Redder than Red Tomato Co P/L v AB & SM Rawlings No. Scgrg-98-863 Judgment No. S30

THE REDDER THAN RED TOMATO COMPANY PTY LTD
V AB & SM RAWLINGS PTY LTD

[1999] SASC 30

JUDGE BURLEY. In this action the plaintiff seeks a declaration that a lease exist between it and the defendant in respect of portion of the land at Lot 203 California Road, Willunga, of which the defendant is the registered proprietor. Lot 203 is the land comprised in Certificate of Title Register Book Volume 4095 Folio 629 (the Willunga property). In the alternative the plaintiff seeks a declaration that the defendant is estopped from denying the existence of the lease.
The plaintiff further seeks orders that the defendant prepare and provide to the plaintiff a lease in registrable form and that injunctive relief be granted restraining the defendant from dealing with the land contrary to the plaintiff’s interest in the Willunga property.
In 1996 the directors of the plaintiff negotiated with Mr Neville Rawlings, a director of the defendant, for the construction of a greenhouse and propagation facility on the land for the purposes of growing tomatoes hydroponically. Construction of the greenhouse commenced as early as May 1996 and it was completed in about November 1996. The plaintiff thereupon proceeded to grow tomatoes hydroponically with a view to selling the produce for profit.
By early November 1997 no formal lease had been executed by the parties. By letter dated 3 November 1997, solicitors on behalf of the defendant demanded that the plaintiff either vacate the premises by 31 December 1997 or enter into a lease on terms proposed by the defendant. The plaintiff contended that a lease agreement had already been entered into and that it was neither obliged to enter into a lease as proposed by the defendant nor was it obliged to quit the land.
A number of factual and legal issues arise from the pleadings, to which I now turn. Paragraphs 1 to 5 of the further amended statement of claim (the statement of claim) have been admitted in the defence and they are as follows:-
“1..... The Plaintiff, The Redder Than Red Tomato Company Pty Ltd (Redder Than Red) is:
1.1... a company duly incorporated pursuant to the Corporations Law on 1 May 1996 for the purpose of carrying on business as a commercial grower and supplier of quality hydroponic tomatoes to interstate and local markets;
1.2... comprised of the following directors - Michael Dzamko (Dzamko), Alex Laughton (Laughton), and John Denton (Denton).
1.3... had as one of its directors until his death on 22 April 1998 - Peter Brown (Brown).
2...... The Defendant, AB & SM Rawlings Pty Ltd (AB & SM Rawlings) is a company duly incorporated pursuant to the Corporations Law and is the registered proprietor of land situated at Lot 203, California Road, Willunga, being the whole of the land comprised in Certificate of Title Register Book Volume 4095 Folio 629.
3...... Rawhard Trading Pty Ltd (Rawhard) is a company duly incorporated pursuant to the Corporations Law and carrying on business as a supplier of hydroponic accessories.
4...... At all material times Brown, Dzamko, Laughton and Denton acted with the authority of and for and on behalf of Redder Than Red and acted prior to the incorporation of Redder Than Red as disclosed agents.
5...... At all material times Neville Rawlings (Rawlings) was a director of and acted with the authority of and for and on behalf of both AB & SM Rawlings and Rawhard.”
Paragraph 6 of the statement of claim is as follows:-
“6..... At all material times Marc Harding (Harding):
6.1... was a director of and acted with the authority of and for and on behalf of Rawhard; and
6.2... acted with the authority of and for and on behalf of AB & SM Rawlings.”
Paragraph 6.1 of the statement of claim is admitted in the defence and paragraph 6.2 is denied.
Paragraph 7 of the statement of claim is as follows:-
“7..... In the course of oral discussions between Dzamko, Brown and Harding from in or about January 1996 to May 1996 and at various times and places that Redder Than Red is now unable to better particularise, Harding orally represented to Dzamko and Brown that, inter alia:
7.1... Rawhard could supply a greenhouse, together with heating and fertigation system suitable for growing hydroponic tomatoes (‘the greenhouse’).”
The defendant disputed the materiality of this paragraph and did not plead to it.
Paragraph 8 of the statement of claim is as follows:-
“8..... In or about April 1996 Harding orally represented to Dzamko, Brown and Denton that:
8.1... A site could be made available at Lot 203, California Road, Willunga on land owned by AB & SM Rawlings on which to situate the greenhouse (the greenhouse site);
8.2... it would be an advantage for the greenhouse to be located at the greenhouse site as Harding was currently operating the Rawhard business from this property and
8.2.1......... he was living on the property and therefore was readily available to provide project management and expertise;
8.2.2......... Rawhard employed a nutrient expert, Peter Schembri, who operated from the property and he would be available to assist Redder Than Red;
8.2.3......... Rawhard made up all of its nutrients on the property and nutrients would therefore be easily accessible.”
In its defence the defendant has explicitly admitted paragraph 8.2 and all of its sub-paragraphs. The defendant has not disputed the allegation in paragraph 8.1 of the statement of claim. The defendant has pleaded in addition (paragraphs 5.1 to 5.8 of the defence) that Harding said that he believed that the defendant would negotiate a long lease, that it was necessary for Rawlings to be involved as he (Harding) did not have the necessary authority, that he believed that a lease of five years with a right of renewal for a further five years would be contemplated by the defendant, that he considered that the lease to be negotiated would address the issue of access by the plaintiff to amenities on the land, that he believed that favourable consideration would be given by the defendant to the leasing of further land to accommodate more greenhouses, that he believed that the defendant would be flexible as to the commencement date for payment of rent but that no concession would be given after the planting of any crop in the greenhouse, that he understood that the defendant would require a rental of $10,000 per annum per 1500 square metres of land leased and that he was proceeding on the assumption that the plaintiff would require 1500 square metres on which to site the greenhouse.
Paragraph 8A of the statement of claim alleges that a meeting took place at the Willunga property on 26 April 1996. Present were Dzamko, Brown and Denton on behalf of the plaintiff, Neville Rawlings for the defendant and Rawhard, Harding for Rawhard, and Mr Carl Hall for a company called Hortinova Greenhouses Pty Ltd. The defendant has admitted that such a meeting took place.
In paragraph 8A of the statement of claim, the plaintiff alleges that a number of representations were made by Rawlings at that meeting. The following is a summary:
8A.1          That the defendant would lease the greenhouse site and the site of the propagation facility for the sum of $10,000 per annum. The only qualification made by the defendant (paragraph 5A.1 of the defence) was that the propagation facility was included in the rental provided that that facility could be used by the plaintiff and the defendant jointly.
8A.2          That the lease would be for a period of 10 years. The defendant denied that that was said at the meeting on 26 April 1996 but admitted that at an earlier meeting leases of 3+ 3 years, 4+ 4 years and 5+ 5 years duration were agreeable to the defendant.
8A.3          That ‘Dzamko, Brown and Denton could have access to sheds for heating, fertigation and coolroom and toilets on the Willunga property together with tractors and trucks’. The defendant denied (paragraph 5A.3 of the defence) that this representation was made but said that at an earlier meeting Rawlings advised that he saw no problem in the housing of a heater in the storage sheds and the use of toilets on the farm on a temporary basis.
8A.4          That an option would be given to lease a further site adjacent to the greenhouse site for another greenhouse. The defendant denied that that representation was made but said that at an earlier meeting Rawlings had said that he would require $10,000 per annum for each 1500 square metres of glasshouse space leased.
8A.5          That Dzamko, Brown and Denton could use Rawhard’s employees in the glasshouse. The defendant denied this allegation.
8A.6          That rental would not be payable until Dzamko, Brown and Denton started making money from tomato crops. The defendant denied that this was said and said that at an earlier meeting Rawlings had said that he would not require rental until the first planting.
By paragraph 9 of the statement of claim the plaintiff alleges that in reliance upon the representations referred to in paragraph 8A, Dzamko, Brown and Denton and/or the plaintiff did a number of acts. The defendant admitted that the acts referred to in paragraph 9 were performed and it was implicitly denied that the acts were performed in reliance upon the representations. However, it was asserted that, to the extent that the defendant has asserted that some representations were made at the meeting on 26 April 1996 and at an earlier meeting, the defendant did not know and could not admit that the acts were performed as a result of those representations.
The acts referred to in paragraph 9 were the incorporation of the plaintiff company, the obtaining of investors, the entry into an agreement with Rawhard in late April or early May 1996 for the design and construction of the greenhouse and the heating and fertigation system, the construction of the greenhouse and the heating and fertigation systems, the cultivation of tomatoes hydroponically in the greenhouse, and the payment of the sum of $195,000 to Rawhard for the construction of the greenhouse and the associated infrastructure.
Paragraph 10 of the statement of claim deals with meetings of the plaintiff company between June 1996 and January 1997 when reference was made to the fact that the plaintiff was awaiting a copy of a lease from either Harding or Rawlings. The defendant pleaded that it did not know and could not admit what took place at those meetings but said that at the meeting on 30 October 1996 Harding repeated that only Rawlings had authority to bind the defendant to specific terms of a lease.
Paragraph 11 of the statement of claim refers to a meeting in a land agent’s office on 4 November 1996 at which Brown, Rawlings and Harding were present, in addition to the land agent, Mr Manuel Paul. The purpose of the meeting was to discuss the preparation of a written lease. The defendant has admitted that the meeting took place and that Mr Paul was instructed by Rawlings on behalf of the defendant company. By paragraph 11.2 of the statement of claim the plaintiff alleges that a formal lease had been requested by the plaintiff and promised by the defendant on a number of occasions prior to 4 November 1996, particularly because one investor insisted upon its execution before advancing further money. The defendant denied that the plaintiff had prior to 4 November 1996 requested the written lease and stated that it was only the defendant who had commented from time to time that the parties should proceed to the negotiation of a formal lease.
Paragraph 12 of the statement of claim alleges that the plaintiff was provided with a copy of a document “being a written agreement to lease premises prepared by Century 21 Eden Real Estate” and paragraph 13 sets out the terms of the agreement to lease. It is apparent from the way in which the plaintiff conducted its case at the trial, that the plaintiff asserts that this document constitutes part of an equitable lease between the parties notwithstanding that its terms are incomplete and it is unexecuted. By paragraph 9 of the defence, the defendant denied that the document constituted a written lease between the parties and stated that it was a draft only containing some of the suggested terms and that it was accompanied by an invitation to the plaintiff to return the document with comments upon the proposed terms on the basis that that constituted an invitation to treat. The defendant also pleaded that the document was not returned and negotiations did not proceed further.
In relation to paragraph 9 of the defence the plaintiff has pleaded in paragraph 1 of its reply that it denied that the document was only a draft and it is asserted that the plaintiff by its conduct, as set out in paragraph 15.3 of the statement of claim, accepted the essential terms of the lease. By pleading acceptance, it is at least implied that the plaintiff asserts that the defendant forwarded the incomplete document for acceptance by the plaintiff, i.e. it was an offer to lease and not an invitation to treat.
By paragraph 14 of the statement of claim the plaintiff alleges that as from 12 November 1996 the plaintiff occupied the greenhouse site on “the terms recorded in the agreement to lease and the lease representations”. The defendant denies this assertion. The plaintiff says in a number of sub-paragraphs that it had been previously agreed that the lease payments would not begin until the business to be operated from the greenhouse began making money from the cultivation of tomatoes hydroponically. This was denied by the defendant.
By paragraphs 14.2 to 14.6 of the statement of claim the plaintiff alleged that it made a number of payments for rent, that it effected an appropriate policy of insurance and that it paid for a number of utility charges. These allegations were admitted by the defendant.
In paragraph 10 of its defence, the defendant has pleaded further to paragraph 14 of the statement of claim by denying that the occupation of the land by the plaintiff was pursuant to the terms of the alleged lease agreement, by asserting that it permitted occupation in expectation of negotiations for the lease continuing, and by asserting that there existed only a monthly tenancy which was terminated by notice given on 18 August 1998.
In response to paragraph 10 of the defence, the plaintiff says in its reply (paragraphs 2, 3 and 4) that it had occupied the property since May 1996 when construction of the glasshouse commenced and that from 12 November 1996 it occupied the site in terms of the agreement to lease and that there has been part performance as pleaded in paragraph 15.3 of the statement of claim.
The plaintiff maintains that the defendant had an obligation to provide a formal written agreement but that it failed to do so. The plaintiff also asserts that the defendant is estopped from contending that there was a monthly tenancy which had been terminated, that the plaintiff had not failed to execute a lease in registrable form and that it was the defendant which had failed to provide the lease in registrable form. The plaintiff repeated its assertion that it continued in possession of the land on the terms recorded in the agreement to lease and the lease representations (as defined in the statement of claim) and had been permitted to do so by the defendant.
Paragraph 15 of the statement of claim is as follows:-
“15... As a consequence of:
15.1.......... the Lease Representations;
15.2.......... the Agreement to Lease; and
15.3.......... the part performance of Redder Than Red by:
15.3.1....... entering into and continuing in possession of the greenhouse site;
15.3.2....... complying with the terms set out in the Agreement to Lease; and
15.3.3....... the acceptance by AB & SM Rawlings of the performance by Redder Than Red of the terms of the Agreement to Lease including without limitation the payment of rental and utilities charges;
Redder Than Red have the benefit of an equitable lease over the greenhouse site on the terms and conditions set out in the agreement to lease and the lease representations.”

The defendant has denied the allegations in paragraph 15 of the statement of claim and repeated the assertions made by it in paragraphs 2 and 4 to 10 of the defence.
By paragraph 16 of the statement of claim the plaintiff pleads in the alternative that as a consequence of the matters referred to in paragraphs 15.1 to 15.3 of the statement of claim, the defendant caused the plaintiff to form the belief that a lease existed in terms set out in the agreement to lease and the lease representations. The plaintiff next says in paragraph 17 of the statement of claim that as a consequence of the assertions in paragraph 16, the plaintiff formed the belief that it would remain as tenant for a period of five years with a right of renewal for a further five years and a rental of $10,000 per annum (which was to be reviewed) and that it would retain access to the amenities and other facilities on the defendant’s property.
In paragraph 18 of the statement of claim the plaintiff repeats the assertions contained in paragraphs 9, 12, 13 and 14 and asserts that it has conducted its affairs and has otherwise acted in reliance upon the belief and expectation referred to respectively in paragraphs 16 and 17.
In response to the allegations made in paragraphs 15 to 18 of the statement of claim the defendant repeated paragraphs 2 and 4 to 10 of the defence.
Paragraph 19 of the statement of claim refers to a letter dated 3 November 1997 from the defendant’s solicitors to the plaintiff whereby the defendant demanded that the plaintiff either vacate the land or enter into a lease on the terms set out in the letter. The defendant has admitted sending the letter.
Paragraph 20 of the statement of claim refers to the plaintiff’s response by letter from its solicitors dated 18 November 1997. It is alleged that the plaintiff denied the defendant’s entitlement to give a notice to quit or to require the plaintiff to enter into a new lease. The plaintiff has pleaded that by that letter it offered to execute a lease in registrable form as set out in the agreement to lease and the lease representations. The defendant admitted receipt of the letter but denied that the plaintiff thereby offered to execute the lease in registrable form.
Paragraphs 21 to 25 of the statement of claim deal with the lodging of a caveat by the plaintiff to protect its alleged interest and to the defendant’s application to have the caveat removed. The defendant has admitted the allegations made in those paragraphs.
By paragraph 26 of the statement of claim the plaintiff alleges that it will suffer detriment if the defendant is permitted to deny the existence of a lease or to deny the truth of or act in any way contrary to the belief formed by the plaintiff as referred to in paragraph 16 of the statement of claim or to go back on the belief or expectation, the latter of which is referred to in paragraph 17 of the statement of claim. The detriment is said to arise because the plaintiff will not be able to continue to have access to the property and it will incur the cost of relocating the greenhouse.
By paragraph 27 of the statement of claim the plaintiff alleges that the plaintiff is estopped from denying the existence of the lease or, alternatively, from denying the truth of the belief and from failing to give effect to the expectation. The defendant responded to paragraph 26 of the statement of claim by paragraph 14 of the defence. The defendant alleges that the plaintiff, having been afforded access to the land, proceeded to occupy approximately 3000 square metres, that the plaintiff never responded to the defendant’s invitation to treat (as set out in paragraph 9 of the defence), that the letter of 3 November 1997 constituted an invitation by the defendant to the plaintiff to proceed to negotiations leading to the execution of a lease, that the plaintiff refused after that letter to negotiate and execute a formal lease, that a notice to quit was given after the plaintiff’s refusal and that any detriment which the plaintiff might experience arises from the matters referred to in paragraph 14 of the defence and not as a result of any actions or representations of the defendant. The defendant denies that it is estopped as alleged in paragraph 27 of the statement of claim.

The following is a summary of the reply pleaded by the plaintiff:-
5.1    That the greenhouse is 1526 square metres in area and that the propagation facility is 256 square metres in area.
5.2    That the defendant’s property had an existing shed partly constructed on it and that the plaintiff offered to relocate an additional shed belonging to it from another property and that the total area of the combined sheds was 150 square metres.
5.3    The plaintiff admits that an application to the Council for building approval refers to an area of 3000 square metres.
6.     The plaintiff denied that it had never responded to the agreement for lease and asserts that its response was to continue in possession of the land on the terms recorded in the agreement to lease and the lease representations.
7.     That the letter of the 3rd November 1997 proposed terms which were materially different from and inconsistent with the equitable lease which the plaintiff says that it by then had.
8.     The plaintiff denied that it refused to negotiate or execute a formal lease.
9.     The plaintiff alleges that a notice to quit is invalid and/or in the alternative the defendant is estopped from enforcing a notice to quit.
10.    The plaintiff denies that the detriment referred to in the statement of claim arises from the matters referred to in paragraphs 14.1 to 14.5 of the defence.
A number of disputes arise from the pleadings.
The first I propose to deal with is the question of whether or not Mr Harding was the agent of the defendant. This matter was determined at trial by an evidential ruling. Objection was taken to affidavit evidence of Mr Dzamko, which was based on the assumption that Mr Harding was the agent of the defendant. I ruled that neither the pleadings nor any of the affidavit evidence disclosed that Mr Harding was the agent of the defendant and I excluded Mr Dzamko’s evidence based on such an assumption. The course of the trial has not caused me to change that view. It follows that, whatever may have been said or represented by Mr Harding in the conversation referred to in paragraph 8 of the statement of claim (or any other paragraphs), it was not said or represented on behalf of the defendant.
I turn to the other issues which fall for determination after a review of the facts and the applicable law.
Were the representations made by Rawlings on behalf of the defendant those contended for by the plaintiff or by the defendant?
The plaintiff says that the rental of $10,000 per annum included the area for the propagation facility, whereas the defendant says that that would apply only if the plaintiff and the defendant had joint use of the propagation facility.
The plaintiff asserted that Rawlings had represented that the lease could be for ten years and Rawlings does not dispute that the lease would be for a period of five years plus the right of renewal for five years.
The plaintiff asserts that a representation was made that the plaintiff would have access to sheds for heating, fertigation and cooling, together with access to the toilets. Although the plaintiff’s pleading is not clear in this regard, I take the plaintiff to mean that the plaintiff also asserts that it was to have access to the leased area over the area that was not the subject of the lease for the purposes of bringing vehicles onto the leased area. The defendant asserts that access could be had to the shed for the purposes of installing various equipment and that the plaintiff’s employees or agents could have access to the toilets located elsewhere on the property but only on a temporary basis.
The plaintiff has referred to a representation to the effect that the plaintiff could use the employees of Rawhard at the leased site. This is denied by the defendant but it does not seem to me to be a matter which is material to the existence or otherwise of a lease.
The plaintiff has said that it was represented that rent would not be payable until the plaintiff earned profits from the growing of the tomatoes. The defendant asserts that the representation was that the rent would not be payable until the first planting of tomatoes.
There also arises from the representations the question of the area of land which was to be the subject of the lease. That has not been dealt with specifically in the pleadings but was the subject of evidence and I propose to deal with that aspect of the matter when I turn to the evidence.
The plaintiff asserts that it embarked upon the venture of growing tomatoes in reliance upon the representations which it asserts were made by Rawlings on behalf of the defendant. The defendant denies this but says that to the extent that Rawlings did make representations on behalf of the defendant it does not know and cannot admit that the actions of the plaintiff in embarking upon the venture were done in reliance upon the representations which the defendant says Rawlings made.
The remaining issues arising on the pleadings are matters of law or mixed questions of fact and law. I have to decide whether an equitable lease arose in favour of the plaintiff on the terms and conditions contended for by it after the agreement for lease was drawn up by the land agent and the plaintiff continued in occupation of the area the subject of the alleged lease. Alternatively, I have to decide whether an estoppel arose, such that the defendant is precluded from denying the existence of the lease, from asserting that only a monthly tenancy was created and that that monthly tenancy has been validly terminated.
As to the disputes between the parties as to what had been agreed up to November 1996 when the draft agreement to lease was prepared, in view of the fact that, for reasons which I will turn to shortly, I do not consider that an equitable lease as contended for by the plaintiff has ever arisen, it is not necessary to determine the disputes between the parties as to what the terms of that lease might have been. Nevertheless, those disputes must be dealt with to the extent (if any) that the discussions between the parties gave rise to a common understanding which led to the construction of the greenhouse and propagation facility on portion of the Willunga property and the use of various facilities situated upon that property. This is so because such matters are relevant to whether or not an equity has arisen by way of estoppel in favour of the plaintiff conferring upon the plaintiff the right to remain in occupation of the property.
In terms of estoppel, the disagreement between the parties as to whether the $10,000 rental was to be in respect of the greenhouse only or the greenhouse plus the propagation facility and, if so, whether or not the defendant was to have the use of the propagation facility, must be looked at in light of what actually occurred. The plaintiff occupied the site covered by the greenhouse and the propagation facility and the defendant, at least for a period of time, had the use of the propagation facility. Rent, when it was eventually paid, was paid at the rate of $10,000 per annum and it was accepted by the defendant. In those circumstances, whatever the current disputes may be between the parties as a matter of contract law, it is open to me to find (and I do so) that in conjunction with the occupation of the greenhouse and the propagation facility, the plaintiff paid monthly rental at the rate of $10,000 per annum which the defendant accepted.
As to the period during which the plaintiff was to be entitled to occupy portion of the Willunga property, I propose to set out my findings and conclusions in that regard later in these reasons when dealing with the question of estoppel.
As outlined above, the pleadings have revealed a difference between the parties in relation to the basis upon which, and the extent to which, the plaintiff was to have access to facilities on the Willunga property not specifically within the boundaries of the greenhouse and propagation facility. These included particular access to the sheds constructed near the greenhouse (referred to as the packing shed), access to toilet facilities and vehicular access to the site. Again, regard must be had to what took place after discussions between the parties in April of 1996. The greenhouse and propagation facility were constructed. Certain of the equipment, such as the fertigation system, a heater and cooling facilities, were placed within the packing shed. It is inconceivable that Mr Rawlings did not approve of at least the installation of the heating and fertigation systems as he was both a director of the defendant and a director of Rawhard. In addition, Mr Harding said that Mr Rawlings agreed to the placement of the heater in the packing shed. That inevitably meant that the plaintiff’s access to the packing shed was to be for the duration of the proposed lease, even if it was not part of the leased premises.
Access to the toilets was given and taken respectively by the defendant to the plaintiff’s employees. Similarly, vehicular access was given and taken. This took place between May 1996 and November 1997. Although the defendant said that access to the toilet facilities on the Willunga property was only to be on a temporary basis, there were never any discussions as to how the plaintiff was to incorporate such facilities into its operations at the Willunga property.
With regard to the dispute as to the date from which rent was to be payable, I will deal with this more specifically when dealing with the question of estoppel.
I turn to a more detailed consideration of the evidence. At the trial, various affidavits were tendered in evidence as constituting the evidence-in-chief of the particular witnesses. There was liberty to supplement such examination-in-chief by viva voce examination where necessary. The plaintiff relied upon the affidavit of Mr Dzamko sworn on 21 October 1998 and the affidavit of Ms Heuvel sworn on the same date. The defendant relied upon the affidavits of Mr Rawlings of 13 August 1998 and 23 October 1998, the affidavit of Mr Paul sworn on 22 October 1998 and the affidavit of Mr Harding sworn on 23 October 1998. All of the deponents gave evidence at the trial and were cross-examined.
To the extent that assertions have been made in the statement of claim which have been admitted in the defence, those facts constitute my factual findings subject only to any specific finding made by me in relation to the evidence as opposed to the pleadings.
In his affidavit Mr Dzamko stated that he is a director of the plaintiff company, which was incorporated on 1 May 1996. One of the purposes of the plaintiff company was the carrying on of the business of cultivating tomatoes hydroponically to be sold on the wholesale market. Mr Dzamko is also a director of a company called Greener Than Green Pty Ltd. That company carries on business as a hydroponic and garden centre at Port Noarlunga South. It has been operating that business for about seven years. Mr Dzamko met Mark Harding and Neville Rawlings as customers of the garden centre. They were looking at hydroponic growing systems. Between 1992 and 1995 Mr Dzamko discussed with Mr Rawlings cultivation using the hydroponic technique. Both were interested in the hydroponic process. Mr Dzamko became aware that Mr Rawlings and Mr Harding embarked upon a venture for the cultivation of roses hydroponically. Mr Dzamko introduced to Mr Rawlings a Mr Schembri, who made up hydroponic display units at Mr Dzamko’s garden centre at Port Noarlunga South. Mr Dzamko became aware that Mr Harding and Mr Rawlings incorporated the company Rawhard Trading Pty Ltd, which sold, on a wholesale basis, hydroponic supplies and accessories from late 1995.
In late 1995, early 1996, Mr Dzamko with others, including Mr Brown, contemplated setting up a greenhouse for the purposes of growing tomatoes hydroponically. He spoke to Mr Harding about this in early 1996 to see if Rawhard wanted to be involved in supplying the greenhouse and setting up the commercial hydroponic operation. He asked Mr Harding to provide a quotation for the construction of the greenhouse and the other equipment necessary for a commercial operation for 3000 plants to be conducted at a property at Seaford Rise. An estimate, as opposed to a quotation, was subsequently produced and is Exhibit “P5”. Later, Mr Dzamko found that the property at Seaford Rise was not suitable for the proposed development and he informed Mr Harding of this in about April 1996. On this occasion Mr Dzamko saw Mr Harding at the Willunga property. Subsequently in April, Mr Dzamko attended with Mr Brown and Mr Denton at the Willunga property and had a discussion with Mr Harding relating to the possible use by Mr Dzamko and others of portion of the Willunga property for the purposes of the growing of tomatoes hydroponically. Their conversation is detailed in paragraph 40 of Mr Dzamko’s affidavit, which is as follows:-
“40... Harding said a number of things to us at this time, including:
40.1.......... a long lease would be provided in respect of the site. An option could be given to build a further greenhouse in the future;
40.2.......... that a lease for at least ten (10) years with an option to renew for a further 5 years would be available;
40.3.......... that rental would not be payable until such time as the tomato project had begun making money;
40.4.......... that the lease would be yearly lease of $10,000.00 all inclusive to be paid once the first crop of hydroponic tomatoes had been planted; and
40.5.......... that Rawhard would provide access to the necessary amenities on site including toilet facilities, shedding, coolroom, tractor and trucks.”
In late April Messrs Dzamko, Brown, Denton, Harding, Rawlings and a Mr Carl Hall from Hortinova Greenhouses Pty Ltd had a meeting at the Willunga property. Mr Dzamko deposed as to the discussions at that meeting at paragraphs 45, 46 and 47 of his affidavit which are as follows:-
“45... At this meeting we discussed the plans of Brown, Denton and me to do the propagation of the tomato plants on site and to have this propagation room available to propagate plants for other people eg, basil in winter. We requested that Rawhard’s quote dated 31 March 1996 (exhibit MD3) be varied to include a propagation room attached to the side of the greenhouse. We also stepped out the size and location of the greenhouse and discussed the heating and fertigation system. I remember it being said by either Harding or Rawlings that the heater unit could be located inside the half shed which was already at the site.
46.... I understand the meeting with Hall occurred because he wanted to meet all of the people involved in the Tomato Project and we could then confirm a final quoted price and give our consent to proceed. We indicated to Rawhard and Hortinova at this meeting that they could proceed with the tomato project. Later, the verbal prices provided by Hall and Harding at this meeting were confirmed in a quote dated 26 April 1996.
47.... At the meeting we also talked about using Rawhard labour as our first choice when we needed to get in workers to help us with the tomatoes. The idea was that we would be helping them to cover the wages of their workers. It was at this meeting that Rawlings, when referring to the tomato project, said:
‘Everyone’s a winner’
In fact the tomato project had the ability to be a winner for everyone. We were getting a cost price on the greenhouse project and associated materials and nutrients in exchange for Rawhard using the greenhouse as a display. This would help Rawhard’s image as a leader in hydroponics and would also be one of Hortinova’s first greenhouses of a large size in South Australia. At the meeting we also spoke about building a second greenhouse next the first one and said that we wanted an option to locate a second greenhouse on the land adjacent to the first greenhouse but at a cheaper rental then [sic] the $10,000.00 we had agreed to pay for the first greenhouse.
Afterwards we had a few beers.”
The Exhibit “MD3” referred to in paragraph 45 is the same document marked as Exhibit “P5”.
An amended quotation was subsequently received from Rawhard which included the incorporation of a propagation facility. This was accepted by Mr Dzamko and the other investors and construction of the greenhouse started in May 1996. By 4 December 1996 the sum of $195,000 had been paid by the plaintiff to Rawhard for the construction of the greenhouse.
The question of the written lease over the greenhouse site was discussed at directors’ meetings of the plaintiff. Exhibit “MD6” to Mr Dzamko’s affidavit consists of copies of minutes of the meetings of 17 June, 1996, 19 August, 1996, 30 October 1996 and 14 January 1997. It was Mr Dzamko’s understanding that Mr Brown had asked Mr Harding about the lease on a number of occasions. Shortly after the meeting of 30 October 1996, Messrs Dzamko, Brown, Denton and Laughton met with Mr Rawlings in the packing shed. At paragraph 62 of his affidavit Mr Dzamko said:-
“... We mentioned to Rawlings that we still did not have the lease organised and his response was words to the effect that:
‘We could do it the cheap way or the expensive way. We are all friends here and there shouldn’t be any problems’.”
As a result of that meeting it was decided that Mr Brown would attend with Mr Rawlings and Mr Harding at the offices of Century 21 Eden Estates to have a simple and cheap lease prepared. On 12 November 1996 the plaintiff was provided with a copy of an agreement to lease premises. A copy of that document is Exhibit “MD7” to Mr Dzamko’s affidavit.
The land, the subject matter of the lease, is described as follows in Exhibit “MD7”:
“PREMISES:..... Being portion of
Lot 203 California Road, Willunga
Volume ? Folio ?
as shown on plan attached, bounded in
red.
(hereinafter called ‘the premises’)”
The term of the lease was for a period of five years with a right of renewal for a further five years. The lease was to commence on 1 November 1996. Rental was to be at the rate of $10,000 per annum. There was to be a rental review “to be mutually agreed at end of term”. Payment of rent was to be from 1 November 1996. The plaintiff as lessee was required to pay utility charges and outgoings and was to effect the appropriate insurance.
Paragraph 13 of the agreement to lease premises is as follows:-
“13... FIRST MONTH’S RENT AND DEFAULT:
(a).... Upon execution of the Agreement by the Lessee, the Lessee must pay Rawhard Trading Pty Ltd the first month’s rental hereinbefore set out, which sum shall be applied towards payment of the first month’s rent.
(b)... If the Lessee breaches any of the terms of this Agreement (including, without limiting the generality of the foregoing, its obligation hereunder to execute a formal lease document) then without prejudice to any other rights which the Lessor may have against the Lessee for breach of this Agreement the first month’s rental shall be forfeited to the Lessor and the Lessee must pay to the Lessor any expenses incurred by the Lessor (including legal costs and disbursements) arising out of this Agreement or the breach of it by the Lessee.
(c)... If the lessor does not execute this Agreement the first month’s rental shall be returned to the Lessee in full.”
Paragraphs 14, 15 and 17 of the agreement to lease premises are as follows:-
“14... OFFER BY LESSEE:
The Lessor and the Lessee agree that the submission by the Lessee to either the Lessor or Lessor’s agent of a copy of this Agreement, executed by or on behalf of the Lessee but not the Lessor, shall be deemed to constitute an offer by the Lessee to the Lessor to lease the premises.
15.... BINDING AGREEMENT:
The Lessor and the Lessee agree that upon the execution of this Agreement by or on behalf of both parties this Agreement shall constitute a tenancy agreement which shall be binding upon both parties and shall be enforceable by each of them.
...
17.... EXECUTION OF LEASE:
(a).... The formal lease shall be prepared by the Lessor’s solicitors and, if a form of lease is annexed hereto and marked ‘A’ (or if a form of lease has been provided to the Lessee during negotiation for this Agreement) shall be in that form altered and or completed as the case may require so as to reflect the terms and conditions set out in this Agreement, but otherwise shall be in a form nominated by the Lessor or its solicitors. In the latter case, it shall contain the terms and conditions recorded in this Agreement and such other terms and conditions as the Lessor’s solicitors deem reasonable for a lease of premises of the kind hereby leased provided that such other terms and conditions must not vary the terms hereby agreed.
(b)... The Lessee shall execute the formal lease within twenty one (21) days of its submission to the Lessee. Failure to do so shall not in any way affect the binding nature of the Agreement.”

Paragraph 18 of the agreement also provides for a guarantor to guarantee the payments of the rent and the observance of the lessee’s obligations with the provision that the guarantor “shall execute such formal deed or agreement of guarantee and indemnity as may be prepared by the lessors’ solicitors to embody the terms of this clause”.
It is common ground that a plan setting out the area to be leased was not attached to the document prepared by the land agent, nor was there attached a draft of a formal lease.
Mr Dzamko believed that the question of the lease had been sorted out at the meeting on 12 November 1996 which Mr Brown attended on behalf of the plaintiff. He understood that there were no further issues to be discussed. He did not ask Brown if the agreement to lease had been signed. It was his understanding that the lease between the plaintiff and the defendants was in place. Mr Brown could not be called to give evidence because he died prior to the trial.
The evidence of Mr Rawlings, Mr Harding and Mr Manuel Paul, the land agent who prepared the agreement to lease, is contrary to Mr Dzamko’s understanding and, in my view, must be accepted because those witnesses deposed of their own knowledge as to what occurred in relation to the preparation of the agreement to lease premises, whereas Mr Dzamko was not directly involved. It was Mr Brown who attended the relevant meeting at Mr Paul’s office and Mr Dzamko merely assumed that as a result of that meeting the question of the lease had been sorted out. This was an assumption which was not justified by the circumstances. I refer, in particular, to the evidence of Mr Paul in his affidavit sworn on 22 October 1998. The affidavit is as follows:-
“1..... I am a real estate agent trading as Century 21 Real Estate in the State of South Australia.
2...... In or about November 1996, I was instructed by Neville Rawlings to act as the real estate agent in respect of a potential partial lease of the property at Lot 203, California Road, Willunga owned by AB & SM Rawlings Pty Ltd.
3...... Mr Rawlings informed me that and this was subsequently confirmed by representatives of the Redder than Red Tomato Co Pty Ltd (that was in particular Peter Brown) that a greenhouse had already commenced to be constructed by the Redder than Red Tomato Co Pty Ltd (Redder than Red) on the aforementioned land in approximately May 1996.
4...... In or about November 1996, I was further instructed by Neville Rawlings to convene a meeting at my offices on Tuesday 12 November 1996 to discuss such a partial lease of the aforementioned property with Redder than Red.
5...... I was instructed by Mr Rawlings that the purpose of the meeting was an informal discussion to progress negotiations regarding a possible long term lease by Redder than Red of the greenhouse site that was partially constructed.
6...... The following people were present at the meeting on 12 November 1996 - myself, Neville Rawlings, Marc Harding and Peter Brown.
7...... I did not record minutes of the meeting save for preparing handwritten notes with a view to creating a formal document or Agreement to Lease for the parties’ later consideration and further negotiation.
8...... At the meeting there were some other discussions regarding hydroponics generally and I recall there being a number of topics concerning possible terms of a lease that might be entered into between the parties.
9...... I recall that there were a number of topics discussed as I have said, these being as follows:-
9.1... There was a general discussion that we would need to describe the land intended to be occupied by Redder than Red in proper terms. There was some discussion to the effect that the land could not be subdivided and it would need to be described as a portion of the whole of the Lot 203 California Road. There was a discussion to the effect that the parties contemplated a five year term with a right to renew for a further five years.
9.2... There was a view expressed and I do not remember why, that any formal lease should record a commencement date of 1st November, 1996.
9.3... The figure of $10,000.00 per 1,500 square metres was mentioned, being approximately the size of the greenhouse under construction.
9.4... Outgoings were discussed and it was demanded by Neville Rawlings that Redder than Red pay all outgoings in respect of their occupation of the premises and especially 100% of water, the consumption of which was contemplated as being quite substantial.
9.5... There was a discussion regarding the insurance and I believe that Neville Rawlings required that sheds to which Redder than Red had access, being sheds used by Rawhard Trading Pty Ltd for storage of their goods and products must be insured by the Lessee.
9.6... It was proposed that one month’s rent be paid to Rawlings forthwith.
10.... There was some further discussion between the parties regarding who from Redder than Red would be nominated to act as guarantors for any lease. Peter Brown and Robyn Heuvel were nominated to execute any documents and moreover guarantee the lease. The meeting concluded with the understanding that I would draft up a pro forma ‘Agreement to Lease’ and submit it to the Redder than Red for their consideration.
11.... Within the next few days I prepared a document in accordance with my notes and faxed it to Redder than Red at a number that Peter Brown had indicated to me.
12.... I did not receive a response to the faxed document from Redder than Red. I had no further communication with anyone from Redder than Red.
13.... I followed up the lease negotiations with Mr Rawlings at some later stage who informed me that the parties were ‘getting around to it’.
14.... I did not take any further action as I believed that negotiations had stalled.”
Mr Paul’s evidence is consistent with and corroborates the evidence of Mr Rawlings relating to the circumstances under which the agreement to lease premises was prepared. The combination of the evidence of the two of them leads inevitably to the conclusion that Mr Brown, on behalf of the plaintiff, and Mr Rawlings, on behalf of the defendant, regarded the document which was subsequently prepared by Mr Paul as being a basis for further negotiation. In his affidavit of 23 October 1998, Mr Rawlings said at paragraph 15:-
“... I recall, however, that the meeting occurred on or about 12th November, 1996. Apart from Paul, myself and Harding, Brown was the only person present. I believe that most of the discussion was between myself and Paul. To the best of my recollection the conversation went something like this:-
I said:........ ‘Manuel, the position is that there is a 1,500 square metre greenhouse in place on the north western corner. There is a propagation area sitting off of that. Redder than Red require a lease for 5 plus 5 years if that can be arranged.’
Paul:......... ‘What do you actually want? What have you agreed upon?’
I said:........ ‘We have agreed $10,000.00 rent for the 1,500 square metre greenhouse and joint use of the propagation facility. There is an additional 3,000 square metre greenhouse to go in. That is being formalised. There is uncertainty as to who is to be in that and who isn’t to be in it.’
Paul:......... ‘What do you need now?’
I said:........ ‘We need to start the negotiations on the kind of agreement that we would need down the track. We need to get it under way. There are more issues to be addressed that will need to be discussed. That can best be done if we have a document to work from. The basis however is $10,000.00 per annum for every 1,500 metres square greenhouse.’
Paul:......... ‘So you want something as a basis to talk about?’
I said:........ ‘We want an agreement to end in a formal lease but all we need now is to get something to negotiate from.’
Paul:......... ‘I will put together a basic document. I’ll give it to you and you can consider it and then get back to me. One thing you will have to do is to address a plan showing exactly what land is to be leased. Because the land is not subdividable it can only be described as a portion of the larger land.’
I said:........ ‘I will have to get back to you about that.’
Apart from the usual courtesies there was not much else said. I do not believe that Brown took a great part in the conversation.”
When cross-examined on the topic, Mr Harding stated that he remembered the meeting at the land agent’s office on 12 November when Mr Brown and Mr Rawlings were present. He agreed that by that time the greenhouse had been constructed and that the propagation facility was complete. At that meeting it was confirmed that a term of the lease of five years plus five years had been agreed and that the rental was to be $10,000. He did not agree that the rental was fixed by reference to the area occupied by the greenhouse and the propagation facility, except on the basis that the parties were to have joint usage of that facility. He agreed that access to the sheds and toilets was occurring and that that aspect had been agreed between the parties. He understood (incorrectly, in my view), that the only uncertainty was whether an option would be taken for another greenhouse.
It seems to me that the net result of the parties’ dealings with regard to the execution of a lease was that, on the one hand, Mr Dzamko thought that everything had been attended to, while on the other hand, Mr Rawlings was waiting for the plaintiff to indicate its attitude to what the defendant regarded as a draft agreement for lease. The reality is that there were still unresolved matters, in particular, the finalisation of the agreement for lease and the execution of same, the preparation of guarantee agreements and the execution of same by suitable guarantors and the preparation and execution of a lease in registrable form. Whilst it could be said that as at November 1996 the area of the greenhouse and propagation facility were defined because they had been constructed, there remained the question of whether or not an option would be included in the lease for the leasing of further areas in the event that the plaintiff wished to establish additional greenhouses.
The plaintiff’s primary argument was that by 12 November 1996 an equitable lease had arisen in the sense that there was an agreement for a lease which could be specifically enforced: Walsh v Lonsdale (1882) 21 ChD 9. I was referred to “Australian Real Property Law”, Bradbrook, MacCallum and Moore at paragraph 12.07. The learned authors there state:-
“A contract for a lease enforceable under the rule in Walsh v Lonsdale is usually referred to as an ‘agreement for a lease’. The rule will not apply unless the agreement is specifically enforceable at equity and constitutes a binding contract under normal common law principles. Thus, the parties must have reached final agreement on the essential details of the lease, viz the property to be leased, the rent payable, the names of the parties and the commencement and maximum duration of the term. The other terms of the agreement do not have to be specified in detail, however, and where necessary will be implied by the courts. The major difficulty confronting the court is to determine whether the contract is intended to be final. Before the contract will be enforced as an agreement for a lease, the court must be of the opinion that the execution of the future lease contemplated by the contract will merely formally embody the terms of the contract already agreed upon. If the court forms the opinion that certain essential features of the agreement are still open to negotiation prior to the signing of the lease, the contract for a lease will be held to be unenforceable at both law and equity.”
It is clear from this passage and the cases cited in support of the propositions contained therein, that there must be a contract between the parties established “under normal common law principles”. I do not think that the plaintiff has established that such a contract was entered into. There were negotiations between the parties at the end of April 1996 but, even on the plaintiff’s case, the parties contemplated that a written agreement would be entered into. In early November 1996 the parties took steps to have a written agreement prepared. There was a meeting at Mr Paul’s office when instructions were given to him by Mr Rawlings in the presence of Mr Brown on behalf of the plaintiff for the preparation of what can only be characterised as a draft agreement for further discussion between the parties. It was clearly contemplated that that document would be completed and had to be signed by both of the parties before it became binding. In those circumstances, it is not open to me to conclude that there had been a contract reached according to normal common law principles between the parties. Consequently, there is no agreement which might be the subject of a claim for specific performance and, therefore, no equitable lease.
In view of that conclusion, it is not necessary for me to consider whether or not the plaintiff may rely upon the doctrine of part performance. It is common ground that the draft prepared by Mr Paul was never signed by either party and, had I concluded that the parties had reached a contractual agreement which lacked the statutory requirement of being in writing, I would have had to have considered whether the agreement had been partly performed. This is a different process from deciding whether or not the parties’ arrangement had reached contractual status. In my view, even if it is assumed that Mr Dzamko’s evidence as to negotiations up to early November 1996 should be accepted, the evidence of the state of the draft agreement prepared by Mr Paul when combined with the evidence of Mr Rawlings about the circumstances under which that document was prepared, leads inevitably to the conclusion that the parties had not entered into a contractually binding arrangement. Mr Dzamko’s assumption that after the meeting at Mr Paul’s office the lease formalities had been completed was not justified by the facts, and his assumption alone does not convert the negotiations into a concluded agreement.
For the above reasons I hold that there was no agreement for lease on the terms contended for by the plaintiff at any time between the parties. In the absence of an estoppel as contended for by the plaintiff, the only conclusion that can be drawn from the circumstances of the case is that the parties agreed that the plaintiff could lease portion of the Willunga property, as defined by the boundaries of the greenhouse and propagation facility, with a licence to the plaintiff to use other facilities, including the shed and toilet facilities, pending final agreement between the parties. That occupancy was to be paid for by the plaintiff by monthly rental. Characterised as such, the agreement between the parties could be no more than a monthly tenancy.
I turn to a consideration of whether or not the estoppel contended for by the plaintiff has arisen in the circumstances.
I was referred to the decision of Waltons Stores (Interstate) Ltd v Maher and Anor (1987-1988) 164 CLR 387 and, in particular, to the judgment of Brennan J, as he then was. His Honour referred to the differences between a contract and an equity created by estoppel. He said (at 425):-
“... A contractual obligation is created by the agreement of the parties; an equity created by estoppel may be imposed irrespective of any agreement by the party bound. A contractual obligation must be supported by consideration; an equity created by estoppel need not be supported by what is, strictly speaking, consideration. The measure of a contractual obligation depends on the terms of the contract and the circumstances to which it applies; the measure of an equity created by estoppel varies according to what is necessary to prevent detriment resulting from unconscionable conduct.”
His Honour set out the requirements of equitable estoppel as follows (at 428):-
“In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff’s action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise. For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will nevertheless be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant’s property, a diminution of his rights or an increase in his obligations and he, knowing that the plaintiff’s reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs.”
The following narrative consists of my findings as to what occurred between the parties from the time of the initial discussions between the representatives of the parties, in particular Mr Dzamko and Mr Rawlings, about the possibility of establishing a greenhouse and propagation facility for the cultivation of tomatoes hydroponically to the time that the defendant, in late 1997, called upon the plaintiff either to vacate the Willunga property or enter into a written lease. As such, the narrative consists of my findings of fact relevant to the question of estoppel.
In early 1996 there were discussions initially between Mr Dzamko and Mr Harding and later between Mr Dzamko and Mr Rawlings and others relating to the establishment on the Willunga property owned by the defendant of a greenhouse and propagation facility. As a result of those discussions the defendant permitted the plaintiff to cause to be constructed the greenhouse and propagation facility on portion of the Willunga property. The costs associated with the establishment of the greenhouse and propagation facility and the necessary facilities relating to the cultivation of tomatoes hydroponically was, to the knowledge of the defendant, approximately $200,000. From discussions in April 1996 between the relevant principals, it was anticipated that a lease agreement would be prepared providing for a term of five years with a right of renewal for five years and that the rental, at least for the first five years, was to be $10,000 per annum, with the rent for the subsequent period of five years to be agreed between the parties. The commencement of the initial five year period was to be 1 November 1996. There is a dispute as to whether the rent was to be payable from the time of the first planting of a tomato crop or from the time at which the defendant commenced to earn money from the cultivation of the tomatoes but, in any event, Ms Heuvel’s evidence reveals that rent has been paid for the period commencing 1 November 1996.
The defendant was aware that, in constructing the greenhouse and propagation facility on the Willunga property, the plaintiff had an expectation of being able to occupy the relevant portion of the land for a period of ten years. The defendant caused to be made to the relevant local Council applications for building approval both in respect of the greenhouse and propagation facility and a shed which was erected on the Willunga property by the plaintiff. The greenhouse and propagation facility and most of the hydroponic equipment were respectively constructed and supplied by the company Rawhard Pty Ltd, of which Mr Rawlings and Mr Harding were directors. The parties discussed the construction of at least one additional greenhouse at a future time on the Willunga property, the rental for which was to be $10,000 per annum per 1500 square metres of area occupied. It was anticipated by all the principals concerned from at least April 1996 that a formal written lease would be prepared which was to embody the parties’ agreement as to the plaintiff’s continued occupancy of portion of the Willunga property. The parties have not at any material time reached final agreement with regard to the content of that lease. It was contemplated by the principals concerned that the plaintiff would have access to and use of the packing shed to be constructed near to the greenhouse and that the plaintiff’s employees and agents would have the use of a toilet facility situated on the Willunga property. It was also contemplated by the relevant principals that the plaintiff, by its servants or agents, would have vehicular access to the greenhouse and propagation facility and that the plaintiff could install heating and cooling equipment in the packing shed. In addition, the defendant permitted the plaintiff to install water tanks on areas abutting the greenhouse.

The parties understood, and the plaintiff subsequently acted in accordance with such an understanding, that the plaintiff would obtain and pay for insurance in respect of the greenhouse, propagation facility and associated equipment and that the plaintiff would pay for utilities, such as water and electricity consumed by it.
If those facts were taken in isolation it might well be said that the six elements of equitable estoppel identified by Brennan J in Waltons Stores have been made out. However, the defendant has contended that the plaintiff did not act in accordance with the assumptions and expectations common to both parties. In particular, the defendant contended that the plaintiff effectively occupied an area considerably greater than the combined area of the greenhouse and propagation facility. In addition, the defendant contended that the plaintiff purported to exclude the defendant from the use and occupation of the sheds erected near the greenhouse facility. The defendant also complained that the plaintiff failed to complete negotiations with the defendant leading to a final agreement as to the terms of the lease to be entered into and that the plaintiff failed to pay rent in accordance with the understanding which was common to both of them, namely, according to the defendant, that rent be payable from the first planting. It is common ground that the rent was not paid from the first planting and that no rent was paid until the middle of 1997, when a lump sum was paid to cover arrears and part of the future rent.
As to the time at which rent payments would commence, Mr Dzamko, on the one hand, said in evidence that it was agreed between the parties that rent would not be paid until the plaintiff commenced to earn money from the sale of tomatoes. The evidence of Mr Rawlings and Mr Harding is to the contrary. I accept the evidence of the latter. I think their evidence generally is more reliable than that given by Mr Dzamko. I think that he was inclined to adopt a position which he considered to be expedient without necessarily being careful about the accuracy of what he was saying. Mr Rawlings and Mr Harding, on the other hand, appeared to me to be endeavouring to tell the truth according to the best of their recollection. Consequently, I find that the arrangement reached between the parties was that rent would not be payable until the first planting. That took place in late 1996 and it is common ground that the first payment of rent did not take place until mid-1997.
The complaint by the defendant that the plaintiff, when it took occupation of the site did not limit its occupation to the greenhouse and propagation facility is, in my view, without substance. The fact is that the parties contemplated a lease of the site occupied by the greenhouse and propagation facility and that the plaintiff could have access to other facilities on the property, such as the shed and toilet facilities and the ability to bring vehicles on to the property without the areas concerned being the subject of a formal lease. Consequently, to that extent, I do not consider that the plaintiff when it occupied the property implemented that occupation in a manner other than that contemplated by the parties from as early as April and May of 1996.
As to the exclusion of the defendant from the use of the packing shed greenhouse, I accept the evidence of Mr Rawlings and Mr Harding in this regard that they were for a period of time excluded from the use of those sheds by being locked out of them. Mr Dzamko said that it was locked as a matter of security and that the defendant’s employees could have access by asking for the key to the padlock. This was clearly not in accordance with the understanding reached in April 1996 and subsequently.
These matters are material to whether or not an estoppel has arisen as contended for by the plaintiff. It is implicit in the reasoning of Brennan J in Waltons Stores that the person in whose favour the equity arises by virtue of the estoppel has adhered faithfully to the original understanding and expectations of the parties. If there is an absence of such adherence, an estoppel may hardly be said to arise in favour of the person who has departed from that understanding or expectation. But, in my view, the departure must be something more than a minor aberration. The concept of equitable estoppel is based on unconscionable behaviour and if both parties act in an unconscionable way it cannot be said that the equity will arise. But a minor alteration does not constitute unconscionable behaviour.
In my view, the exclusion of the defendant from the use of the sheds and the non-payment of rent until mid-1997 do not constitute a material departure from the common understanding of the parties by the plaintiff and it follows that such conduct does not prevent the equity from otherwise arising. The non-payment of rent was subsequently remedied by payment of arrears and payment of some rent in advance. Rent has continued to be paid and accepted at the appropriate rate since that time.
The fact that the formal written lease was never drawn up was attributed by the defendant to the plaintiff’s failure to continue negotiations after Mr Paul prepared the draft agreement to lease. As such, it was part of the plaintiff’s failure to adhere to the understanding reached between the parties. I do not consider that the plaintiff’s failure to follow up with negotiations for a formal lease, either alone or in conjunction with any other failure to adhere to the understanding arrived at referred to above, constitutes a basis for holding that the estoppel cannot arise. True it is that the plaintiff failed to pursue negotiations after the meeting at Mr Paul’s office in November 1996. But there was a lack of assiduity in that regard on the part of the defendant as well. There may well have been requests made by Mr Rawlings to the plaintiff to do so, but there was no demand to do so for twelve months and that was a demand to quit or enter into a lease on terms which were not to be the subject of negotiation and which were quite different from those originally contemplated. Had the defendant demanded that a meeting take place with a view to negotiating the final terms of the lease and had the plaintiff refused or neglected to comply with that demand, there would have been, in my view, a material departure from the original understanding. However, the defendant took a different course by setting out terms of a lease quite different from those originally contemplated on a “take it or leave it” basis. In those circumstances, I do not think the plaintiff’s failure to follow up negotiations between November 1996 and November 1997 constituted a material departure from the original understanding.
Mr Rawlings said that the plaintiff abandoned the site because (he alleged) it has not conducted any business operations from the greenhouse since about February 1998. Mr Dzamko’s explanation for this was that the heating system was not working properly and they were unable to cultivate tomatoes over the winter months of 1998. The failure of the heating system to work properly is the subject of litigation in the District Court between the plaintiff and Rawhard. In addition, a new crop was planted in September 1998. I do not consider that the plaintiff has abandoned the site.
Turning specifically to the six elements of equitable estoppel set out above:
(1)... I find that as a result of the dealings between the parties the plaintiff, from the end of April 1996, assumed that a particular legal relationship, namely that of lessor and lessee, would exist between the plaintiff and the defendant and the defendant would not be free to withdraw from the expected legal relationship. Mr Heywood Smith, counsel for the defendant submitted that the plaintiff had not made out the first element because there had been a failure to call other directors of the plaintiff as to what the expectation of the plaintiff was. However, in my opinion, the conclusion is justified by the fact that the defendant permitted the plaintiff to construct the greenhouse and propagation facility on a portion of the Willunga property in expectation of a lease of up to ten years being granted by the defendant to the plaintiff at an annual rental of $10,000 for the first five years.
(2)... That the defendant, by Mr Rawlings, induced the plaintiff to adopt that assumption by permitting the construction of the greenhouse and propagation facility after the discussion at the end of April 1996. It was submitted by Mr Heywood Smith that this element had not been established by the plaintiff because there was no evidence that the defendant had induced any belief on the part of the plaintiff as to the basis upon which the plaintiff was to occupy the premises upon construction of the greenhouse. I agree that there may not be direct evidence in that regard but in my view, the necessary inference to be drawn from the fact that the defendant permitted the plaintiff to construct the greenhouse and propagation facility on portion of the Willunga property is that the defendant induced the plaintiff to adopt the relevant assumption.
(3)... That, in reliance upon the understanding that had been reached, namely that the defendant would permit the plaintiff to occupy the greenhouse and propagation facility at a rental of $10,000 per annum for an initial period of five years plus a right of renewal of a further five years, the plaintiff caused to be constructed the greenhouse and propagation facility on portion of the Willunga property.
(4)... That the defendant, by Mr Rawlings, knew or intended that the plaintiff should do so.
(5)... That the plaintiff will suffer detriment if the assumption or expectation is not fulfilled. The detriment would consist of the plaintiff not being able to continue to occupy a portion of the Willunga property and having to relocate the greenhouse propagation facility and associated equipment.
(6)... That the defendant has failed to act to avoid that detriment by calling upon the plaintiff to quit the property.
I must next consider that aspect of the understanding between the parties relating to the payment of rent for the second period of five years. The parties in discussions have never put forward, let alone agreed upon, a method by which rent might be fixed for the second period of five years. Contractually, that would be fatal to the ability of the plaintiff to occupy the relevant portion of the Willunga property for the second period of five years because the parties have only reached an agreement to agree. In terms of the estoppel, I do not think that the plaintiff has established an understanding which gives an entitlement to occupy for the additional five year period because the understanding between the parties was illusory. Put another way, I do not think it would be unconscionable for the defendant to maintain that a commercially satisfactory arrangement had not been reached between the parties in relation to payment of rent for the second five year period. Consequently, the equity which follows from my conclusions as to the estoppel which has arisen is limited to a period of five years. That five year period commenced on 1 November 1996, the understanding or expectation having arisen at the meeting at Mr Paul’s office on 12 November 1996 where, I infer, Mr Rawlings provided for such a commencement date and Mr Brown did not dissent. In addition, according to paragraph 3.1 of Ms Heuvel’s affidavit, rent has been paid since 1 November 1996.
For the above reasons I hold that in the circumstances an equity has arisen in favour of the plaintiff which entitles the plaintiff to occupy the greenhouse site and propagation facility for a period of five years commencing on 1 November 1996 at an annual rental of $10,000. The equity includes a licence in favour of the plaintiff to have access to the sheds constructed near the propagation facility for the purposes of storing heating and cooling equipment and the use thereof. In addition, the plaintiff has the right to bring vehicular traffic on to the property for the purposes of carrying out the cultivation of tomatoes hydroponically in the greenhouse and propagation facility and the sale thereof. Further, the servants or agents of the plaintiff properly engaged in the cultivation process have the right to take access to the toilet facilities situated on the Willunga property. The plaintiff, in addition to paying the rent, is obliged to effect the appropriate insurance and to pay for water and electricity consumed in the operation of its business. There will be a declaration accordingly.
The plaintiff was granted leave to add a new paragraph 4 in the prayer for relief in replacement of the paragraph 4 which dealt with a caveat. Leave was granted to substitute the following paragraph:
“4..... An injunction restraining the defendant from dealing with the Willunga property other than subject to such of the plaintiff’s interest in the Willunga property as may be determined by this Honourable Court.”
In light of the fact that the plaintiff is entitled to occupy portion of the Willunga property as determined in these reasons I propose to grant an injunction to protect the plaintiff’s interest in the land.
There will be liberty to speak to the minutes.

[1999] SASC 30

5 February 1999