DHJPM Pty Ltd v Blackthorn Resources Ltd - [2011] NSWCA 348

Court of Appeal

Supreme Court

New South Wales

Amendment notes

Medium Neutral Citation: DHJPM Pty Limited v Blackthorn Resources Limited (formerly called AIM Resources Limited) [2011] NSWCA 348
Hearing dates: 15 August 2011
Decision date: 30 November 2011
Before: Macfarlan JA at [1]
Meagher JA at [2]
Handley AJA at [92]
Decision:
Appeal dismissed with costs.
[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

Catchwords: ESTOPPEL - equitable estoppel - lease of commercial office premises taken by appellant on basis that premises would be occupied as to part by respondent - subsequent refusal by respondent to occupy that part - claim to enforce an equitable estoppel - issues on appeal - findings of fact challenged - circumstances in which equitable proprietary or promissory estoppels might arise - whether equitable proprietary estoppel in circumstances of this case - requirement that expectation be intended and understood to affect legal relations - whether unjust or unconscionable for respondent to depart from expectation that it would enter into a sub-lease - whether appellant entitled to relief by way of equitable compensation.
Legislation Cited: Trade Practices Act 1974 (Cth)
Real Property Act 1900
Cases Cited: Actionstrength Ltd v International Glass Engineering In.Gl.En. SpA [2003] 2 AC 541
Amalgamated Property Co v Texas Bank [1982] QB 84
Attorney-General of Hong Kong v Humphreys Estate (Queen's Gardens) Ltd [1987] 1 AC 114
Austotel Pty Ltd v Franklins Self-Serve Pty Ltd (1989) 16 NSWLR 582
Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485
Baird Textiles Holdings Ltd v Marks & Spencer PLC [2002] 1 All ER (Comm) 737
Cobbe v Yeoman's Row Management Ltd [2008] 1 WLR 1752; 4 All ER 713
Commonwealth v Verwayen [1990] HCA 39; (1990) 170 CLR 394
Crabb v Arun DC [1976] Ch 179
Delaforce v Simpson-Cook [2010] NSWCA 84
Duke of Beaufort v Patrick (1853) 17 Beavan 60 [51 ER 954]
East India Co v Vincent (1740) 2 Atk 83 [26 ER 451]
Evans v Evans [2011] NSWCA 92
Flinn v Flinn [1999] 3 VR 712
Gillet v Holt [2001] Ch 210
Giumelli v Giumelli [1999] HCA 10; (1999) 196 CLR 101
Laird v Birkenhead Rail Co [1859] Johns 500 [70 ER 519]
Legione v Hateley [1983] HCA 11; (1983) 152 CLR 406
Metropolitan Transit Authority (Vic) v Waverley Transit Pty Ltd [1991] 1 VR 207
Mobil Oil Australia Ltd v Wellcome International Pty Ltd (1998) 81 FCR 475
Plimmer v Mayor of Wellington (1884) 9 App Cas 699
Ramsden v Dyson (1866) LR 1 HL 129
Riches v Hogben [1985] 2 Qd R 292
Selah v Romanous [2010] NSWCA 274
Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466
S & E Promotions Pty Ltd v Tobin Bros Pty Ltd (1994) 122 ALR 637
Sledmore v Dalby (1996) 72 P&CR 196
Taylor's Fashions Ltd v Liverpool Victoria Trustees Co Ltd [1982] QB 133
Thorner v Major [2009] 1 WLR 776
Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7;
(1988) 164 CLR 387
Walton v Walton (Court of Appeal, Civ Div, 14 April 1994, unreported)
Whitlock v Brew [1968] HCA 71; (1968) 118 CLR 445
Category: Principal judgment
Parties: DHJPM Pty Limited (Appellant)
Blackthorn Resources Limited (formerly called AIM Resources Limited) (Respondent)
Representation: Counsel
M R Speakman SC; N E Chen (Appellant)
J C Giles (Respondent)
Solicitors
Gillis Delaney Lawyers (Appellant)
Minter Ellison (Respondent)

File Number(s): CA 2010/151645
Decision under appeal

Citation:

DHJPM Pty Limited v AIM Resources Limited

Date of Decision:

2010-06-08 00:00:00

Before:

Curtis DCJ

File Number(s):

DC 4050 of 2008

Judgment

MACFARLAN JA: I agree with Meagher JA.

MEAGHER JA: On 23 May 2006, the appellant ( DHJPM ) leased a single floor of commercial office premises at Level 7, 151-153 Macquarie Street, Sydney from Lambardi Pty Limited ( Lambardi ) for a term of five years commencing on 1 July 2006. It intended that part of the premises would be occupied by Chifley Investor Group Pty Limited ( Chifley Investor Group ), a private investment company associated with DHJPM, and three other companies with each of whom arrangements had been made to occupy a part of the premises and share receptionist and boardroom facilities. One of those companies was the respondent, then named AIM Resources Limited ( AIM ). The others were Peregrine Corporate Limited ( Peregrine ) and Imperial Mining Limited ( Imperial Mining ). Chifley Investor Group specialised in venture capital activities in the mining and resource sector. It was proposed that the remaining part of the floor would be occupied by other individuals and businesses whose activities were complementary to Chifley Investor Group. The intention was that the businesses would share information and provide mutual introductions to potential clients and sources of funding.

DHJPM fitted out the premises at a cost of $499,585. That fit-out included an area in the north-western corner of the floor consisting of two offices and personal assistant space which it was proposed would be occupied by AIM. The fit-out was completed in early August 2006. At that time AIM refused to occupy part of the premises. That refusal was communicated by letter dated 8 August 2006 from AIM's solicitors, Chandlers International Lawyers ( Chandlers ), to DHJPM's solicitors, Gillis Delaney Lawyers ( Gillis Delaney ).

In September 2008, DHJPM commenced proceedings in the District Court against AIM claiming damages for breach of contract, damages for misleading or deceptive conduct in contravention of s 52 of the Trade Practices Act 1974 (Cth) and equitable compensation to enforce or vindicate an equity said to arise from AIM's failure to fulfil an assumption or expectation which it induced and which DHJPM acted upon. The assumption was that there was an agreement for sub-lease or occupation between them. The expectation was that AIM would take a sub-lease of or otherwise occupy part of the premises.

Those proceedings were heard by Curtis DCJ who dismissed each of DHJPM's claims. The only claim pressed on appeal is that to enforce an equitable estoppel.

When addressing whether DHJPM had established an equitable estoppel, the primary judge considered whether it had proved the six matters identified by Brennan J in Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387 at 428-429:

"In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise."

The primary judge held that DHJPM had established the first five of those matters but that, in respect to the sixth element, AIM did not act unreasonably in early August 2006 in refusing to enter into the licence agreement which had been proffered by DHJPM: [50], [66]. He also held that the circumstance that the venture had "proved profitable to DHJPM, because the anticipated synergies have given rise to advantageous commercial opportunities" militated against the granting of relief: [68].

DHJPM contends that the primary judge erred in failing to conclude that AIM was estopped from denying the existence and subsistence beyond 8 August 2006 of an agreement for sub-lease. It also challenges some of the findings made by the primary judge, including as to whether it suffered detriment, and says it is entitled to equitable compensation in an amount of $303,900.

The primary judge was correct to dismiss DHJPM's claim. AIM did not induce any expectation on the part of DHJPM that AIM was "bound" to enter into a sub-lease. Any expectation of DHJPM as to what AIM would do was based upon DHJPM's belief that it had a binding agreement with AIM. That belief was not induced by AIM. Nor was it reasonably available on the objective facts. Secondly, it would not have been against good conscience or unjust for AIM on 8 August 2006 to depart from any such expectation because DHJPM had not offered it a sub-lease or obtained the landlord's written consent to such a sub-lease and it was not certain that such consent would be given. Finally, the primary judge did not err in concluding that DHJPM would not have been granted the equitable compensation claimed.

Before identifying the issues raised in the appeal, it is convenient to set out in more detail the facts said to give rise to an equitable estoppel.

The relevant facts

Mr David Hannon was a director and the guiding mind of DHJPM. He was also a director of Chifley Investor Group. Mr Marc Flory was the managing director of AIM.

Between November 2005, when Mr Hannon first became aware that the premises were available for lease, and May 2006, Mr Hannon and Mr Flory had discussions about AIM taking space in the premises. Early in that period Mr Flory visited the premises and selected three offices and a space for his personal assistant from a proposed floor plan design. On about 27 March 2006, Mr Hannon received a letter of intent from the landlord's agent, Colliers International, which set out the terms of a proposed lease between Lambardi and DHJPM. Mr Hannon discussed the content of that letter with Mr Flory.

The primary judge made the following findings as to the conversations which occurred between March and May 2006:

"13. By this time Mr Hannon had a reasonable estimate of the cost of fitting out the offices. He had the following conversation with Mr Flory:

Mr Hannon: "I am entering into a long lease of five years, so you will get a five-year one."

Mr Flory: "Okay".

Mr Hannon: "Marc this is a big commitment for us. We are going to enter into a 5 year lease, and so will you. I will be financing the fit out."

Mr Flory: "Yeah, no problem. We'll be there with you."

Mr Hannon: "I've worked out the rates and your space is going to be around $10,000 a month plus GST."

Mr Flory: "Sure that is fine."

14. With the Chifley Investor Group, Peregrine Corporation, Imperial Mining, and AIM all committed to the project, around 80 per cent of the premises were tenanted. This occupancy level made the venture financially realistic.

15. Relying upon the assurances of Mr Flory and what he understood to be the commitment of AIM to the project, Mr Hannon for DHJPM signed the letter of intent, and on 20 April 2004 committed DHJPM to proceeding with the fit-out at an estimated price of $333,000.

16. On or about 13 May 2006 Mr Hannon met with Mr Flory and Mr Scott Reid, another executive of AIM, for the purpose of confirming that AIM was committed to the project before he signed the lease with the owner of 151 Macquarie St. The following exchange took place:

Mr Hannon: "I am going to need to sign the lease soon. It is going to be for five years and your space will be $10,000 per month plus GST. Is everything still Okay?"

Mr Flory: "We're going ahead with the leasing arrangements. We are committed."

Mr Hannon's evidence was that based on this conversation of 13 May 2006 and his earlier conversations with Mr Flory, he signed the lease of the premises. He said that he would not have done so had he not believed that there was a binding agreement with AIM. At no time did Mr Flory ever say or do anything which suggested that there was no such agreement.

On 23 May 2006, DHJPM executed the head lease with Lambardi. The commencing annual rent was $242,970 plus GST. The lease provided for that rent to increase by 4 percent on each anniversary of the commencement date. The lease also provided for DHJPM to pay increases in various outgoings attributable to the operation, maintenance or repair of the premises over the base year which was the twelve months ending 30 June 2006.

Clause 9 of the lease dealt with assignment and sub-letting. It relevantly provided:

"9 Assignment and Sub-letting

9.1 No Assignment Etc.

The Tenant must not assign, transfer, mortgage, charge or otherwise deal with its interest in the Premises or demise, sublet, part with possession of or grant any licence affecting the Premises.

9.2 Assignment and Subletting Permitted

(1) The Landlord may consent to the assignment or subletting of the Premises if the Tenant first makes an application to the Landlord for consent and the following provisions have been observed by the Tenant ..."

Clause 1.12 provided that unless otherwise stated "if the Landlord's consent or approval is required" it "is not effective unless in writing".

In July 2006, Mr Hannon calculated the amounts that DHJPM proposed to charge each of the businesses that would be sharing space in the premises. The amount calculated for AIM was $9,700 a month plus GST. Gillis Delaney were retained to draft a form of licence agreement. The form of licence was sent to Chifley Investor Group which completed details for each proposed occupant and forwarded draft licences to AIM, Peregrine and Imperial Mining.

The form of licence was provided to AIM on about 19 July 2006. It relevantly provided:

" Recitals:

A. The Licensor is the tenant of the Premises.

B. The Licensor has agreed to allow the Licensee to occupy part of the Premises from the Commencement Date on the terms and conditions of this Agreement.

C. The Licensee has agreed to pay the Monthly Licence Fee.

Agreement:

...

2.Licence

The Licensor grants to the Licensee from the Commencement Date a licence (' the Licence ') for the Term to occupy for commercial office purposes only that part of the Premises set out in Item 7 of the Schedule. The Licence so granted includes the Additional Rights.

3.Fee

The Licensee must pay the Monthly Licence Fee in advance of each month to the Licensor by direct debit to the Bank Account. The commencing Licence Fee will be pro rata to the end of the month in which the Licence commences.

...

5.No lease created

The Licence does not confer or give rise to any lease, tenancy or interest in land whatsoever.

...

SCHEDULE

Item No.	Expression	Meaning
…
Item 4	Monthly Licence Fee	Nine thousand seven hundred dollars ($9,700.00) per month plus GST
Item 5	Commencement Date	7-Aug-2006
Item 6	Term	59 Months
Item 7	Part of Premises	Set out in diagram attached comprising 1 level 9 office, 1 standard office and 1 PA station
Item 8	Additional Rights	Use of boardroom, kitchen, receptionist, IT infrastructure, Siemens PABX, Dell Computers and 19” LCD screens, internet connection (up to XXMB download and XXMB upload per month), and administrative support facilities of the premises
Item 9	Additional Charges	Courier costs, telephone call charges, over quota use of internet, proportionate share of your Part for any increase in outgoings charged by the landlord to DHJPM Pty Ltd

..."

It is likely that the date for commencement of the licence was fixed following a conversation between Mr Hannon and Mr Flory. The fit-out was scheduled to be completed by 7 August 2006. Mr Flory said that AIM currently occupied premises on a month to month arrangement and that he would put everything in place to move in on 7 August 2006, the same time as Chifley Investor Group.

On 27 July 2006, AIM provided a copy of the licence to Chandlers. On 28 July, Ms Claire Jelbart, a solicitor at Chandlers, advised AIM that it should obtain a copy of the head lease for the premises. By 2 August Chandlers had obtained a copy of the head lease and on that day Chandlers drew AIM's attention to cl 9.1 and advised it that DHJPM was unable to grant a licence of the premises and that by doing so it would provide the landlord with grounds for terminating the lease.

On 3 August 2006, Ms Jelbart had a conversation with Mr Michael Gillis of Gillis Delaney. She referred to the head lease and said that she did not think that DHJPM could grant a licence as it was prohibited from doing so by cl 9.1. Mr Gillis responded that his client was not licensing the premises and that the prohibition in cl 9.1 was directed to the premises as a whole and not to a licence of part of the premises.

According to Mr Gillis, his next telephone conversation with Ms Jelbart was at about 4pm on 7 August 2006. However, the written communications indicate that there were further telephone conversations between them on 3 and 4 August. In those conversations the possibility of a redrafted licence agreement or a sub-lease was discussed on the basis that AIM should bear some of the costs associated with the preparation of those documents and of obtaining Lambardi's consent to any sub-lease. The findings of the primary judge in relation to these particular communications are challenged by DHJPM on the appeal.

On 3 August 2006, in an email to Mr Flory, Ms Jelbart reported:

"We called Mr Hannon and spoke to his lawyer, Mr Michael Gillis of Gillis and Delaney, and raised the issues we discussed regarding the Licence Agreement and the head lease. We also reiterated that without the appropriate consents and agreements being executed AIM would not be in a position to move into the premises tomorrow.

Mr Gillis advised that there would be no trouble in obtaining the consent of the landlord and also undertook to review the head lease and contact us at lunchtime today."

In the morning of 7 August 2006, by fax, Ms Jelbart wrote to Mr Gillis as follows:

"... As you know, we act for AIM ..., the company currently negotiating with your client, DHJPM ... for lawful occupation of part of the premises at Level 7, 151 Macquarie Street, Sydney ...

We refer to the telephone conversations between you and the author on 3 and 4 August 2006.

...

As discussed with you on 3 August 2006, if executed in its current form, the draft Licensing Agreement would breach of clause 9.1[sic] of the Head Lease and fail to grant AIM lawful occupation of the premises.

Also as discussed, the draft Licensing Agreement does not contain the following essential terms:

1. a full and proper description of the premises;

2. detailed protection such as quiet enjoyment and clear default;

3. maintenance and repair provisions; and

4. termination and surrender provisions.

Your client's proposal that AIM bear the costs of negotiating with Lambardi and redrafting the licence agreement or drafting a sublease to ensure that AIM will on execution be entitled to lawful occupation of the premises has been rejected.

AIM requires written confirmation of Lambardi's consent to its intended occupation of the premises by 17h00 on 7 August 2006; failing which AIM will take such action as may be advised in the circumstances.

All our client's rights remain reserved."

Mr Gillis replied by fax on 7 August 2006 in the following terms:

"...

We note your concession that your client is "currently negotiating" with our client in respect of part of the premises at Level 7, 151 Macquarie Street, Sydney. Consequently, we are mystified as to the reference in the last paragraph of your letter to your "client's rights".

Our client does not agree with your assessment of the effect of clause 9.1 of the Head Lease.

...

In short, the Head Lease does not proscribe the use under licence of a part of the premises by a third party. We are awaiting the head lessor's confirmation that any such transaction would not be considered a breach of the Lease.

We shall be further in touch shortly."

In cross-examination Mr Gillis accepted that his reference to "currently negotiating" was to the fact that there was discussion "happening with the lawyers for AIM as to the form of the licence agreement, or form of the agreement, the documented agreement, as to how they were to occupy the premises". A reason he gave for not responding to Ms Jelbart's letter of 7 August by proffering a further draft document which addressed matters such as quiet enjoyment, maintenance and repair or termination and surrender was that they went "beyond what we had been instructed as far as what had been agreed" and were "not a part of the agreement that had been reached".

The reference in the second-last paragraph of Mr Gillis' fax to the "lessor's confirmation" is to his having telephoned Colliers International on receipt of the fax of 7 August 2006 and asked that they obtain the landlord's permission for DHJPM to sub-let part of the floor to AIM. At about 4pm on 7 August, Mr Gillis received a phone call from Colliers International and was told that the landlord "consents to your client subletting the premises to AIM". He then telephoned Ms Jelbart and told her he had been advised by the agent that the landlord consented to AIM having a sub-lease.

On the evening of 7 August 2006, Chandlers provided an opinion to AIM which advised against executing the draft licence agreement. That opinion also referred to DHJPM's proposal that AIM bear the costs of negotiating with Lambardi and redrafting the licence agreement or drafting a sub-lease to conform with DHJPM's obligations.

On 8 August 2006, Ms Jelbart sent an email to Mr Gillis, which responded to his fax of 7 August, and said:

"We note your interpretation of the effect of clause 9.1 of the Head Lease and respectfully disagree. We have advised our client's board accordingly.

Kindly note our client's board does not intend to proceed with the leasing of a part of Level 7, 151 Macquarie Street, Sydney."

Mr Gillis did not respond to this email until 11 August 2006. In his response, Mr Gillis referred to a telephone conversation on 3 August and said "[a]t all times during the conversation with the writer your client was offered, as an alternative to the Licence Agreement, a sub-lease pursuant to clause 9.2 of the Lease". He also stated:

"6. At no stage did the writer advise you your client would "bear the costs of negotiating with Lambardi and redrafting the Licence Agreement or drafting a sub-lease ...". This statement in your letter dated 7 August 2006 is clearly a mistake on your behalf. At no stage did the writer advise you that your client would be liable for any costs other than the obvious and standard commercial costs of a sub-lease.

7. We confirm you are (sic) advised that the landlord would provide its consent to a sub-lease prior to 5pm on 7 August 2006.

8. We note your letter dated 8 August 2006 fails to address the alternative by way of a sub-lease pursuant to cl 9.2 of the Head Lease that has always been available."

Ms Jelbart responded by letter of 25 August 2006. She refuted the recording of "factual circumstances" in the letter and reiterated that AIM did not intend to proceed with the leasing of part of the premises.

The amount claimed by way of equitable compensation was $299,400. Before this Court that amount was amended to $303,900, being the monthly rent of $9,700 plus GST for 59 months less income received from the occupation by others of the offices and space which were to be occupied by AIM.

The issues on appeal

By its amended notice of appeal and submissions, DHJPM challenges the primary judge's conclusion that it had not established that AIM was estopped from denying the existence and subsistence beyond 8 August 2006 of a binding agreement for lease. In particular, it says that the primary judge erred when addressing whether Brennan J's proposition (6) was satisfied by focusing on AIM's refusal on 8 August 2006 to sign the licence agreement rather than its refusal to proceed with any lease at all. Those challenges are the subject of grounds of appeal 5 and 6.

As part of that argument, it also challenges the primary judge's findings on three matters. Those challenges are the subject of grounds of appeal 1, 1A, 2, 3, 4, 7, 8 and 9. The first subject is whether in early August 2006 AIM was offered a sub-lease as an alternative to the licence agreement. The primary judge rejected Mr Gillis' recollection that AIM was offered a sub-lease as "unreliable" and found that no proposal for the preparation of a sub-lease "at DHJPM's expense" was communicated before Mr Gillis' letter of 11 August. The second is whether the primary judge was correct in describing DHJPM's position communicated by its letter of 7 August as being that AIM should execute the licence agreement before being granted possession. DHJPM also says that the primary judge should have held that as at 8 August it was not refusing to negotiate further the terms of a sub-lease. The third is whether DHJPM had established that it would suffer detriment or prejudice if AIM sought to depart from the assumption or expectation relied upon. DHJPM says that the primary judge erred in finding that the overall venture had proved profitable to DHJPM, erred in treating commercial opportunities of Chifley Investor Group as relevant and should have found that DHJPM suffered loss of approximately $300,000.

In addition to supporting the primary judge's conclusions as correct, AIM contends that the primary judge's decision that DHJPM was not entitled to an equitable estoppel should be affirmed for the following reasons. First, there was no concluded agreement which AIM could be estopped from denying and the content and circumstances of the conversation on 13 May 2006 did not give rise to any assumption or expectation as to the existence of a binding contract or the performance of a promise. Secondly, AIM was not estopped from denying an agreement to sub-lease in circumstances where DHJPM could not lawfully part with possession of part of the premises. Finally, DHJPM had suffered no detriment sufficient to create an estoppel. These matters are the subject of AIM's notice of contention and challenge the primary judge's conclusion that AIM had induced DHJPM to adopt an assumption or expectation of the kind described in Brennan J's proposition (1).

Resolution of challenges to findings of fact

It is convenient to deal with the first and second of the three subjects which are the subject of challenge. I will deal with the third when addressing the question of entitlement to equitable compensation.

As to the first subject of challenge: Mr Gillis did not in his affidavit or oral evidence refer to anything being said about his offering a sub-lease as an alternative to the licence agreement in his telephone conversations with Ms Jelbart on 3 or 4 August 2006. The only reference from Mr Gillis' perspective to a proposal for a sub-lease was in his letter of 11 August. He was not cross-examined about the assertions in that letter although they are denied generally by Chandler's letter of 25 August. In these circumstances, the primary judge's reference in [61] to Mr Gillis' "present recollection" of his offering of a sub-lease in the conversation of 3 August 2006 as being "unreliable" is not apposite.

The only evidence as to the content of the discussions which followed the first conversation on 3 August 2006 is in the contemporaneous correspondence. Accordingly, this Court is in as good a position as the primary judge to draw inferences as to the likely content of those conversations. Those documents indicate that after the first conversation there was a further conversation or conversations on 3 and 4 August. Chandler's letter of 7 August suggests that the possibility of a redrafted licence agreement or sub-lease was discussed but on the basis that AIM would bear at least some of the costs associated with the preparation of those documents and of obtaining the consent of the landlord. This is consistent with Mr Gillis' letter of 11 August which acknowledges that there was some reference in the discussions to AIM being liable for some costs (described as "the obvious and standard commercial costs of a sub-lease"). For these reasons, the primary judge was correct to conclude at [64] that the idea of the preparation of a sub-lease at DHJPM's expense was not communicated before 11 August. He was also correct to conclude that the subject of negotiating a sub-lease had been raised earlier but probably wrong to suggest that the proposal had come from DHJPM rather than Gillis Delaney: cf. [63]. However, nothing turns on this.

As to the second subject of challenge: The primary judge's observations at [26] that the Gillis Delaney letter of 7 August 2006 was consistent only with DHJPM maintaining that AIM should execute the licence agreement may overstate the effect of the letter. However, the significance of this letter was that it emphasised that whilst the parties were negotiating, AIM had no rights in circumstances where DHJPM did not proffer a form of sub-lease and the lessor's written consent but instead continued to maintain that AIM could lawfully occupy the premises under a licence agreement.

Circumstances in which an equitable estoppel might arise

In Waltons Stores v Maher an estoppel was enforced by a landowner against an intended tenant in circumstances where there was no dispute as to the terms of the proposed lease agreement. There was no binding agreement because there had not been any exchange of executed counterparts of the contract. The assumption or expectation relied on was directed to the completion of that exchange. In Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466 there also was no issue as to the terms of the lease under which the proprietors of the adjoining plant nursery occupied the owner's land. The leasehold interest could not be registered under the Real Property Act 1900, because the relevant land was not the subject of an approved plan of subdivision. Accordingly, although the lease was binding as between the parties, it was not enforceable at law against a third party purchaser of the owner's land. In each of these cases, the parties contemplated and intended that the proprietary rights which were sought to be enforced by an equitable estoppel had been or would be created by a binding contract and they had reached agreement as to the essential terms of that contract. In each case an equitable estoppel was upheld.

The facts in Austotel Pty Ltd v Franklins Self-Serve Pty Ltd (1989) 16 NSWLR 582 were different. The estoppel was sought to be enforced by the intended tenant, a supermarket proprietor, against the owner, a property developer. Initially, they had reached agreement on the essential terms of a lease subject to a formal agreement being executed. They had then agreed to increase the size of the leased store area but had not reached agreement as to the rent to be charged for the larger area. They also contemplated and intended that the proprietary rights which were sought to be enforced would be created by a binding contract. There was no binding contract because no rent had been agreed for the larger area. It was also argued that there was no binding contract because of the absence of a formal executed agreement for lease. The claim to an equitable estoppel was rejected (Priestley JA dissenting).

The present case is like Waltons Stores v Maher in that the equitable estoppel is sought to be enforced by the intended tenant against an intended sub-tenant except that here the dealings giving rise to the assumption or expectation occurred at a time before DHJPM had obtained its leasehold interest in the relevant premises. That estoppel is said to have arisen by reason of an assumption or expectation induced by the conversation of 13 May 2006 and DHJPM's act in reliance being the entry into the lease on 23 May. The present case is unlike Waltons Stores v Maher in that at the time of the relevant act of reliance, the parties had not reached agreement about a number of matters concerning AIM's right of occupation. Those matters included the rent or occupation fee to be paid, the commencement date and duration of the occupation and the extent to which AIM would bear any share of the outgoings or increases in the outgoings which may be charged under the head lease. DHJPM and AIM must be taken, however, to have contemplated and intended that any proprietary or other right of occupation would be created by a binding agreement. This much is implicit in Mr Hannon's position that he relied upon his belief that he had an agreement with AIM following the conversation on 13 May. It is also consistent with the fact that subsequently there were negotiations for a written contract.

The judgments in Waltons Stores v Maher accept that common law and equitable estoppel are separate doctrines although they have many ideas in common: at 398-399, 415-416, 458-459. See also Commonwealth v Verwayen [1990] HCA 39; (1990) 170 CLR 394 at 422, 454, 499-500; Silovi v Barbaro at 472 and S&E Promotions Pty Ltd v Tobin Bros Pty Ltd (1994) 122 ALR 637 at 652-653. They also accept that the "familiar categories" of promissory and proprietary estoppel identify different characteristics of circumstances in which equitable estoppels will arise: at 399-400, 404, 420, 458-459. See also Legione v Hateley [1983] HCA 11; (1983) 152 CLR 406 at 432, 434-435 and Giumelli v Giumelli [1999] HCA 10; (1999) 196 CLR 101 at [6], [7]. Those different characteristics were described by Brennan J (at 420):

"In cases of promissory estoppel, the equity binds the holder of a legal right who induces another to expect that right will not be exercised against him .... In cases of proprietary estoppel, the equity binds the owner of property who induces another to expect that an interest in the property will be conferred on him."

See also Mason CJ and Wilson J at 399, 404 and Gaudron J at 458-459.

Because there are separate doctrines which apply to common law and equitable estoppel and because of the different characteristics which give rise to the different species of equitable estoppel, it is necessary, as the judgments in Waltons Stores v Maher , Silovi v Barbaro and Austotel v Franklins demonstrate, to attend carefully to the identification of the assumption or expectation which the object of the estoppel is said to be estopped from denying or asserting. This also directs attention to the relevant doctrine which must then be applied in a disciplined and principled way: Cobbe v Yeoman's Row Management Ltd [2008] 1 WLR 1752; 4 All ER 713 at [16], [28], [46].

In Waltons Stores v Maher there were three assumptions or expectations which Mr Maher said had been made and relied upon. They were that an exchange would occur, that an exchange had occurred and that there was a binding agreement between the parties: at 398, 413, 443, 459. Mason CJ, Wilson, Brennan and Gaudron JJ agreed that the first assumption which concerned an expectation as to what Waltons would do could be supported upon principles of equitable estoppel: 399, 413, 459. As to the second assumption, Brennan and Gaudron JJ agreed that it was as to an existing state of affairs and could be supported, if at all, by a common law estoppel: 413, 460. As to the third assumption, Brennan J considered that it also rested on an existing state of affairs and could only be supported by a common law estoppel: 413. Gaudron J did not consider the third assumption to be in substance any different from the second: 460. Deane J dealt with the third assumption as an estoppel by representation or conduct which provided the factual foundation for an action to enforce the resulting "contract": 444-445.

In Silovi v Barbaro the assumption or expectation was that the proprietors of the adjoining nursery had or would acquire an interest in the owner's land entitling them to occupation for an agreed period: 471, 473. In Austotel v Franklins the estoppel argument was also put in two ways. The first was that Austotel was estopped from denying an agreement in terms of an exchange of letters. The second was that Austotel was estopped from denying that it would grant a lease to Franklins in the event that Franklins executed a formal lease: 584, 602, 616.

The primary judge sought to apply Brennan J's formulation of what is necessary to establish an equitable estoppel. Of particular importance to this appeal are propositions (1), (2) and (3) and whether any expectation induced by AIM was as to something AIM was "bound" to do. Two things should be noted about Brennan J's formulation. The first is that any general formulation of the relevant principles must necessarily, in its application in particular circumstances, be subject to qualification and refinement reflecting or giving effect to the broad equitable principles which underlie its application. Some of those qualifications may be found in the judgments in Waltons Stores v Maher and S&E Promotions Pty Ltd v Tobin Bros Pty Ltd at 653-654. The second is that it does not describe the characteristics of the different species of equitable estoppel and, in particular, promissory and proprietary estoppel. This is because Brennan J considered there was a difficulty in limiting the principle of equitable estoppel, in so far as it operated in relation to promises, to those which suspended or extinguished existing rights, or to those which created or conferred proprietary as distinct from non-proprietary interests: at 425-426. In this context I note that this Court said in Saleh v Romanous [2010] NSWCA 274, esp at [55], [62], [74], that a promissory estoppel operates as an equitable restraint on the exercise or enforcement of contractual and other rights and is negative in substance.

The outcome of this appeal does not turn on whether the equitable estoppel relied upon is a proprietary estoppel or a promissory estoppel with respect to a promise to create new rights. The propositions stated by Brennan J are applicable to circumstances which would give rise to an orthodox proprietary estoppel. The estoppel claimed by DHJPM, if made out, could be supported as an orthodox proprietary estoppel, by which AIM created and encouraged an expectation that an interest by way of reversion on a sub-lease would come into existence.

The reference in Brennan J's proposition (1) to an expectation that "a particular legal relationship would exist" and that the party said to be estopped "would not be free to withdraw" from it, draws attention to two essential aspects of the expectation. The first is that it must be as to a legal relationship which is expected to exist between the parties. The second is that the expectation be induced by a promise which is intended by the promisor and understood by the promisee to affect their legal relations with the result that it is treated between them as something which the party estopped is "bound to do or not to do". This appears from Brennan J's analysis at 421, 422.

In their joint judgment in Waltons Stores v Maher , Mason CJ and Wilson J also emphasise this second aspect of the expectation necessary to justify a promissory estoppel. After referring to an observation of Robert Goff J (later Lord Goff of Chieveley) in Amalgamated Property Co v Texas Bank [1982] QB 84 at 107, they say (at 403):

"... The point is that, generally speaking, a plaintiff cannot enforce a voluntary promise because the promisee may reasonably be expected to appreciate that, to render it binding, it must form part of a binding contract."

When considering the Privy Council decision in Attorney-General of Hong Kong v Humphreys Estate (Queen's Gardens) Ltd [1987] 1 AC 114, they note (at 406):

"As a failure to fulfil a promise does not of itself amount to unconscionable conduct, mere reliance on an executory promise to do something, resulting in the promisee changing his position or suffering detriment, does not bring promissory estoppel into play. Something more would be required. Humphreys Estate suggests that this may be found, if at all, in the creation or encouragement by the party estopped in the other party of an assumption that a contract will come into existence or a promise will be performed and that the other party relied on that assumption to his detriment to the knowledge of the first party."

In Waltons Stores v Maher the expectation or assumption which was induced and acted upon and which was understood to affect their legal relations was that completion of the exchange of contracts would occur or had occurred: at 408, 430, 444, 464.

In Silovi v Barbero , Priestley JA (Hope and McHugh JJA agreeing) offered a more succinct formulation of what could be distilled from the different judgments in Waltons Stores v Maher (at 472):

"(5) For equitable estoppel to operate in circumstances such as those of the present case 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, and reliance on that by the plaintiff, in circumstances where departure from the assumption by the defendant would be unconscionable." (italics added)

In Austotel v Franklins , Priestley JA explained an aspect of this proposition and expanded it to take account of the different circumstances of that case. In speaking of "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" he made clear that proposition (5) was speaking "of a contract or a promise the content of which was known": at 604. Austotel v Franklins was not such a case. In Plimmer v Mayor of Wellington (1884) 9 App Cas 699, an equitable proprietary estoppel was upheld where there was no agreement which, although unenforceable, contained precise terms describing what was expected. To take account of cases like Plimmer , in Austotel v Franklins Priestley JA expanded proposition (5) (at 604, 610, 612). See at 610:

"(5) 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." (italics added)

That formulation was cited with approval by a Full Court of the Federal Court in S&E Promotions Pty Ltd v Tobin Bros Pty Ltd at 653.

The requirement that the promise or expectation be intended by the promisor and understood by the promisee to affect their legal relations applies equally to cases where a contract is not contemplated and the expectation is that some interest in land will be granted. That appears from the statement of Lord Kingsdown in his dissenting speech in Ramsden v Dyson (1866) LR 1 HL 129 at 170:

"If a man, under a verbal agreement with a landlord for a certain interest in land, or, what amounts to the same thing, under an expectation, created or encouraged by the landlord, that he shall have a certain interest , takes possession of such land, with the consent of the landlord, and upon the faith of such promise or expectation, with the knowledge of the landlord and without objection by him, lays out money upon the land, a Court of equity will compel the landlord to give effect to such promise or expectation." (italics added)

That requirement does not mean that there must be certainty in the promise or representation said to give rise to the assumption or expectation in respect of which the proprietary estoppel operates. Such an equitable estoppel can be established notwithstanding that the expectation contains elements that would not be sufficiently certain to amount to a valid contract or is formed on the basis of vague assurances: Gillett v Holt [2001] Ch 210 at 226 (citing Slade LJ in Jones v Watkins ); Baird Textiles Holdings Ltd v Marks & Spencer PLC [2002] 1 All ER (Comm) 737 at [85]; Evans v Evans [2011] NSWCA 92 at [121]-[125] and cases there cited, esp. Flinn v Flinn [1999] 3 VR 712 at [80]-[81].

In Giumelli v Giumelli Gleeson CJ, McHugh, Gummow and Callinan JJ (at [35]) cited with approval the observation of McPherson J in Riches v Hogben [1985] 2 Qd R 292 at 300-301 where the plaintiff son relied upon an oral agreement and in the alternative a proprietary estoppel by encouragement:

"A consequence of applying the principle may be to complete an otherwise imperfect gift, as in Dillwyn v Llewellyn ; ... or to give effect to an agreement that, for want of certainty or consideration or of some other essential element, falls short of constituting an enforceable contract. ... What distinguishes the equitable principle from the enforcement of contractual obligations is, in the first place, that there is no legally binding promise. If there is such a promise, then the plaintiff must resort to the law of contract in order to enforce it, it being the function of equity to supplement the law not to replace it. The second distinguishing feature is that what attracts the principle is not the promise itself but the expectation which it creates."

Whether a representation or promise has created or encouraged an expectation which if relied upon will be sufficient to give rise to an equity obviously depends upon the circumstances including the nature of the relationship between the parties and whether they contemplate that any interest to be granted or promise to be performed is to be created by a binding contract. This is illustrated by the decisions of the House of Lords in Cobbe v Yeoman's Row Management Ltd and Thorner v Major [2009] 1 WLR 776. In the former, an equitable estoppel was relied upon in a commercial context. In the latter, the claimant sought to enforce an expectation of inheritance against the estate of his father's cousin.

In Cobbe v Yeoman's Row Management Ltd the critical question was whether the conduct was such as to induce an expectation affecting legal relations which was binding and irrevocable. Having noted that it is "not enough to hope or, even to have a confident expectation, that the person who has given assurances will eventually do the proper thing", Lord Walker continued:

"[66] The point that hopes by themselves are not enough is made most clearly in cases with a commercial context, of which Attorney-General of Hong Kong ... is the most striking example. It does not appear so often in cases with more of a domestic or family flavour, from Inwards v Baker and Pascoe v Turner to Windeler v Whitehall , Gillett v Holt , Grundy v Ottey , Jennings v Rice and Lissimore v Downing . The son who built the bungalow in Inwards v Baker , the young farm manager in Gillett v Holt , the elderly country neighbour in Jennings v Rice and the female companions in the other three cases almost certainly did not take any legal advice until after the events relied on as creating the estoppel. They may not have had a clear idea of the quantum of what they expected to get .... But in those cases in which an estoppel was established, the claimant believed that the assurance on which he or she relied was binding and irrevocable.

...

[68] ... In the commercial context, the claimant is typically a business person with access to legal advice and what he or she is expecting to get is a contract. In the domestic or family context, the typical claimant is not a business person and is not receiving legal advice. What he or she wants and expects to get is an interest in immovable property, often for long-term occupation as a home. The focus is not on intangible legal rights but on the tangible property which he or she expects to get. The typical domestic claimant does not stop to reflect (until disappointed expectations lead to litigation) whether some further legal transaction (such as a grant by deed, or the making of a will or codicil) is necessary to complete the promised title."

In Thorner v Major , the party resisting the estoppel argued that the assurances were not sufficiently certain and relied upon observations of Lord Scott in Cobbe v Yeoman's Row Management Ltd . Addressing that argument, Lord Neuberger said:

"[96] Secondly, the analysis of the law in Cobbe's case ... was against the background of very different facts. The relationship between the parties in that case was entirely arm's length and commercial, and the person raising the estoppel was a highly experienced businessman. The circumstances were such that the parties could well have been expected to enter into a contract, however, although they discussed contractual terms, they had consciously chosen not to do so. They had intentionally left their legal relationship to be negotiated, and each of them knew that neither of them was legally bound. What Mr Cobbe then relied on was "an unformulated estoppel" ... asserted in order to protect [his] interest under an oral agreement for the purchase of land that lacked both the requisite statutory formalities ... and was, in a contractual sense, incomplete: para 18.

[97] In this case, by contrast, the relationship between Peter and David was familial and personal, and neither of them, least of all David, had much commercial experience. Further, at no time had either of them even started to contemplate entering into a formal contract as to the ownership of the farm after Peter's death. Nor could such a contract have been reasonably expected even to be discussed between them. On the deputy judge's findings, it was a relatively straightforward case: Peter made what were, in the circumstances, clear and unambiguous assurances that he would leave his farm to David, and David reasonably relied on, and reasonably acted to his detriment on the basis of, those assurances, over a long period."

Was there an equitable estoppel in the circumstances of this case?

By its notice of contention, AIM challenges the primary judge's holding that the assumption or expectation relied upon by DHJPM that there would be a sub-lease, was capable of giving rise to an equitable estoppel. It argues that as commercial men, the parties contemplated that any right of occupation would be the subject of a binding contract, that there was no agreement between them which was capable of giving rise to a binding contract and that there was no assumption or expectation induced or relied upon that notwithstanding that they had not reached agreement, AIM was nevertheless to be regarded between them as bound to take a sub-lease on terms which remained to be negotiated and agreed. For this reason it was said that the primary judge erred in concluding that it was sufficient that there was "a legitimate assumption in DHJPM that the parties would negotiate in good faith the exact amount of a monthly fee closely approximating $10,000 and subsequently enter a binding contract".

DHJPM pleaded an oral agreement made in May 2006 as to the licensing of part of the floor for a term of five years from July 2006 at a monthly licence fee of $10,000 plus GST. The primary judge rejected that case. Referring to Mr Hannon's evidence of his conversations with Mr Flory as to the monthly rent being "around" $10,000 a month plus GST or "plus or minus a bit", he concluded that the agreement was not "sufficiently certain to create a binding contract" and that Mr Hannon was "himself unclear as to what was agreed": [39]-[41]. An enforceable lease or agreement for lease must at least define the commencement date and duration of the lease term as well as the rent: Whitlock v Brew [1968] HCA 71; (1968) 118 CLR 445 at 454, 456, 460-461.

At the time of the conversation in mid-May 2006, the terms of the head lease had not been finalised and there had been no discussion or agreement with AIM as to whether it would bear any share of the outgoings or increases in the outgoings which may be charged under the head lease. In addition, there had been discussion as to the term of the head lease being five years, but no agreement as to when AIM's occupation would commence. Although DHJPM's primary case was that AIM induced it to adopt and hold an assumption that AIM would enter a binding sub-lease, there was subsequently uncertainty as to whether the arrangement was that AIM would occupy as a sub-tenant or as a licensee. That uncertainty is relevant to whether there was an assumption as to a binding agreement or an expectation intended to affect the legal relations between them. It manifested itself in the following ways. First, the draft agreement provided to AIM in July 2006 provided for a licence and stated that it "did not confer or give rise to any lease, tenancy or interest in land". Secondly, Mr Gillis' evidence of his understanding of the arrangement, which could only have been communicated directly or indirectly from Mr Hannon, was that it provided for a licence and that there had been no agreement as to matters such as maintenance and repair obligations or the circumstances in which the occupation might be terminated. Thirdly, DHJPM's alternative formulations of the alleged expectation before this Court include that AIM would bind itself to a "contract for possession".

The assumption or expectation it pleaded by way of estoppel was that a licensing relationship would exist between them subject to the oral agreement being reduced to writing. That formulation was directed to satisfying Brennan J's proposition (1). The primary judge found a slightly different expectation, namely "that AIM would bind itself to a sub-lease for a term of five years at a rental of approximately $10,000 per month commencing as soon as fit-out was completed": [50]. Neither of these formulations reflected the assumption made by Mr Hannon which was that at the time he signed the lease on 23 May 2006 he believed that "there was an agreement with AIM".

On appeal DHJPM put its argument so as to reflect both its pleaded case and Mr Hannon's evidence. In its oral submissions it adopted the formulation of the expectation by the primary judge and refinements of it. Those refinements involved deleting the word "approximately" and leaving the formulation as found by the primary judge but substituting the words "contract for possession" for "sub-lease". In its written submissions it described the primary judge's error as failing to conclude that AIM was estopped from denying "the existence and subsistence beyond 8 August 2006 of an agreement for lease".

Before addressing the principal question raised by AIM's notice of contention, it is convenient to deal first with the argument that AIM was estopped from denying that there was an agreement for lease as a result of the conversation on 13 May 2006. That argument was not expressly addressed by the primary judge. It must be rejected for the same reasons that a similar argument was rejected in Austotel v Franklins : at 584, 602, 620-621. It asserts an estoppel from denying that there was an existing "agreement" for sub-lease which could not constitute a binding contract because of the absence of agreement as to rent and as to the duration of the lease. In Baird Textiles Holdings Ltd v Marks & Spencer PLC at [33], [78] it was conceded that a similar argument must fail. It was not claimed that AIM was estopped from denying that there was a binding contract notwithstanding that there was not agreement as to the essential terms or that there was no formal contract: see Actionstrength Ltd v International Glass Engineering In.GI.En. SpA [2003] 2 AC 541 at [9], [11], [35], [51]; Cobbe v Yeoman's Row Management Ltd at [15].

The negotiations and discussions between Mr Hannon and Mr Florey were between experienced businessmen. They should be taken to have expected that any right of occupation, whether by way of sub-lease or licence, would have to be the subject of a binding contract and that they could not safely rely upon a promise as legally binding without taking the necessary contractual steps or at least obtaining an assurance that made clear that the promise was to be regarded as binding notwithstanding that those steps had not been taken: Waltons Stores v Maher at 403; Baird Textiles v Marks & Spencer at [92].

As at May 2006, Mr Hannon did not believe that DHJPM was unconditionally bound to grant a right of occupancy or sub-lease to AIM. He accepted that if the landlord or any of the other anchor tenants "pulled out", DHJPM would not take a head lease or be bound to grant any right of occupation to AIM. This was consistent with any agreement in so far as it was to grant a sub-lease, being conditional on DHJPM entering into the head lease. However, these and other possible outcomes were not addressed in the arrangement between DHJPM and AIM, adding to the likelihood that neither could regard the other as bound until a contract was signed.

The primary judge found that Mr Hannon himself was unclear as to what had been agreed following the conversation on 13 May 2006: [39]. Mr Hannon's evidence was that he believed that following that conversation he had a legally binding agreement for sub-lease. That belief provided a basis for an expectation that AIM would take a sub-lease. It was not, however, induced by any conduct of Mr Flory on behalf of AIM. In the conversation on 13 May 2006 he indicated that he was "going ahead with the leasing arrangements" and was "committed". These were promises but there was not in the circumstances any objective basis for concluding that there was a binding contract. Nor was there any communication by which AIM indicated that it regarded itself as bound to proceed notwithstanding that there was no agreement as to all of the relevant commercial terms of any right of occupation. In the language of Mason CJ and Wilson J in Waltons Stores v Maher (at 406), the "something more" was not present. To adopt the words of Lord Walker in Cobbe v Yeoman's Row Management Ltd (at [65]), all that AIM encouraged DHJPM to have was a "hope" or "confident expectation". Neither was sufficient to give rise to an equitable estoppel.

That this was so is reflected in the finding of the primary judge that the conversation was sufficient "to create a legitimate assumption in DHJPM that the parties would negotiate in good faith". AIM did not encourage an expectation that it had "bound" itself irrevocably to enter into a sub-lease, the terms of which remained to be negotiated and agreed.

For these reasons, the primary judge was wrong to hold that AIM induced and DHJPM adopted an expectation sufficient to give rise to an equitable estoppel.

Was it unconscionable or unjust for AIM to depart from any expectation as to its entry into a sub-lease?

This issue arises if I am wrong in my conclusion that the circumstances did not give rise to the equitable estoppel alleged. In that event, the question is whether the primary judge was correct to conclude that AIM "did not act unreasonably" in refusing to enter into the licence agreement: [66]. The primary judge addressed that question by reference to Brennan J's proposition (6) in Waltons Stores v Maher : [48], [53].

That proposition describes, albeit not exhaustively, circumstances where a departure from the assumption by the party said to be estopped would be contrary to good conscience measured according to equity's standards: see Waltons Stores v Maher at 428-429. Priestley JA's formulation of the relevant principle in Austotel v Franklins (at 606) requires for an equitable estoppel that any departure from the assumption be "unconscionable". In Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485 at 506 the terms "unjust" and "unconscionable" are used.

The time for addressing whether it would be contrary to good conscience for a defendant to depart from an expectation is the time that that party seeks to do so: Evans v Evans at [107]-[109] referring to the earlier approval by this Court in Delaforce v Simpson-Cook [2010] NSWCA 84 at [81] of the following remark of Hoffmann LJ in an unreported judgment of Walton v Walton (Court of Appeal, Civ Div, 14 April 1994, unreported) at [21]. That remark was also approved in Thorner v Major at [56]-[57] and [101]:

"... None of this reasoning applies to equitable estoppel, because it does not look forward into the future and guess what might happen. It looks backwards from the moment when the promise falls due to be performed and asks whether, in the circumstances which have actually happened, it would be unconscionable for the promise not to be kept."

At that time equity will look at all the relevant circumstances "that touch upon the conscionability (or not) of resiling from the encouragement or representation previously made, including the nature and character of the detriment, how it can be cured, its proportionality to the terms and character of the encouragement or representation and the conformity with good conscience of keeping a party to any relevant representation or promise made": per Allsop P (Giles JA agreeing) in Delaforce v Simpson-Cook at [3], [6]. Those circumstances may result in relief being refused or in relief which does not fulfil the encouraged expectation because to do so would "exceed what could be justified by the requirements of conscientious conduct and would be unjust to the estopped party" or would not take account of the impact of such relief on third parties and any hardship or injustice they would suffer: Giumelli v Giumelli at [42], [50]; Delaforce v Simpson-Cook at [60]-[67].

Here the relevant circumstances include the following. First, the expectation said to have been induced was that AIM would enter a binding sub-lease for occupation of the relevant premises. At the time that expectation is said to have been induced, it was known that AIM occupied other office space which it would have to vacate. Secondly, it was proposed that the premises be subject to a fit-out and that AIM would not occupy its part of the premises until that fit-out was completed. By mid-July 2006 it was expected that that fit-out would be completed before 7 August and that AIM would move in on that day. Subsequently, it would seem that this day was brought forward to 4 August. Thirdly, the parties must be taken to have assumed that any occupation by AIM of part of the premises as between DHJPM and the owner of the premises, Lambardi, would be lawful and that AIM could not be expected to take up occupation of the premises in the absence of a binding agreement for sub-lease. This was so because the equitable estoppel relied upon only bound AIM which did not have the benefit of any enforceable promise that DHJPM would grant it a sub-lease of part of the premises. Accordingly, there was no reason why at any time prior to the moment when the expectation fell due to be fulfilled, DHJPM could not have released AIM from any equity arising from the estoppel.

As was said in Giumelli v Giumelli at [42], a party seeking to enforce an equitable estoppel must do equity: see also S&E Promotions Pty Ltd v Tobin Bros Pty Ltd at 653; Commonwealth v Verwayen at 442. When addressing whether a departure from an encouraged expectation is unjust or unconscionable, it is relevant to consider whether the party having the benefit of the estoppel has done or is able and prepared to do what equity would require to enforce the expectation.

In the circumstances outlined above, the time that the expectation fell due to be made good was no earlier than 3 August 2006 and, at an earlier time, had been 7 August. As at 8 August when AIM communicated its intention to depart from the asserted expectation, the position was as follows. AIM had not been offered a form of sub-lease. It had been offered a form of licence which did not address subjects such as maintenance and repair, termination and surrender and responsibility for any share of increases in DHJPM's outgoings under the head lease. There had been discussion on 3 and 4 August as to the possibility of a redrafted licence agreement or a sub-lease but on a basis that AIM should bear at least some of the costs associated with the preparation of those documents. There had been no unconditional offer by DHJPM to enter into a sub-lease or any proffer of the terms upon which it was prepared to do so. Instead, Mr Gillis' letter of 7 August correctly pointed out that AIM had no "rights" in respect of its occupation of part of the premises.

The head lease required that the landlord's written consent or approval be obtained to any sub-lease. By the evening of 7 August 2006, DHJPM had obtained Lambardi's consent to AIM having a sub-lease. However, there was no written consent to that effect and it was not certain if and when that written consent would be forthcoming or whether Lambardi would first require to see the terms of the proposed sub-lease.

Accordingly, as at 8 August 2006, the time at which the alleged expectation fell due to be performed, DHJPM had not offered to enter into a form of sub-lease which addressed at a minimum the matters described above. Nor had it obtained the written consent of the landlord to a sub-lease and it was not in a position to assure that such consent would be forthcoming. By offering a form of licence, it was no longer requiring or relying upon strict adherence to the expectation upon which it had acted. In these circumstances, it was not against good conscience for AIM to depart from making good the expectation. Unlike a party to an agreement for sub-lease, it was not in a position to enforce any promise against DHJPM in the event that DHJPM sought to abandon or release the equity. For these reasons, the primary judge was correct to conclude that in the circumstances departure by AIM from the expectation was not unjust or unconscionable and that DHJPM should be refused relief.

Was DHJPM entitled to equitable compensation?

It is also not necessary to address this issue in the light of my conclusions above. I propose, however, to deal shortly with this question so that the relevant facts which bear on it are sufficiently recorded.

The amount claimed by DHJPM as equitable compensation was $303,900. That amount did not represent the detriment or loss suffered by DHJPM as a result of entering into the head lease. It was the shortfall in rent for a period of 59 months taking into account that the two offices and personal assistant space had been occupied for a short part of that period. As such it represents the loss flowing from non-fulfilment of the expectation rather than that "which flows from reliance upon the deserted assumption": Commonwealth v Verwayen at 415, 429.

The evidence indicated that the rental income received over the period of the lease was likely to have exceeded by approximately $500,000 the rent paid to Lambardi, the costs of fitting out the premises and legal and other costs incurred in entering into the lease. That analysis did not, however, take account of the additional expenses incurred by DHJPM in providing receptionist and other services to the occupants of the premises or any increases in outgoings under the head lease which were for DHJPM's account. At one point in his evidence, Mr Hannon seemed to suggest that if these additional expenses were taken into account, the shortfall over the period of the lease was about $500,000.

Mr Hannon also said that the expenses incurred in providing receptionist and other services and the increases in outgoings under the head lease totalled approximately $53,000 per month. AIM submitted that this evidence was inconsistent with his earlier evidence because if the figure of $53,000 per month was accepted, the loss over the term of the lease should have been in excess of $2 million and not $500,000 as Mr Hannon suggested. It also submitted that this evidence was inconsistent with a DHJPM budget which indicated that the monthly amount of $53,000 was a calculation of the total amount per month which had to be recovered from all occupants in order to cover the rental under the head lease, the amortised cost of the fit-out and the supply of receptionist and other services. That submission appears to be correct.

This evidence provided a basis for the primary judge to be satisfied that there had been a shortfall of revenue over expenses but did not enable it to be quantified. If Mr Hannon's evidence were accepted, that shortfall was no more than $500,000. The evidence did not reveal whether that amount exceeded the shortfall which Mr Hannon calculated at the outset DHJPM would suffer if only the four anchor tenants took office space in the leased premises. His evidence was that in that event, there would have been about four or five spare offices and that if they remained vacant the shortfall would have been "hundreds of thousands" of dollars.

Mr Hannon's evidence also was that there were "intangible benefits" which accrued to Chifley Investor Group as a result of its occupying part of the premises. He was a director of DHJPM and of Chifley Investor Group and described the latter as a company which he "represented" and as one of "my" companies. His evidence was that he took those "intangible benefits" into account when deciding whether DHJPM should proceed with the head lease. He agreed that he was prepared to take the risk of a shortfall of "hundreds of thousands" of dollars to DHJPM because of the benefits in the form of synergies which would be available to Chifley Investor Group and which would make the venture worthwhile.

Finally, Mr Hannon agreed that each of the companies taking space in the premises (including Chifley Investor Group) had made "considerable amounts of money working through these synergies". That evidence justified the primary judge's finding that "overall the venture proved profitable" to DHJPM provided that the value of those benefits to Chifley Investor Group was able to be taken into account: [68].

There does not appear to be any governing principle that requires that the relief to be granted is that which is the minimum necessary to do justice: Giumelli v Giumelli at [40]-[48]; Delaforce v Simpson-Cook at [3], [6], [59]. Furthermore, to the extent that there is a prima facie entitlement to relief on the basis that the adopted expectation is made good, that entitlement must be weighed against any injustice to the estopped party in doing so and any detriment suffered by the party acting upon the induced expectation: Plimmer v Mayor of Wellington at 714; Giumelli v Giumelli at [42].

In some circumstances it may not be unconscionable to allow the estopped party to depart from the expectation without making it good. A relevant but not determinative consideration is that the claimed remedy bears no relationship to the detriment suffered: Delaforce v Simpson-Cook at [4], [62], [67], [68]. Sledmore v Dalby (1996) 72 P&CR 196 (esp. at 204, 209) was a case where relief was refused because of benefits received before the estopped party sought to repudiate the expectation.

When addressing from DHJPM's perspective the benefits or advantages which could be taken into account when deciding whether to enter into the lease, Mr Hannon weighed in the balance the value of business opportunities expected to be generated to Chifley Investor Group from its occupation of part of the premises. The evidence did not explore the nature of the business and other relationships between DHJPM and Chifley Investor Group beyond the existence of that arrangement and the fact that each was effectively 'controlled' by Mr Hannon. That being the position, the primary judge was justified in concluding that it was in the interests of DHJPM that such opportunities would be generated and for that reason that their value should be weighed in the balance when assessing any question of detriment. Having done so, he was also justified in concluding on the evidence that overall and taking account of that benefit the venture had been "profitable" to DHJPM: [68].

In circumstances where there was no detriment and there was some injustice to the estopped party in having to pay the shortfall in rent without the benefit of occupying the premises, the primary judge did not err in holding that DHJPM was not entitled to relief by way of equitable compensation.

Order

The appeal should be dismissed with costs.

Since drafting my reasons I have had the opportunity to read Handley AJA's reasons for judgment. Handley AJA has dealt with the claim on the basis that it could only succeed as a proprietary estoppel. I agree with his reasons for rejecting the appellant's claim formulated as one to a proprietary estoppel.

HANDLEY AJA: In this appeal I have had the benefit of reading the reasons for judgment of Meagher JA in draft. He has set out the facts and the history of the proceedings. This enables me to focus on the central issues. I agree with the orders he proposes but will express my own reasons for supporting them.

The appellant relied on an equitable, that is a proprietary, estoppel, particularly an estoppel by encouragement. Its arguments strayed at times into promissory estoppel but, as this Court unanimously held in Saleh v Romanous [2010] NSWCA 274 (special leave refused [2011] HCATrans 101), a promissory estoppel must be negative in substance. It is an equitable restraint on the enforcement of the promisor's rights.

A promissory estoppel would not assist the appellant which must assert positive rights against the respondent. Its claim for equitable compensation depends on proof, through an estoppel by encouragement, of its right to enforce an expectation that the respondent would enter into a sublease for a term of five years.

The estoppel by encouragement is said to have arisen from conversations between the chief executives of the two companies, principally on 13 May 2006. The encouragement was not evidenced or supported by any written communications. The respondent did not go into possession or do other acts on, or in relation to the premises which evidenced the encouragement, or created or supported the appellant's expectation.

The critical conversation occurred on 13 May 2006. It was not suggested that the respondent was bound by a proprietary estoppel before that date. Meagher JA sets out the important part of the conversation at [13]. When the appellant committed itself to the head lease on 23 May Mr Hannon for the appellant believed there "was an agreement" between the two companies: see above at [14].

Mr Flory told Mr Hannon that the respondent was "going ahead", and was "committed". However there was no oral contract, let alone one evidenced in writing which satisfied s 54A of the Conveyancing Act. The chief executives "agreed on" a sublease of the area for five years at a rent of $10,000 a month plus GST, and left it at that.

The other terms to be expected in such a sublease were not mentioned, let alone agreed. They would have to be settled by negotiation in due course.

This "transaction" fell outside the established boundaries of a proprietary estoppel by encouragement. What the respondent did was to create or encourage an expectation that an executory contract would come into existence on terms to be negotiated. The case is unlike Waltons Stores (Interstate) Pty Ltd v Maher [1988] HCA 7, (1988) 164 CLR 387 ( Waltons Stores ) where the terms had been agreed and reduced to writing awaiting exchange.

The classic statement of principle is that of Lord Kingsdown in Ramsden v Dyson (1866) LR 1 HL 129, 170:

"If a man, under a verbal agreement with a landlord for a certain interest in land, or, what amounts to the same thing, under an expectation, created or encouraged by the landlord, that he shall have a certain interest, takes possession of such land, with the consent of the landlord, and upon the faith of such promise or expectation, with the knowledge of the landlord, and without objection by him, lays out money upon the land, a Court of equity will compel the landlord to give effect to such promise or expectation."

Whilst Lord Kingsdown was in the minority, Lord Cranworth LC, who delivered the principal speech for the majority, acknowledged (at 142) the principle, but held that it did not apply. Lord Kingsdown's statement was applied in Plimmer v The Mayor of Wellington (1884) 9 App Cas 699 ( Plimmer ), 710-711 where Sir Arthur Hobhouse said:

"... Ramsden v Dyson was strongly pressed in argument ... But there was no disagreement among the judges on the principles of law laid down in that case. Only Vice-Chancellor Stuart first, and after him Lord Kingsdown, drew from the evidence inferences of fact at variance with those drawn by the majority of the House, and so brought out a different legal conclusion."

Lord Kingsdown's statement was approved in Taylor's Fashions Ltd v Liverpool Victoria Trustees Co Ltd [1982] QB 133, 151 ( Taylor's Fashions ); and in Attorney-General of Hong Kong v Humphreys Estate (Queen's Garden) Ltd [1987] AC 114 ( the Hong Kong case ) where Lord Templeman said (at 121) before citing Lord Kingsdown's statement:

"The authorities expound and illustrate the principle upon which a litigant who is led to believe that he will be granted an interest in land and who acts to his detriment in that belief is enabled to obtain that interest."

Lord Kingsdown's statement has since been approved in Waltons Stores at 404, 419, 420, 424, 459; and Cobbe v Yeoman's Row Management Ltd [2008] UKHL 55, [2008] 1 WLR 1752 ( Cobbe ), 1763-4, 1767, 1777. Estoppels by encouragement are no longer confined to cases where the party with the expectation has built on the land of the party who encouraged it. Other forms of detrimental reliance can support the estoppel.

Estoppels by encouragement have been applied in a wide variety of factual situations. Most fall into one of two categories; those where the parties are in a domestic or family relationship, and those where the relationship is commercial. Parties in the latter category typically contemplate a legal relationship and frequently intend to enter into a contract or otherwise formalise their expectation.

In domestic or family cases, the parties are not at arm's length and usually have no intention of entering into a contract or formalising their expectation. The party encouraged will frequently expect to receive a gift, inter vivos or testamentary.

Estoppels by encouragement have a long pedigree and the cases have considered the problems created when parties in a commercial context act to their detriment before negotiations have been successfully concluded. There are only two such cases, to my knowledge, where an estoppel by encouragement has been held to create an executory contract: Waltons Stores and Metropolitan Transit Authority (Vic) v Waverley Transit Pty Ltd [1991] 1 VR 207. As will be apparent from these reasons, I respectfully differ from the finding of the Appeal Division in the latter case that Waltons Stores could support by estoppel an executory contract for the supply of services where the terms had not been agreed.

In some commercial cases the court has enforced an existing proprietary right. In Taylor's Fashions one of the plaintiffs enforced its option of renewal against a successor in title of the original landlord.

In other commercial cases the court has enforced a new proprietary right. In Plimmer the plaintiff who had been encouraged to erect a wharf and warehouse on Crown land in Wellington harbour was held entitled to a perpetual, irrevocable licence equivalent to the fee simple. In Crabb v Arun DC [1976] Ch 179 ( Crabb ) a land owner, in the belief encouraged by the Council that it would grant him a right of way, sold the land over which he had enjoyed access, and was held entitled to the right of way.

Where the court has enforced a new proprietary right it has not done so by making an executory contract for the parties. In some cases, such as Plimmer and Crabb , the owner was not entitled to compensation as a condition of the grant of relief. Where the beneficiary had erected permanent improvements on the land of another and expected to pay for the easement, as in Duke of Beaufort v Patrick (1853) 17 Beavan 60 [51 ER 954] and Laird v Birkenhead Rail Co [1859] Johns 500 [70 ER 519], the court had to determine the payments to be made by way of compensation.

The estoppel has been rejected, despite a detrimental change of position, where this occurred during negotiations which proved unsuccessful. In East India Co v Vincent (1740) 2 Atk 83 [26 ER 451], Lord Hardwicke LC referred to cases on proprietary estoppel by standing by and continued (at 83, [451]):

"But these cases have never been extended so far as where parties have treated upon an agreement for building, and the owner has not come to an absolute agreement; there, if persons will build notwithstanding, they must take the consequence, and this is not such an acquiescence on the part of the owner, as will prevent him from insisting on his right."

The question arose in Ramsden v Dyson . A yearly tenant, who constructed a house on the appellant's land, claimed to be entitled to a long, renewable, lease. Lord Cranworth LC with the approval of Lord Brougham (at 162) and Lord Westbury (at 174) said (at 151-2):

"What can be the meaning of a person having a right to call for a lease at a rent to be agreed upon between him and his lessor? Suppose they do not agree ... The mere circumstance that the amount of rent remained to be settled by agreement between the lessor and the lessee excludes the notion of there being a right to compel the grant of a lease ... If there was nothing else, this absolute uncertainty as to rent seems to make it impossible that [the lessor] could have supposed his tenants at will were building in the belief that they had any right to compel their landlord to grant them a lease.

But another important observation ... is, that the supposed right is one in which there is no reciprocity. It is not alleged, indeed it is denied, that there was any right in the landlord to compel his tenant from year to year to accept a lease."

Lord Wensleydale said (at 166):

"... it would be very difficult ... to convert that practice into an obligatory custom or usage, especially in those cases in which the alleged custom itself contemplates a future important matter, which was left open to future agreement, namely, the amount of rent to be paid and other matters to be fixed under the lease to be granted."

In the Hong Kong case the parties entered into an agreement in principle in 1981, subject to contract, for an exchange of properties with a substantial payment to the Crown. In 1981 and 1982, without waiting to formalise their contract, the Crown and the company took possession of the properties each was to acquire, and the company paid the agreed difference between the valuations. By February 1984 consensus had been reached on the terms and Lord Templeman said (at 120) that the Court could have enforced specific performance if "the agreement had become binding by estoppel."

The Crown's changes of position in 1981 and 1982 occurred while the parties "continued to negotiate" (at 125). There was no further change of position after consensus was reached on the terms of the bargain. The Privy Council held that the company had been entitled to withdraw from the transaction in April 1984. Lord Templeman said at 127:

"In the present case the Government acted in the hope that a voluntary agreement in principle expressly made 'subject to contract' and therefore not binding would eventually be followed by the achievement of legal relationships in the form of grants and transfers of property."

In Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466 Priestley JA, who gave the principal judgment, found that there was an equitable estoppel, but this was unnecessary because the tenants had an equitable lease and the contractual purchaser was on notice.

Austotel Pty Ltd v Franklins Self-Serve Pty Ltd (1989) 16 NSWLR 582 ( Austotel ) is of considerable relevance. In August 1987 Franklins wrote to Austotel setting out their five page preliminary agreement, subject to contract, for a long term lease. Negotiations continued without reaching a consensus yet from April 1988 onwards (at 595-6) Franklins incurred significant liabilities to third parties and Austotel incorporated some of Franklins' hardware in the slab for the main floor. In August 1988 Austotel informed Franklins that it had decided to lease the premises to another party (at 599). The trial judge enforced a proprietary estoppel, but this Court, by majority, allowed the defendant's appeal.

Kirby P based his decision "above all" on the absence of any agreement on the rent payable for additional space that had been added during the negotiations (at 586). Rogers AJA held (at 620) that "the plaintiff was not entitled to believe that a lease would be entered into until the additional rental was agreed or otherwise determined."

Kirby P said (at 587):

"... it strikes me as astonishing, in a multi-million dollar transaction designed to last for many years which substantial and well-advised parties have held back from completing, that a court should step in and determine so crucial and disputable an element in the parties' commercial relationship as the rental to be paid."

Rogers AJA said (at 621):

"It is necessary to ... keep in mind the proper reluctance of courts to complete an agreement for commercial parties in circumstances where at least one of them has deliberately held back from so doing."

The majority applied the principle that Mance LJ later invoked in Baird Textiles Holdings Ltd v Marks & Spencer PLC [2001] EWCA Civ 274, [2002] 1 All ER (Comm) 737, 765 [94] where he said:

"... the law should not be ready ... to fetter business relationships with its own view of what might represent appropriate business conduct, when parties have not chosen, or have not been willing or able, to do so in any identifiable legal terms themselves."

Priestley JA, in dissent, held that Austotel was bound by estoppel to lease the supermarket to Franklins. He held (at 604) and Kirby P agreed (at 585) that Waltons Stores enabled the Court to enforce an expectation that a contract the "content of which was known" will come into existence.

In Waltons Stores , four judges (Mason CJ and Wilson J at 407, Brennan J at 428-429 - although this may be a finding of a proprietary estoppel - and Deane J at 450-451) found an expanded promissory estoppel that conferred positive rights; four found an orthodox proprietary estoppel (Mason CJ and Wilson J at 407-408, Brennan J at 428-429 - although this may be a finding of a promissory estoppel - and Deane J at 453); and three found an orthodox estoppel by representation based on silence (Brennan J at 427, Deane J at 443-445, and Gaudron J at 461-464).

In Giumelli v Giumelli [1999] HCA 10, (1999) 196 CLR 101, 120, 125 the High Court rejected dicta of Mason CJ, Brennan and Deane JJ in Waltons Stores (at 419, 423 and 427), and in The Commonwealth v Verwayen [1990] HCA 39, (1990) 170 CLR 394 (at 403, 412-413, 429, 441-443. Those dicta are not directly relevant here.

In these circumstances Waltons Stores is not binding authority for the recognition via proprietary estoppel of an executory contract where the content of that contract is not known.

The Full Federal Court has twice considered Waltons Stores . Neither case supports a proprietary estoppel in a commercial case where the content of the transaction is not known. In S&E Promotions Pty Ltd v Tobin Brothers Pty Ltd (1994) 122 ALR 637 the Court enforced an orthodox proprietary estoppel (at 651-2, 654-6), and an orthodox estoppel by representation based on silence (at 656).

In Mobil Oil Australia Ltd v Wellcome International Pty Ltd (1998) 81 FCR 475 the estoppels were rejected (at 484, 525). The Court directed itself (at 513):

"In order to determine the appeal on the estoppel issue, it is necessary to consider whether the statements ... were sufficiently unqualified, firm and specific so as to induce an assumption that 'a particular legal relationship' would be established or an 'interest' would be granted."

The Court held (at 515):

"The essential elements and details of the legal relationship are lacking as are any specific details relating to the duration or terms of any extension or renewal or of the period over which the franchisees would qualify ... we consider that [the Trial Judge] erred in law in concluding that the statements or conduct of Mobil were sufficiently specific and unqualified to attract the application of equitable estoppel ...".

The position in England since Cobbe is clear. The parties had entered into an informal profit sharing arrangement for a property development. Both knew that their arrangement was incomplete and not legally binding. The plaintiff performed his part by obtaining planning permission, but the defendant then repudiated the arrangement. The lower courts held that the defendant's conduct was unconscionable and enforced a charge over the land for the plaintiff's share of the expected profit. The House of Lords rejected the estoppel.

Lord Scott, who gave the principal speech, accepted the finding of unconscionable conduct, but held that this, without more, did not entitle the plaintiff to enforce a proprietary estoppel. He said (at 1756) that the defendant's promise:

"... being no more than an oral promise to enter into a written contract ... part of an incompletely negotiated agreement, [was] not contractually enforceable."

He asked rhetorically (at 1761):

"... what is the fact or facts, or the matter of mixed fact and law, that ... the defendant ... is said to be barred from asserting? And what is the proprietary right claimed ... that the facts and matters it is barred from asserting might otherwise defeat?"

He concluded (at 1772):

"Mr Cobbe's expectation of an enforceable contract ... was inherently speculative and contingent ... and ... [he] never expected to acquire an interest in the property otherwise than under a legally enforceable contract."

Lord Walker, who delivered a separate, concurring speech, said (at 1781):

"It is not enough to hope, or even to have a confident expectation, that the person who has given assurances will eventually do the proper thing ... hopes by themselves are not enough ... in cases with a commercial context."

He added (at 1785-6) that none of the commercial cases:

"... cast doubt on the general principle that the court should be very slow to introduce uncertainty into commercial transactions by over-ready use of equitable concepts ... That applies to commercial negotiations whether or not they are expressly stated to be subject to contract."

Lord Walker also said (at 1787) that "Mr Cobbe was expecting to get a contract". That expectation was not enough to create an estoppel by encouragement.

In the present case, the appellant made no attempt to complete and formalise the agreement in principle before committing itself to the head lease on 23 May 2006. It expected to be able to negotiate a contract with the respondent but its content was not known.

On or about 19 July 2006, the solicitors for the appellant sent the respondent a draft licence agreement, without a copy of the head lease. The appellant was attempting to formalise the agreement but at the same time was asserting an entitlement to renegotiate its legal basis. It knew that the respondent had no security of tenure, and was expecting to move into the premises on 7 August: Meagher JA [19]. The respondent's solicitors did not obtain a copy of the head lease until 2 August: Meagher JA [20]. Negotiations between the solicitors followed.

On 7 August 2006, the respondent's solicitors stated in a fax to the appellant's solicitors that their client was "currently negotiating" for the lawful occupation of the premises, a statement the appellant's solicitors promptly accepted: Meagher JA [24]-[25].

The proffer of the draft licence agreement on 19 July 2006 demonstrated that the appellant did not then have, and was not relying on, an expectation that the respondent was bound to enter into a sublease.

The proffer of the draft licence agreement destroyed any expectation the respondent had of receiving a sublease, and in any event the respondent had no clear expectation about its terms.

The estoppel relied on was one-sided. If the respondent had gone into possession on or shortly after 8 August 2006 with no clear expectation it would have been a s 127 Conveyancing Act tenant, liable to eviction on one month's notice and in an extremely vulnerable negotiating position.

As Lord Cranworth LC held in Ramsden v Dyson (at 151-2) lack of reciprocity tends to negative any estoppel by encouragement.

The appellant's expectation that negotiations with the respondent would be successful and a contract would come into existence could not support a proprietary estoppel.

The orders proposed by Meagher JA should be made.

**********

Amendments

29 October 2013 - [52] line 7, delete Silovi v Barbaro and insert Austotel v Franklins[76] line 5, delete Lambardi and insert DHJPM

Amended paragraphs: [52] and [76]

Decision last updated: 29 October 2013

Medium Neutral Citation:	DHJPM Pty Limited v Blackthorn Resources Limited (formerly called AIM Resources Limited) [2011] NSWCA 348
Hearing dates:	15 August 2011
Decision date:	30 November 2011
Before:	Macfarlan JA at [1] Meagher JA at [2] Handley AJA at [92]
Decision:	Appeal dismissed with costs. [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
Catchwords:	ESTOPPEL - equitable estoppel - lease of commercial office premises taken by appellant on basis that premises would be occupied as to part by respondent - subsequent refusal by respondent to occupy that part - claim to enforce an equitable estoppel - issues on appeal - findings of fact challenged - circumstances in which equitable proprietary or promissory estoppels might arise - whether equitable proprietary estoppel in circumstances of this case - requirement that expectation be intended and understood to affect legal relations - whether unjust or unconscionable for respondent to depart from expectation that it would enter into a sub-lease - whether appellant entitled to relief by way of equitable compensation.
Legislation Cited:	Trade Practices Act 1974 (Cth) Real Property Act 1900
Cases Cited:	Actionstrength Ltd v International Glass Engineering In.Gl.En. SpA [2003] 2 AC 541 Amalgamated Property Co v Texas Bank [1982] QB 84 Attorney-General of Hong Kong v Humphreys Estate (Queen's Gardens) Ltd [1987] 1 AC 114 Austotel Pty Ltd v Franklins Self-Serve Pty Ltd (1989) 16 NSWLR 582 Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485 Baird Textiles Holdings Ltd v Marks & Spencer PLC [2002] 1 All ER (Comm) 737 Cobbe v Yeoman's Row Management Ltd [2008] 1 WLR 1752; 4 All ER 713 Commonwealth v Verwayen [1990] HCA 39; (1990) 170 CLR 394 Crabb v Arun DC [1976] Ch 179 Delaforce v Simpson-Cook [2010] NSWCA 84 Duke of Beaufort v Patrick (1853) 17 Beavan 60 [51 ER 954] East India Co v Vincent (1740) 2 Atk 83 [26 ER 451] Evans v Evans [2011] NSWCA 92 Flinn v Flinn [1999] 3 VR 712 Gillet v Holt [2001] Ch 210 Giumelli v Giumelli [1999] HCA 10; (1999) 196 CLR 101 Laird v Birkenhead Rail Co [1859] Johns 500 [70 ER 519] Legione v Hateley [1983] HCA 11; (1983) 152 CLR 406 Metropolitan Transit Authority (Vic) v Waverley Transit Pty Ltd [1991] 1 VR 207 Mobil Oil Australia Ltd v Wellcome International Pty Ltd (1998) 81 FCR 475 Plimmer v Mayor of Wellington (1884) 9 App Cas 699 Ramsden v Dyson (1866) LR 1 HL 129 Riches v Hogben [1985] 2 Qd R 292 Selah v Romanous [2010] NSWCA 274 Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466 S & E Promotions Pty Ltd v Tobin Bros Pty Ltd (1994) 122 ALR 637 Sledmore v Dalby (1996) 72 P&CR 196 Taylor's Fashions Ltd v Liverpool Victoria Trustees Co Ltd [1982] QB 133 Thorner v Major [2009] 1 WLR 776 Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387 Walton v Walton (Court of Appeal, Civ Div, 14 April 1994, unreported) Whitlock v Brew [1968] HCA 71; (1968) 118 CLR 445
Category:	Principal judgment
Parties:	DHJPM Pty Limited (Appellant) Blackthorn Resources Limited (formerly called AIM Resources Limited) (Respondent)
Representation:	Counsel M R Speakman SC; N E Chen (Appellant) J C Giles (Respondent) Solicitors Gillis Delaney Lawyers (Appellant) Minter Ellison (Respondent)
File Number(s):	CA 2010/151645
Decision under appeal	Citation: DHJPM Pty Limited v AIM Resources Limited Date of Decision: 2010-06-08 00:00:00 Before: Curtis DCJ File Number(s): DC 4050 of 2008