Westpac Banking Corporation v Kurobe Holdings Pty Limited and Karovel Nominees Pty Ltd
[2010] NSWSC 537
•19 May 2010
CITATION: WESTPAC BANKING CORPORATION v KUROBE HOLDINGS PTY LIMITED & KAROVEL NOMINEES PTY LTD [2010] NSWSC 537 HEARING DATE(S): 17, 18 May 2010
JUDGMENT DATE :
19 May 2010JURISDICTION: Equity JUDGMENT OF: Pembroke J EX TEMPORE JUDGMENT DATE: 19 May 2010 DECISION: See paragraph 56 of Judgment CATCHWORDS: LEASE - construction - exercise of option - validity - service on lessor's agent - nomination of lessee's agent - condition precedent - ESTOPPEL - equitable estoppel established - silence - causation and inducement - intention CATEGORY: Principal judgment CASES CITED: Ballas v Theophilos (No 2) (1957) 88 CLR 193
Bowes v Chaleyer (1923) 32 CLR 159 at 178-9
Carter v Hyde (1923) 33 CLR 115
Central London Property Trust v High Trees House Ltd [1947] KB 132
FAI General Insurance Company Ltd v Parras (2002) 55 NSWLR 498
Gollin & Company Ltd v Karenlee Nominees Pty Ltd & Anor (1983) 153 CLR 455
Grundt v Great Boulder Gold Mines Ltd (1937) 59 CLR 641
Mannai Investment Co Limited v Eaglestar Insurance Co Limited (1997) AC 749
Mineaplenty Pty Limited v Trek 31 Pty Limited [2006] NSWSC 1203
Moratic Pty Ltd v Laurence James Gordon & Anor [2007] NSWSC 5
Quadling v Robinson (1976) 137 CLR 192
Riltang Pty Ltd v L Pty Ltd [2002] NSWSC 625
Tew v Harris (1847) 11 QB 7
Thomas v Fredricks (1847) 10 QB 775
Tradex Export SA v Volkswagenwerk AG [1970] 1 QB 537
Townsend Carriers Ltd v Pfizer Ltd (1979) 33 P & CR 361
Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387 at 423
Young v Lamb [2001] NSWCA 225PARTIES: Westpac Banking Corporation - plaintiff
Kurobe Holdings Pty Limited & Karovel Nominees Pty Ltd - defendantsFILE NUMBER(S): SC 002822217/2008 COUNSEL: J Simpkins SC with him D J Mackay for the Plaintiff
B A M Connell for the DefendantsSOLICITORS: Minter Ellison (Plaintiff)
Curwoods (Defendants)
IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
EQUITY LIST
PEMBROKE J
Wednesday, 19 May 2010
002822217/2008 WESTPAC BANKING CORPORATION v KUROBE HOLDINGS PTY LIMITED & KAROVEL NOMINEES PTY LTD
EX TEMPORE JUDGMENT
1. HIS HONOUR: This is an action between landlord and tenant concerning the validity of an exercise of option. It raises only two issues, whether the notice is valid, and if not, whether the defendants are estopped from denying that it is. I heard the evidence on Monday 17 and Tuesday 18 May 2010, and as I was assisted by able submissions from both counsel, I am in a position to give judgment without delay.
The Facts
2. The essential facts are these. The plaintiff, Westpac Banking Corporation (Westpac), is the lessee of premises in The Trust Building at 155 King Street, Sydney. The defendants are the lessors. Westpac's leasing agent for the premises was, at all material times, United Group Services Pty Limited (United). The defendants’ managing agent was Sydney Property Management Pty Limited which I will call SPM.
3. Westpac has leased the premises from the defendants since 1999, and on 7 November 2003, exercised its option under the original lease and entered into a new lease of the premises for a period of 5 years commencing on 9 February 2004. That option was exercised by notice from Westpac's then agent, Investa Property Group (Investa) to the defendants’ agent, SPM. In December 2005, Westpac appointed United as its agent in substitution for Investa. At all material times, the defendants' agent, SPM, was a company having the same registered address as the defendants at level 10, 65 York Street, Sydney. I will say something further about SPM in due course.
4. On 6 August 2008, Mr Mann of SPM wrote to United stating that, "We would be pleased if you would consider taking up the option period."
5. On 29 August 2008, Mr Lorand Loblay sent a letter to Westpac at its head office stating that all future notices should be sent to the defendants at level 10, 65 York Street, Sydney. The letter was not marked for the attention of the NSW Leasing Manager and was not copied to United. It did not include the name of any relevant person at Westpac or United. It was, in effect, a letter at large to a huge organisation and was destined to languish. I accept that, before expiry of the option period, it did not come to the attention of any officer of Westpac or United responsible for this lease.
6. On 16 October 2008, Ms Murphy of United, on behalf of Westpac, gave notice of Westpac's exercise of the option pursuant to cl 15.1 of the lease by sending to Mr Mann of SPM a letter by email, by express post and by facsimile. The letter stated relevantly that:
“United Group Services has been engaged by Westpac Banking Corporation as their national service provider. We are, therefore, instructed to notify you of the bank's intention to exercise its option. In accordance with cl 15 of the lease agreement we hereby exercise the option of 5 years. Please acknowledge receipt of this notice by signing below and returning using the details below. Please feel free to contact me if you have any queries.”
7. On 20 October 2008, Mr Mann acknowledged receipt of the notice of exercise of option by signing it and returning it to United. The option period expired on 8 November 2008. By letter dated 1 December 2008, Mr Loblay, a director of both of the defendants and SPM stated, among other things, "We note that you have not exercised your option to renew the lease.”
Validity of Option
8. I have reached the conclusion that the notice of exercise of option was valid for the following reasons. First, and subject to compliance with any specific contractual stipulation, the notice satisfies the essential requirement that it communicate a clear and unequivocal intention to exercise the option[1]. This must be resolved according to what a reasonable recipient of the notice familiar with the terms of the lease and the surrounding circumstances including the dealings between the parties would have understood[2]. But in general terms, and subject once again to any specific lease provisions, so long as the notice conveys an unequivocal intent, it is not fatal that it does not use terminology precisely conforming to the terms of the option or that it misstates its terms or that it is addressed to the agent of the lessor and not the lessor[3].
9. I accept and adopt the following general statement by Brereton J which must, of course, be read subject to any particular applicable provisions of the lease:
"Notice of exercise of an option may be given by and to the duly authorised agents of the lessee and the lessor. Whether an alleged agent had authority to give or receive such a notice is to be judged having regard to the whole of the circumstances of the case including the terms of the lease and the role of the agent in the relationship between the parties.”[4] (authorities removed)
10. Second, cl 15.1 of the lease specifies no formalities. It merely provides that if the tenant wishes to lease the premises for a further term and "gives notice to that effect to the landlord not less than 3 months before and not more than 6 months before the term expires" then the landlord must grant a further lease.
11. Third, cl 14 contains general provisions about notices to which the operation of cl 15.1 must be subject. Both cls 14.1(a) and 14.1(d) are relevant. I am satisfied that cl 14.1(a) has been complied with and that the effect of cl 14.1(d) does not invalidate the notice. Clauses 14.1(a) – (d) are as follows:
(a) In Writing
Any notice given under this Lease must be in writing. A notice is valid if signed by an officer or solicitor of the party giving it or any other person nominated by that party.
(b) Notice of Change of Address
Each party must promptly notify the other of its address and facsimile number and update the notice if any changes occur.
(c) Service of Notice on Tenant
The Landlord may serve a notice on the Tenant by:
(i) giving it to the Tenant personally;
(ii) leaving it at the Premises;
(iii) sending it to the Tenant’s facsimile number; or
(iv) posting by certified or registered mail to the Tenant’s last known registered office, place of business or residence.
(d) Service of Notice on Landlord
The Tenant may serve a notice on the Landlord by leaving it at, or posting by certified or registered mail to the Landlord’s office set out in item 1 of the Reference Schedule or at the last address notified to the Tenant.
Clause 14.1(a)
12. Two issues arise under cl 14.1(a). The first is whether the notice signed by an officer of United on behalf of Westpac is a notice signed by "any other person nominated by [Westpac]." The second is whether, if it is not so signed, the necessary effect of Clause 14.1(a) is to invalidate the notice. I will deal with the second point first.
Second Sentence - Validity
13. The second sentence of cl 14.1(a) does not, by its terms, seek to prescribe the only circumstances in which a notice will be valid. As a matter of ordinary language, it does not say, as it could easily have done, that a notice will only be valid if signed by the specified persons. That would require some qualification to the language to be implied in circumstances where any such qualification is clearly not necessary.
14. One of the apparent commercial purposes of the limited language of the second sentence of cl 14.1(a) is to obviate the need for proof of authority where the notice is signed by one of the three specified categories referred to in the clause. But in a context where the validity of the exercise of an option by an agent on behalf of a lessee is well recognised as a matter of general principle under the law of agency and under the law of landlord and tenant, I would be reluctant to read the second sentence of cl 14.1(a) in a manner that gives it the effect of limiting valid notices only to those signed by the specified persons. That is not what it says. I do not think it is appropriate to construe the second sentence of cl 14.1(a) other than in accordance with the actual language used by the parties.
15. These parties were commercially sophisticated and both of them, in particular the defendants, were vastly experienced in commercial leasing transactions. I infer that the terms of the lease were negotiated with the assistance of equally experienced specialist solicitors. When they wished to make clear that a mandatory requirement was being imposed, they ensured that the lease contained language appropriate to the task. The first sentence of 14.1(a) is but one example. It provides unequivocally that any notice must be in writing. The second sentence adopts an entirely different and contrasting form. For those reasons, even if there were no "nomination" within the meaning of Clause 14.1(a), to which I will come next, the notice is not thereby invalidated.
Nominated
16. In any event, I am satisfied that the notice of exercise of option was signed by a person nominated by Westpac. The terms "appointed" and "nominated" do not necessarily have the same connotation and the meaning of "nominated" may well vary depending on the particular context and circumstances. It is, in other words, ambulatory. I am satisfied that for the purposes of the lease, the nomination of United, including the officers to through whom it carries on business, to give a notice on behalf of Westpac is clear from the letter dated 24 October 2005 and the letter dated 16 October 2008.
17. The letter dated 24 October 2005 is from Westpac to SPM. It informs SPM that Westpac has appointed United as its new service provider for its asset and lease management services effective 1 December 2005. The clear implication is that United is succeeding to the role of Westpac's previous agent Investa Property Group. Investa had given notice of the previous exercise of option in 2003 upon which the defendants had been prepared to act. That notice had been addressed to, and served upon, SPM.
18. This letter was, or amounted to, a communication to the defendants of the nomination of United as the entity which would from that date, act on behalf of Westpac in connection with the lease. United’s usual authority would have extended to the signing and giving of notices on behalf of Westpac in connection with the lease. There is no reason why a notice of exercise of option should be in a different category.
19. The letter dated 16 October 2008 is the letter from United to SPM purporting to exercise the option. It provided that:
“United Group Services has been engaged by Westpac Banking Corporation as their national service provider. We are, therefore, instructed to notify you of the Bank's intention to exercise its option.”
20. Insofar as the letter records the fact of an instruction from Westpac to United to notify the defendants of the bank's intention to exercise its option, the instruction should be regarded as equivalent to a nomination of United for that purpose. I regard “nominated” as an ordinary English word. It does not have any special or technical meaning, at least in this context. No formalities are prescribed for a nomination under cl 14.1(a). Nor would I expect any. None should be implied. Not only are no formalities prescribed, but there is no requirement that the nomination be communicated to the landlord. Nor do I think that such a requirement can be said to be inherent in the process of nomination, at least in this context.
21. This is not a case such as those involving, for example, the appointment of valuers, referees or arbitrators where the person appointed is required to fulfil a role acting or adjudicating on behalf of both parties[5]. In those contexts, one might naturally expect a requirement for communication of the appointment to the other party. But that does not necessarily apply in a simple case such as this where the person nominated by Westpac is not required to act on behalf of the defendants or to adjudicate between the parties. The point is made in the unanimous judgment of the High Court of Australia in Gollin[6], where it is said:
“… In some cases, the appointment of a person to fill a particular role or to perform a particular task will require nothing more than communication between appointor and prospective appointee. That is not ordinarily so in a case where one party to a contract is entitled or required to appoint a third person to do something with consequences that are contractually binding upon the other party or parties.”
22. For those reasons, I am satisfied that United was nominated by Westpac for the purpose of cl 14.1(a). United could only act through its officers. The notice of exercise of option contained in the letter dated 16 October 2008 from United on behalf of Westpac, to SPM on behalf of the defendants, therefore complies with the requirement of Clause 14.1(a) that it be signed, relevantly by a person “nominated by [Westpac]”.
Clause 14.1(d)
23. The issue that arises under cl 14.1(d) is the legal effect of a notice not served on "the last address notified to the tenant" within the meaning of that clause. If it had any contractual effect at all, Mr Loblay's letter dated 29 August 2008 did no more than specify a new address for the purpose of this clause. For the following reasons I am satisfied that the failure of United to serve the notice of exercise of option at the address notified in the letter dated 29 August 2008 did not invalidate the notice.
24. The letter dated 29 August 2008 was a notification or notice to the tenant. It was, therefore, required to comply with cl 13.2. Clause 13.2 imposed a mandatory requirement, for obvious commercial reasons given the size and complexity of Westpac, that notices to the tenant must be mailed or sent by facsimile to: "Attention New South Wales Leasing Manager, Property Services, Westpac Banking Corporation, c/o Investa Property Group, GPO 4180 Sydney 2001 (level 17/135 King Street, Sydney 2000). Facsimile 61-2-82269497.”
25. The 29 August letter did not comply with cl 13.2 in the form in which it appeared in the lease. Further, the course of dealing between the parties following the replacement of Investa by United as Westpac’s agent, indicates that the parties acted on the basis that cl 13.2 should be treated as substituting United for Investa and being varied to that extent. The letter did not comply with cl 13.2 in its original or varied form.
26. Mr Loblay's evidence as to why his letter notifying a new address to Westpac did not comply with the mandatory requirements stipulated in cl 13.2 in its original or varied form was implausible, unconvincing and somewhat evasive. It caused me to doubt his bona fides. I refer to that evidence in paragraphs [30], [31] and [32] below.
27. For those reasons, the letter did not in my view have any contractual effect as a notice to the tenant under the lease. The consequence is that it did not constitute notification of a new last address to the tenant pursuant to cl 14.1(d). The last address remained that of the defendants' agent, SPM, to whom all previous communications and notices had been given.
28. Alternatively, assuming that a new last address was validly notified to the tenant by Mr Loblay's letter of 29 August 2008, I do not think that compliance with cl 14.1(a) is a condition precedent to the validity of the notice of exercise of option. Clause 14.1(a) is in terms permissive. It is in marked contrast to cl 13.2. Its permissive form supports a construction that leads to the conclusion that compliance with its terms is not a condition precedent to validity[7]. In the overall context, it hardly seems likely that the parties could have intended that strict and literal compliance with the requirement for service at the last address of the landlord notified to the tenant should be a condition precedent to validity regardless of whether the landlord has, in fact, received the notice.
29. There is no dispute that Mr Loblay actually received and considered the notice himself. This undoubted fact gave the defendants' submissions a surreal air and reflected the opportunism of which Mr Loblay sought to have the benefit. A mildly absurd feature of the defendants' case on this issue is that the letter of 29 August 2008 was sent from “Level 10, 65 York Street” and directed that all future notices be sent to “Level 10, 65 York Street”. The addresses were one and the same for SPM and the defendants. Mr Loblay was the principal of all of those entities.
30. Mr Loblay has been highly successful. He is sharp and mentally acute. He obtained a law degree from the University of Transylvania more than 60 years ago and was admitted to the New South Wales Bar in the 1970s. In his evidence however, he sometimes denied the obvious and asserted the improbable where he thought, mistakenly, that it would advance his case. He was concerned to take advantage of what he thought was the technical legal position regardless of other considerations. In his evidence, he agreed that he gave special attention to this lease, of all the many leases given by companies under his control. There was no apparent reason for singling out this lease despite the fact that the lessors’ address did not appear in the body of the lease. He agreed that doing so was unusual especially as he accepted that there was no problem with communications between Westpac or United on its behalf and SPM on behalf of the defendants. He, at first, denied that he knew that Westpac had an agent. He then said that he knew that Investa was named as Westpac's agent in the lease. Later he admitted that Westpac did change its agent and he referred to the letter notifying the appointment of a new agent.
31. He denied, although he would not have known, that the agency of Investa or that of its successor United, was a general agency. He gave no plausible or sensible reason for not addressing the 29 August letter to the agent. He gave no plausible explanation for not addressing the letter to the New South Wales Leasing Manager of Westpac. He confirmed that he had formed the view, prior to 29 August 2008, that he did not want Westpac to continue as his tenant. Although he confirmed ultimately that he knew in August 2008 that Westpac had an agent, he gave unsatisfactory evidence as to why he did not notify the agent. As I said, he asserted without any reasonable basis for doing so, that the agent did not have authority.
32. There was no dispute that Mr Loblay was the controlling mind of SPM as well as of the defendants. SPM and the defendants shared the same office. They were part of the same family group of companies. Mr Loblay and members of his family were common directors of all of those companies. Quite why, and for what legitimate purpose, Mr Loblay singled out this lease, of all the leases managed by his company SPM, to direct that notices no longer be sent to SPM, remained opaque. Why he did so in a letter that was neither addressed to Westpac's New South Wales Leasing Manager nor to its agent is perplexing.
33. There are some similarities in this case with certain features of FAI General Insurance Company Limited (in liquidation) v Parras[8]. But in this area, each case will turn on the particular terms of the lease in issue and I do not take from Parras any general principle to support the conclusions that I consider to be applicable in this case. Certain statements by Hodgson JA[9] support, in a general way, the result at which I have arrived. But I do not think they should be taken out of the specific context in which they arose.
34. I also find reassuring the following observations of Megarry VC, which I regard as eminently sensible and sound. But they are only useful to the extent of their persuasive value in the context of the particular facts and contractual provisions that are before me in this case. The observations of Megarry VC are as follows:
“If the notice was addressed to the wrong person, but was nevertheless delivered to the right person, the question would be whether the mis-addressing prevented the notice from being given to the right person. The purpose of a notice is, of course, to convey information and if the notice, despite its being misaddressed, suffices to convey the requisite information to the right person, I would have thought that it would satisfy the terms of the lease.”[10]
35. For all those reasons, I have reached the view that the notice of exercise of option is valid. If I am wrong, I have concluded that the defendants are estopped from denying the validity of the notice.
Estoppel
36. The essence of the estoppel for which the plaintiff contended was that it had been induced or encouraged by the conduct of the defendants to assume that its notice of exercise of option was valid notwithstanding that it was addressed to and served upon SPM as the defendants' agent. It contends that, at least, between 17 October and 9 November 2008, the defendants knew that the plaintiff was acting on that assumption; knew that from 9 November 2008 the option period would expire; and knew that the plaintiff would suffer detriment if the assumption were found to be legally incorrect and the plaintiff did not re-address its notice before 9 November.
37. The facts supporting the elements of the plaintiff's case on estoppel emerged clearly from the contemporaneous documents. In important aspects, they were reinforced, indeed highlighted, by Mr Loblay's evidence. I have no difficulty in making the following findings.
38. From 16 October 2008, the plaintiff assumed that the notice of exercise of option was valid notwithstanding that it was addressed to and served upon SPM as the agent of the defendants. I am satisfied that Mr Loblay's letter of 29 August 2008 did not come to the attention of any relevant officer of Westpac or United before 9 November 2008. The plaintiff’s assumption was made because in the commercial context that existed between these parties, and given the course of dealing between them, it was the reasonable assumption to make and followed naturally from the conduct of the defendants and SPM. That course of dealing included the previous notice of exercise of option in 2003 which was addressed to SPM by Westpac’s agent and was accepted and acted upon. It also included numerous communications between the respective agents for both parties during the preceding years. One of those communications was the letter dated 6 August 2008 from SPM to United inviting exercise of the option.
39. From at least 17 October 2008, the conduct of the defendants by themselves or through their agent, SPM, induced or encouraged the plaintiff to maintain that assumption. On 20 October 2008, the defendants' agent signed, acknowledged and returned to United the notice of exercise of option dated 16 October 2008. Neither at that time nor at any time before 9 November 2008, did SPM or the defendants inform the plaintiff that, consistently with Mr Loblay's letter of 29 August, the notice of exercise of option should have been addressed to and served upon the defendants. There is force in the defendants' submission that in an ordinary situation, the landlord would have no duty to correct the mistake of the tenant, but this was not an ordinary situation and the position is revealed more starkly by the evidence of what occurred on 17 October and 3 November.
40. On 17 October 2008, after receipt of the notice of exercise of option addressed to SPM, Mr Loblay specifically instructed Mr Mann that any further communication from Westpac or United should be referred to him. No reasons for doing so were explained.
41. On 3 November 2008, a Mr Thompson, who had taken over as the Senior Property Manager of United on the Westpac account, sent an email to SPM stating that United had exercised the option. His statement indicated his assumption as to the validity of the exercise of the option. It might have been thought that it called naturally for correction if the known basis on which the assumption should have been contradicted was merely that it was addressed to SPM and not to the defendants. Mr Thompson followed up his email a short time later and asked if someone could please respond.
42. There was no response. Instead, the records of the defendants reveal an internal email which provided as follows:
"Please tell them nothing and ignore them at this point. I refer to LL's instruction. If they call then direct them to me.”
43. The email was from Mr Mann, a senior officer of SPM to Ms Holloway, another officer of SPM. It was copied to Mr Loblay. Mr Mann was not called to give evidence and Mr Loblay gave no evidence to explain or qualify this email. The reference to "LL's instruction" was clearly a reference to Mr Loblay. His position at the hearing was that he was entitled to sit back and let the plaintiff labour under its own mistake. He asserted that he did not know if the notice of exercise of option was valid. He did know however that it did not conform to the instruction in his letter of 29 August and that he understood the possible significance of that fact.
44. In his evidence, Mr Loblay confirmed the following facts, all of which I find:
- (a) between 17 October 2008 and 9 November 2008, he knew that the notice of exercise of option had been received from United on behalf of Westpac;
(b) he knew that United or Westpac or both assumed that the notice of exercise of option, insofar as it was addressed to the agent, was valid;
(c) on or about 17 October, he assumed that the notice was valid except for the way it was addressed;
(d) from that time, he was alive to the possibility that because it was addressed to the agent, it was not valid - because of his letter dated 29 August 2008 providing for a new address for all notices under the lease;
(e) between 17 October and 9 November 2008, Mr Loblay appreciated that if Westpac or United were told about the potential problem with the address on the notice of exercise of option, it could and would have been readily and rapidly rectified by Westpac.
Estoppel – Underlying Principle
45. The founding principle of equitable estoppel is that equity will grant relief to a plaintiff who has acted to its detriment on the basis of a fundamental assumption in the adoption of which the defendant has played such a part that it would be unfair or unjust if it were left free to ignore it[11]. The unconscionability which attracts the intervention of equity is the defendant's failure, having induced or acquiesced in the adoption or maintenance of the assumption, with knowledge that it would be relied upon, to fulfil the assumption or otherwise permit the plaintiff to avoid the detriment to which it has been exposed[12].
46. In any given case, the emphasis must be on the part which the defendant played in the adoption or maintenance of the assumption by the plaintiff. This will vary from case to case. In a paradigm case of equitable estoppel, such as Central London Property Trust v High Trees House Ltd[13], the defendant's intention will be clear. In such a case the defendant will have intended by its representation to the plaintiff to alter, informally but effectively, the legal position to which it was strictly entitled and will have intended that the plaintiff should act in reliance on that state of affairs. But this is not precisely the same sort of case. The search is not merely for the defendant’s intention but to the part played by the defendant in the adoption of the assumption that leads to the conclusion that it should be estopped from relying on its strict legal rights.
Causation & Inducement
47. The defendants addressed two principal arguments in response to the estoppel claim. The first was that its conduct did not cause the plaintiff’s assumption. I have already found that it did. This is not one of those cases where an estoppel is not made out because the plaintiff’s assumption was arrived at independently and without any causative influence arising from the conduct of the defendant.
48. Further, the defendants and SPM induced and encouraged the plaintiff to maintain that assumption. Part of that inducement arose from the defendants’ deliberate silence from 17 October 2008. In this case, the defendants’ deliberate silence, together with the knowledge which I have found, supports an estoppel. In Waltons Stores v Maher[14], Brennan J said:
Silence will support an equitable estoppel only if it would be inequitable thereafter to assert a legal relationship different from the one which, to the knowledge of the silent party, the other party assumed or expected.
49. In Moratic Pty Ltd v Lawrence James Gordon & Anor[15], Brereton J said:
Thus, in promissory estoppel, it is the defendant’s knowledge of the potential for the plaintiff to incur detriment if it remains silent that may impose on the defendant’s conscience an obligation to speak.
50. In short, a defendant may remain silent except when it has induced or encouraged the false assumption on which, to its knowledge, the plaintiff has acted to its detriment. In the nature of things, when an assumption is induced wholly or partly by conduct of the defendant and maintained by the defendant's silence, acquiescence or inaction, the inference of reliance or causative inducement will usually follow readily. The inference will be manifest if it is apparent from the evidence that, if the plaintiff were informed of the matters known to the defendant, it would have obviously and inevitably rectified the situation and thereby avoided the detriment to which it has been exposed.
Intention
51. The second principal issue for which the defendants contend was that the plaintiff's pleading, and its case, were flawed because of a failure to plead and prove the requisite degree of intention on the part of the defendants. Reliance was placed on a statement by Brereton J in Moratic[16]. But the underlying principle, as Brereton J acknowledged[17], is as I have set out in paragraph [45] above.
52. In general terms, and putting aside the principles of estoppel, misleading conduct or fraud, it is perfectly correct that in an arm's length commercial transaction, a landlord has no duty to point out possible errors, mistakes and misconceptions by the tenant. However, that will not necessarily be the case when the principles of estoppel are enlivened by the context, the course of dealing and the sequence of events between the parties.
53. I have considered all of the careful, detailed and closely reasoned submissions by the defendants setting out all arguments that could possibly be made as to why this aspect of the estoppel case was not made out. Much of it focused on supposed inadequacies in the evidence of Ms Murphy's mental processes. I do not accept these criticisms. In my view, the evidence, not only taken as a whole, but also having regard to the particular matters that I have already mentioned, leads inevitably to the conclusion that the plaintiff's assumption, and the maintenance of that assumption until beyond 9 November 2008, were caused or induced, contributed to and maintained, by the conduct of the defendants and its agent, SPM.
Strike Out Application
54. Finally, on Monday morning, the defendants sought to strike out a part of the plaintiff's pleaded case on estoppel. I dismissed the motion with costs and said at the time that I would incorporate my reasons in the final judgment. I took the view that the application was hopeless; that it was far too late, as the relevant pleading had been filed with the Court's leave as long ago as 10 November 2009; and that the pleading point, if it had any validity, could be determined as part of the overall resolution of the substantive issues. I also took the view that if there were anything in the point, the defendants would be protected if I allowed Mr Loblay to give oral evidence at short notice. The defendants had not proposed to call any evidence from Mr Loblay and had filed no affidavit from him. In the result, Mr Loblay was called and his evidence-in-chief was elicited orally. As it turned out, his evidence following cross-examination served to confirm the inferences adverse to the defendants that I would in any event have drawn from the contemporaneous documents and the sequence of events.
55. I am quite satisfied that Mr Loblay's actual knowledge, which I have recorded in paragraph [44] above, the sequence of events that I have explained and the inferences that can and should be drawn from Mr Loblay’s instruction to Mr Mann on 17 October 2008 and the internal email sent on 3 November 2008, are sufficient for the plaintiff to make out the necessary elements of its estoppel case on knowledge, intention and unconscionability.
Conclusion
56. For those reasons I make the orders and declarations sought in prayers 1, 2, 3 and 4 of the Statement of Claim dated 17 December 2008. I order the defendants to pay the plaintiff's costs. I direct that the exhibits may be returned.
Endnotes
1 Ballas v Theophilos (No.2) (1957) 98 CLR 193 at 205; Mineaplenty Pty Limited v Trek 31 Pty Limited [2006] NSWSC 1203 at [37]
2 See note 1 (supra) and Carter v Hyde (1923) 33 CLR 115 at 126. See also Mannai Investment Co Limited v Eaglestar Insurance Co Limited (1997) AC 749 at 767 per Lord Steyn
3 See note 1 (supra) and Quadling v Robinson (1976) 137 CLR 192 at 201; Riltang Pty Ltd v L Pty Ltd [2002] NSWSC 625 at [20]-[21]
4 See note 1 Mineaplenty (supra) at [38]; Townsend Carriers Ltd v Pfizer Ltd (1979) 33 P & CR 61, 365 (per Megarry VC); Young v Lamb [2001] NSWCA 225 at paras [36]-[39] (per Stein JA); Riltang Pty Ltd v LPty Ltd see note 3 (supra) at [12]-[14]`
5 Gollin & Company Ltd v Karenlee Nominees Pty Ltd & Anor (1983) 153 CLR 455 at 470; See also Tew v Harris (1847) 11 QB 7 [116 ER 376]
6 Gollin (supra); see also Tradax Export SA v Volkswagenwerk AG [1970] 1 QB 537 at 546 per Edmund Davies LJ; Thomas v Fredricks (1847) 10 QB 775, [116 ER 294]
7 Bowes v Chaleyer (1923) 32 CLR 159 at 178-9
8 FAI General Insurance Company Limited (in liquidation) v Parras (2002) 55 NSWLR 49
9 See note 8 (supra) at [25]
10 Townsend Carriers Ltd v Pfizer Ltd (1979) 33 P & CR 361 at 366 (per Megarry VC)
11 Grundt v Great Boulder Gold Mines Ltd (1937) 59 CLR 641 (per Dixon J)
12 Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387 at 423 (per Brennan J)
13 [1947] KB 132
14 See note 12 (supra) at 428
15 [2007] NSWSC 5 at [35]
16 See note 15 (supra) at [32]
17 See note 15 (supra) at [29]
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