere sham or facade or it is necessary to remove a cloak for fraud. In the ordinary company transaction where there is a commercial purpose, the separate identity of the company and the directors needs to be maintained (Hadoplane Pty Ltd v Edward Rushton Pty Ltd[43]; Pioneer Concrete Services v Yelnah Pty Ltd[44]).

There is little point in my discussing this issue at length. The dearth of authority, and the fact that no similar claim for relief seems to have been adjudicated upon, suggest that it would be unsafe for a court of first instance to create a new remedy. The question is disarmingly simple - when may third parties (i.e. those not directly involved in the transaction to which the defendant's conduct relates) sue to enforce an estoppel? There are instances in which third parties have been held entitled to the benefit of representations made to the immediate party[45] but these are explicable on other grounds. Perhaps the case most helpful to the plaintiff is Brikom Investments v Carr[46], but there the relevant claimants were successors in title to the original lessee to whom the representations had been made. In that case Lord Denning MR spoke of such an assignee as taking "subject to the benefit of [the estoppel]". Citing Lord Coke he continued:

"Every estoppel ought to be reciprocal . . . privies in estate, as the feoffee, lessee etc. . . . shall be bound to take advantage of estoppels."

That is consistent with a statement by Spence in 1846[47]:

"Privies in blood, as the heir; privies in estate, as the feoffee, lessee, &c; privies in law, as the lord by escheat, tenant by the curtesy, tenant in dower, the incumbent of a benefice, and others that come in by act of law or in the post, shall be bound by, and take advantage of, estoppells."

There is no difficulty in upholding the benefit of an estoppel in favour of a party who stands in the shoes of someone who would have been entitled to assert the estoppel. However the present case is not such a case. It might well be asked why persons with sufficient proximity to enable them to sue a defendant for a tort cannot also sue that defendant to enforce an estoppel, if such persons would otherwise be subject to continuing detriment. On current authority (or lack of it) I would hold that in general a claimant who is not a party or privy to the principal transaction is not able to enforce an estoppel arising from a representor's conduct, at least in the absence of some special nexus between claimant and representor. However I am unaware of any authority that really takes the matter any further than Spence's old and quite convincing statement. In the present case I am unable to hold that Mr Harrison, on his own personal behalf, has the right to bring an action to enforce the present estoppel against HIE.

I am however prepared to consider submissions, and if necessary give directions which would permit Mr Harrison to litigate any separate tortious claims that he may be advised to institute. It will also be necessary to give directions for the further conduct of the present action, noting that HIE gave notice before the present hearing that it desired to litigate the question whether it was entitled to terminate Harrison Designs' licence for breach. That issue was raised too late for determination in the proceedings before me, but it may be litigated if the parties find it necessary to engage in further litigation subsequent to the present determination.

It is unnecessary to discuss at length the alternative claim for estoppel by convention or common assumption. The question as to whether precontractual negotiations may be used to found an estoppel by convention is currently something of a minefield. In Johnson Matthey Ltd v A.C. Rochester Overseas Corp[48] McLelland J considered that they could not. However, in the earlier decision of the New South Wales Court of Appeal in State Rail Authority of New South Wales v Heath Outdoor Pty Ltd[49] McHugh JA considered that pre-contract negotiations could give rise to a promissory estoppel where a person has been induced to enter into a contract and to confer rights on the other party as a result of a promise by the other party that he or she would only exercise those rights in a certain way.[50] The other members of the court seemed to have assumed that oral statements prior to signature on a written contract may give rise to a promissory estoppel, without deciding the question. The question is discussed by Dr Derham in his recent article Estoppel by Convention.[51] I am inclined to favour the view expressed by McHugh J.

However I do not find it necessary to resolve this question, because the case here pleaded and proved was wider than mere contractual negotiations between the immediate parties. A particular policy was shown to have existed, to have been known to both parties and to have been relied on by the plaintiffs and others. The case as pleaded is essentially that there was a policy whereunder licences would be extended over an indefinite term and HIE would renew them for further five-year periods as long as the concessionaire was not in breach of the licence; that the assumption of both parties at the time was that HIE would act in accordance with that policy. The evidence[52], I think, adequately establishes the allegations in the pleadings on this alternative basis.

I am therefore of the view that the plaintiffs have also established an entitlement to relief on this basis.

It is not necessary for me to discuss the alternative claims based on rectification and collateral contract. I simply mention my conclusions that I do not see rectification as an appropriate remedy in the present circumstance, but I consider that the case of collateral contract has been made out. The statements were, I think promissory, and I reject the submission that the relevant statements are truly inconsistent with the main contract. A promise of renewal is not inconsistent with a five-year term; and clause 14 would only operate if the licence were not renewed. On the evidence before me the defendant was not entitled to decline to renew the licence.

I would construe the assurances given on behalf of HIE as promises that HIE would renew the licence for further periods of five years for so long as the licensee wished to have it renewed provided that the licensee was not in breach at the time of renewal.

HIE pleaded special defences such as laches, acquiescence, delay, and counter-estoppel. They depend however upon a view of the facts which I have rejected in the above findings. On the view I take of the evidence there is nothing in the conduct of the plaintiffs which should deprive them of any remedy to which they are entitled.

I shall hear submissions from the parties as to the orders that should be made, consistently with the above reasons.

[3] These included Mr Lewis, Mrs Ferrall, Mr Gull, Mr Adams, Mr B. Kelly and Mr Rigo.

[6] cf. exhibit 3, para 6; exhibit 4, para 6.

At a glance

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Decision date

Before

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Judgment (221 paragraphs)

Parties

Cases Cited (8)