Wilson v Interhealth Energies Pty Limited & anor

The legislative scheme 4 It is trite that the jurisdiction of the District Court is statutory. The sources of its equitable jurisdiction are found in two enactments: s 134 of the District Court Act 1973 and s 6 of the Law Reform (Law and Equity) Act 1972. Respectively, the relevant provisions are as follows: "134 Jurisdiction in equity proceedings 1 … (h) any equitable claim or demand for recovery of money or damages, whether liquidated or unliquidated (not being a claim or demand of a kind to which any other paragraph of this subsection applies), in an amount not exceeding the Court's jurisdictional limit. 6 Defence in inferior court Every inferior court shall in every proceeding before it give such and the like effect to every ground of defence, equitable or legal, in as full and ample a manner as might and ought to be done in the like case by the Supreme Court under the Supreme Court Act 1970."

Equitable estoppel in the District Court 5 It is relevant to note that there is a distinction between common law estoppel and equitable estoppel. I respectfully adopt the language of Brereton J in Moratic Pty Limited v Lawrence James Gordon & Anor [2007] NSWSC 5 that explains this distinction - "32 In Waterman v Gerling Australia Insurance Company Pty Ltd [2005] NSWSC 1066, 65 NSWLR 300, I compared the elements of these two related estoppels - both are included in the rubric of estoppel in pais [ Legione v Hateley , (1983) 153 CLR 406 at 430 (Mason and Deane JJ)] - so as to reveal their analogies and distinctions in the following terms. In equitable promissory estoppel, it is necessary for a plaintiff to establish (1) that it has adopted an assumption as to the terms of a legal relationship with the defendant; (2) that the defendant has induced or acquiesced in the plaintiff's adoption of that assumption; (3) that the plaintiff has acted in reliance on its assumption; (4) that the defendant knew or intended that the plaintiff so act; and (5) that it will occasion detriment to the plaintiff if the assumption is not fulfilled [ Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387 at 428-429 (Brennan J)]. In common law conventional estoppel, it is necessary for a plaintiff to establish (1) that it has adopted an assumption as to the terms of its legal relationship with the defendant; (2) that the defendant has adopted the same assumption; (3) that both parties have conducted their relationship on the basis of that mutual assumption; (4) that each party knew or intended that the other act on that basis; and (5) that departure from the assumption will occasion detriment to the plaintiff [ Waterman v Gerling , [83], [96]]. 33 The similarities between the two doctrines should not be allowed to mask their differences, which reflect the disparate origins of promissory estoppel and conventional estoppel. Promissory estoppel, a creature of equity, is, typically, focussed on the conscience of the defendant: it operates when the defendant has induced or acquiesced in the adoption by the plaintiff of an assumption that the defendant will not assert its strict legal rights, so to prevent unconscionable (or unconscientious) insistence by the defendant on its strict legal rights. On the other hand, conventional estoppel, a creature of the common law, is focussed on the consensual basis of the parties' relationship: it operates when both parties have adopted the same assumption as the basis of their relationship, often without appreciating that any departure from the strict legal position is involved, so as to hold both parties to their common understanding." 6 As I understand it, the relevant dispute between the parties is whether, by selling the property at a particular price agreed by the companies, outstanding debts or obligations, if any, would not be payable. To the extent that the defence is particularised, it appears that Dr Wilson seeks to use equitable estoppel as a fallback defence in the event that his common law estoppel case is not made out. It seems clear that, however formulated, Dr Wilson's defence is not an "equitable claim or demand for recovery of money or damages" within the meaning of s 134(1)(h) of the District Court Act 1973 but rather an allegation that the companies cannot make such a claim on him. Accordingly, that provision does not confer jurisdiction on the District Court in the circumstances here. 7 The substantial argument before me concerned whether the pleading raised a ground of equitable defence were within the meaning of s 6 of the Law Reform (Law and Equity) Act 1972. 8 In his work Estoppel by Conduct and Election (2006) Sweet & Maxwell Ltd, Handley describes (at 202) a "promissory estoppel…[as] an equitable cause of action which entitles the promisee to an injunction to restrain enforcement of the right with a possibility of an award of equitable compensation or damages under Lord Cairns' Act" as well as "a defence to proceedings in a Court of Equity to enforce an equitable right, or for equitable relief in aid of a legal right". For present purposes it is sufficient to adopt this statement of principle and it is unnecessary to analyse the authorities, such as Waltons Stores (Interstate) Ltd v Maher & Anor (1988) 164 CLR 387, The Commonwealth v Verwayen (1990) 170 CLR 394 (see also Wykes & Ors v Samilk Pty Ltd & Ors, unreported NSWCA 19 May 1998) that discuss the developing notions in this area of legal discourse. Handley points out (at 203) that to consider promissory estoppel as a purely defensive mechanism is too limited and notes that the "orthodox" principle that it was "restricted to precluding departure from a representation" between contracting parties (the language of Mason and Deane JJ in Legione v Hatley (1982-83) 152 CLR 406 at 432 was abandoned in Waltons Stores). 9 In Verwayen, Deane J (170 CLR at 435), in the context of explicating the phrase "an equity", noted that "the phrase can be used to refer to a 'defensive equity' such matters as 'laches, acquiescence or delay' or a mere set off or to an interest or entitlement which does not of itself found equitable relief"; see also Meagher, Gummow and Lehane, Equity Doctrines and Remedies, Butterworths, Fourth Edition at 71-72. 10 It has been held, I think applying the "defensive" characterisation of the estoppel, that the District Court had jurisdiction to entertain the defence under s 6 of the Law Reform (Law and Equity) Act 1972: Yahl v Bridgport Customs Pty Limited (unreported, 31 July 1984, Master Allen); Batley v Local Court of New South Wales (unreported, NSWSC, 4 February 1998 Bruce J). However, in Taylor Farms (Aust) Pty Ltd v A Calkos Pty Ltd & Ors [1999] NSWSC 186, Kirby J, after a careful consideration of the changing scope of promissory estoppel, concluded that s 6 did not give jurisdiction to the Commercial Tribunal of New South Wales to entertain a defence based upon it. (In this respect, the District Court has no greater jurisdiction than the Commercial Tribunal, both only being able to consider equitable defences to the extent enabled by s 6.) His Honour pointed out that, although a party's pleadings might limit the application of promissory estoppel to defeating or moderating the plaintiff's claim and no positive equitable remedy is sought, it is "wrong in principle that a party, in an effort to give jurisdiction to a court with circumscribed powers, should nominate one possible outcome, which the court is then obliged to accept or reject". ([1999] NSWSC 186 at [83]). Kirby J considered the question in light of the developments in the law of promissory estoppel to which I have very briefly referred above. This approach was not available to Master Allen, for obvious reasons and not, apparently, argued before Bruce J. In short, Kirby J held that a "defence based upon promissory estoppel" is not an equitable ground of defence within the meaning of s 6.

11 As was the case in Taylor Farms, the pleading here may go no further than Dr Wilson's seeking only recognition of the fact that his acceptance of the specified consideration for the sale of the property expunged any indebtedness for sums that might have been outstanding for improvements or other payments in circumstances where the companies are estopped from denying that expunction. Nevertheless, the question is not whether his defence relies on a particular for of relief but whether it invokes an equitable defence within the meaning of s 6. 12 Taylor Farms has now stood for some ten years. It seems to me that judicial comity should lead me to follow it but, if I might add my small voice to that of Kirby J, I respectfully agree with his Honour's conclusion at all events. 13 Accordingly, I order that the proceedings be transferred to the Supreme Court. I direct the parties to make brief written submissions within the next seven days on the question of costs.

30/10/2008 - Change to order - Paragraph(s) cover sheet

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