Whittle v Parnell Mogas Pty Ltd - [2006] SASC 129

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
WHITTLE & ANOR v PARNELL MOGAS P/L
[2006] SASC 129
Judgment of The Full Court
(The Honourable Justice Debelle, The Honourable Justice Vanstone and The Honourable Justice Layton)
9 May 2006
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - OFFER AND ACCEPTANCE - MATTERS NOT GIVING RISE TO BINDING CONTRACT - STATEMENTS OF INTENTION, NEGOTIATIONS AND INVITATIONS TO TREAT
ESTOPPEL - ESTOPPEL IN PAIS - EQUITABLE ESTOPPEL - PROMISSORY ESTOPPEL
Lengthy negotiations over lease of appellants' property - letter of offer from respondent stipulating conditions - whether conditions precedent to formation of contract - whether conditions waived or fulfilled - whether binding contract formed - whether conduct of respondent in negotiations unconscionably induced an assumption in the appellants upon which they relied to their detriment - whether respondent estopped from denying existence of binding contract.
Attorney-General (Hong Kong) v Humphreys Estate (Queen's Gardens) Ltd [1987] AC 114; Brian Gardner Motors Pty Ltd v Bembridge [2000] WASCA 400; Commonweatlh v Verwayen (1990) 170 CLR 394; Finance & Guarantee Co Ltd v FCT (1970) 44 ALJR 368; Fraser Henleins Pty Ltd v Cody (1945) 70 CLR 100; Guarnaccia v Rocla Concrete Pipes Ltd [1976] VR 302; Jones v Dunkel (1959) 101 CLR 298; Masters v Cameron (1954) 91 CLR 353; Meehan v Jones (1982) 149 CLR 571; Perri v Coolangatta (1982) 149 CLR 537; Pomeroy v Rural Hotels Pty Ltd (1973) 5 SASR 191; R v Bonython (1984) 38 SASR 45; Re Devala Provident Gold Mining Co Ltd (1883) 22 Ch D 593; Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, considered.

WHITTLE & ANOR v PARNELL MOGAS P/L
[2006] SASC 129
Full Court: Debelle, Vanstone and Layton JJ

DEBELLE J. There are two issues in this appeal. The first is whether the parties formed a contract and, if so, what were the terms of that contract. The second is whether the defendant is estopped from denying the existence of a binding contract which required the defendant to take a lease of the plaintiffs’ service station complex at Port Augusta. If the plaintiffs succeed on either ground, it will be necessary to remit the action to the District Court for an assessment of the damages suffered by the plaintiffs.
The facts are set out in the reasons of Vanstone J. I will not repeat them or add to them except to the extent necessary for these reasons.
Was a Contract Formed?
For the reasons which follow, a contract was formed when the plaintiffs received the defendant’s letter dated 9 June 2000. The terms of the contract are contained in the defendant’s letters dated 16 May 2000 and 9 June 2000.
Mr Whittle was plainly making all of the arrangements on behalf of himself and his wife. He had the authority to bind both himself and his wife. The evidence also shows that Mr Hicks had authority to bind the defendant.
The letter dated 16 May 2000 was clearly an offer. The relevant parts of the letter were in these terms:
I am writing to propose an offer from Parnell Mogas Pty Ltd to Lease the Service Station located at Highway 1, Port Augusta, known as “Andy’s Truck Stop”.
I draw your attention to Clause 7, of Lease No. 7653236, and your obligations under that clause to Caltex (Australia) Pty. Ltd.
The Parnell Mogas offer, which is conditional upon the termination of the existing monthly tenancy with Caltex, and Caltex not exercising its rights under clause 7 of the agreement of Lease, is as follows:
Term:
10 (ten) years, with an option for a further 10 (ten) years.
Rental:
$11,500 per month, ($138,000 per annum).
Rental Review:
Annually by the lesser of CPI or 4 (four) percent.
Area:
The area leased is to include the forecourt, driveways, shop/restaurant/kitchen, house and office, but, to exclude the shed immediately to the rear of the site, currently occupied by Bridgestone.
Parnell Mogas will provide uninterrupted access to the shed.
Improvements:
Parnell Mogas will enter the lease subject to the following improvements being completed:
1)    The realignment of the eastern access, site drainage, and sealing of the forecourt and driveways.
2)    The toilets are upgraded to meet all regulations, including wheel chair access.
3)    The proposed integration of the newly installed office into the main building be completed to include additional restaurant seating for 20 people, and provide for approximately 60 square meter sales room, immediately adjacent to the console.
…
Underground Fuel Tanks:
The existing underground fuel storage tanks are to be provided for the use of Parnell Mogas.
Any additional underground storage equipment required by Parnell Mogas during the term of the lease is to be installed at Parnell Mogas expense, and surrendered to AT & MJ Whittle at the termination of the proposed lease.
AT & MJ Whittle are to provide an environmental site assessment prior to the execution of the proposed lease.
…
I trust you will find this offer attractive.
Mr Whittle and Mr Hicks met on 1 June 2000 and discussed the proposal. Thereafter, the defendant sent another letter on 9 June 2000. The implication in that letter is that the parties had agreed the terms of the letter dated 16 May and had also agreed that the lease would commence on 1 August. As the letter stated, the defendant wished to complete the execution of the lease as soon as possible. The letter of 9 June read:
I am writing to confirm the following as a result of our meeting on Thursday 1^st June and with Minas Makridis at Caramag on Monday 5^th June:
1.     Parnell Mogas accepts your proposed commencement date of 1^st August, subject to receipt of your lease document, and its execution prior to July 1^st.
Parnell Mogas would prefer to complete the execution as soon as possible, due to the lead times required for pumps & LPG equipment.
As indicated in the Parnell Mogas offer of the 16^th May, 2000, the execution of any lease is dependant upon the termination of the existing agreement with Caltex.
2.     I met with Minas at Caramag on the morning of the 5/6/00, and indicated the preferred Parnell Mogas site layout. I have asked him to forward to you for your consideration.
3.     Parnell Mogas is interested in purchasing the house on the site subject to the ability to be able to transport to another location. Could you please give some indication as to your willingness to sell and its value.
There is no letter or other document by which the plaintiffs accept the defendant’s offer. However, as Mr Whittle himself said in his evidence, he considered that the parties had reached agreement at the meeting on 1 June 2000. He would, therefore, have considered the letter of 9 June 2000 as confirmation of the defendant’s willingness to proceed. In this respect it is relevant to note that it is the evidence of both Mr Whittle and Mr Hicks that Mr Whittle was not willing to incur expenditure in making improvements to the service station unless he had a commitment from the defendant to enter into a lease. As Mr Hicks himself acknowledged in his evidence, that was commercial common sense. The fact that the plaintiffs began work to improve the service station soon after the letter of 9 June 2000 indicates that they had accepted the defendant’s offer. It also confirms Mr Whittle’s evidence that the parties had reached agreement at the meeting on 1 June 2000.
This was the kind of contract where the parties intended to be bound immediately, although they acknowledged that it would be necessary for a lease in registrable form to be prepared and executed: Masters v Cameron (1954) 91 CLR 353 at 360.
The terms of the contract are contained in the defendant’s letters of 16 May and 9 June. I refer to the main terms of the agreement and, in particular, to the conditions of the agreement. I deal first with the conditions.
The trial judge found that there were three sets of conditions precedent to the execution of the lease. They were
1.the three conditions relating to the improvements which had to be effected to the service station;
2.the termination of the tenancy of Caltex; and
3.the provision of an Environmental Site Assessment.
I will deal with each in turn.
For the reasons which follow, the conditions concerning improvements to the service station complex were not conditions precedent. Instead, they were conditions of the agreement to lease the premises to be performed by the plaintiffs.
The works listed in the paragraphs numbered 1, 2 and 3 of the defendant’s letter dated 14 May 2000 were relatively substantial. The only work which the plaintiffs agreed to complete before the defendant entered into possession was the renovation to the forecourt of the service station, the works described in the first of the numbered paragraphs. The plaintiffs proceeded to have those works carried out and they were completed by 3 August 2000. The plaintiffs, therefore, satisfied that term of the contract.
It was necessary for the works in the paragraphs numbered 2 and 3 to be designed and planned. In May and June the plaintiffs had already instructed a designer. It was necessary for the plaintiffs to obtain both development consent and building consent under the Development Act 1993. Once all development consents had been obtained, a builder would have to be found and the construction completed. All of those steps could not, as a matter of practical necessity, be completed before 1 August 2000, the date when the defendant wished to take possession.
Mr Hicks acknowledged in his evidence that the works could not be completed before 1 August 2000. His evidence was that Mr Whittle had told him that it would take three months to complete the construction of the building work, including obtaining approvals from the Council and tendering for the work. Given that the works could not be completed before 1 August 2000, it is clear that those works were not conditions precedent. Instead, they were conditions of the contract to be performed by the plaintiffs. The defendant agreed to enter into possession on condition that the works were completed by the plaintiffs. If the plaintiffs failed to perform their part of the bargain, the defendant would be entitled to terminate the contract and claim damages.
This conclusion is consistent with the desire of the defendant as expressed in its letter of 9 May 2000 to be able to complete the execution of the lease as soon as possible and to enter by 1 August. In his evidence, Mr Hicks admitted that the defendant wished to enter into possession in the shortest possible time. Thus, the works were not a condition precedent to the execution of the lease.
The next condition that the monthly tenancy of Caltex be terminated was a condition precedent. Plainly, that tenancy had to be terminated so that the plaintiffs were able to give possession of the site to the defendant. On 28 June, Mr Wellington gave Caltex notice to vacate by 31 July 2000. Caltex agreed to vacate the service station but asked if it could have until 6 August to do so in order that it might decommission the premises. The plaintiffs agreed after first obtaining the agreement of the defendant. Thus, the parties agreed that the defendant could enter on 7 August. The condition as to termination of the monthly tenancy was, therefore, satisfied.
The condition relating to the provision of an Environmental Site Assessment was, on any view, a condition precedent, since the condition expressly stated that it was to be provided “prior to the execution of the proposed lease”. The trial judge found that the plaintiffs had failed to satisfy this condition precedent. In my view, the judge erred in reaching that conclusion for the following reasons.
It is important to note the terms in which the condition was expressed:
AT and MJ Whittle are to provide an Environmental Site Assessment prior to the execution of the proposed lease.
The obligation of the plaintiffs was simply to provide an Environmental Site Assessment. The obligation went no further. The plaintiffs did not have to provide an Environmental Site Assessment to the satisfaction of the defendant. Nor did they have to provide an Environmental Site Assessment of a standard which was satisfactory to the defendant. Nor did they have to provide an Environmental Site Assessment of the kind requested by the defendant. Their obligation amounted to no more than the provision of an Environmental Site Assessment, an obligation which was to be objectively determined.
On 18 July, a report dated 14 July 2000 from Coffey Geosciences Pty Ltd (“Coffey Geosciences”) was sent to the defendant by facsimile transmission. The defendant sent that report to its own environmental consultant, PPK Environment & Infrastructure Pty Ltd (“PPK”), which on 21 July reported to the defendant. As a result of the advice from PPK, the defendant in a letter dated 21 July 2000 asked the plaintiffs for further information. On 25 July 2000, a copy of an earlier report by Coffey Geosciences dated 14 May 2000 was sent by facsimile transmission to the defendant. Thus, both reports were in the hands of the defendant by no later than 25 July 2000, more than one week before the defendant was to enter on 7 August. By that time the lease had not been executed. Thus, the reports had been supplied relating to the contamination of air, soil and ground water.
The only question remaining is whether the two reports, when read together, constituted an Environmental Site Assessment. The trial judge held that they were not. In doing so, he relied on a report from and the evidence of Mr Hall, an environmental consultant. For the reasons which follow, he erred in doing so.
Notwithstanding that no objection was taken to the admissibility of Mr Hall’s report and his evidence, I think that the evidence of Mr Hall was not admissible because the question whether the two reports from Coffey Geosciences were Environmental Site Assessments which satisfied the condition precedent to the agreement is not a matter for expert evidence. It is, instead, a matter capable of being determined by the court. In my view, the question whether the reports were Environmental Site Assessments was a question which was capable of being answered by an ordinary person.
The principles governing the admissibility of expert evidence are expressed in these terms in Cross on Evidence (7^th Australian ed) at [29050]:
Two principles govern the question of whether the field is one on which expert evidence can be called. One seeks to exclude evidence on the ground that the ordinary person is as capable of forming a correct view on the question as anyone else. The second seeks to exclude evidence which, since it is not based on an organised body of sound knowledge or experience, is insufficiently reliable.
The learned editor then quotes the well known remarks of King CJ in R v Bonython (1984) 38 SASR 45 at 46 – 47:
Before admitting the opinion of a witness into evidence as expert testimony, the judge must consider and decide two questions. The first is whether the subject matter of the opinion falls within the class of subjects upon which expert testimony is permissible. This first question may be divided into two parts: (a) whether the subject matter of the opinion is such that a person without instruction or experience in the area of knowledge or human experience would be able to form a sound judgment on the matter without the assistance of witnesses possessing special knowledge or experience in the area, and (b) whether the subject matter of the opinion forms part of a body of knowledge or experience which is sufficiently organized or recognized to be accepted as a reliable body of knowledge or experience, a special acquaintance with which by the witness would render his opinion of assistance to the court. The second question is whether the witness has acquired by study or experience sufficient knowledge of the subject to render his opinion of value in resolving the issues before the court.
The editor of Cross then notes:
Aspect (a) seeks to control the reception of statements of the obvious or ordinary. Aspect (b) seeks to control the reception of the arcane. On the one hand, experts should not intrude into areas where their aid is not necessary because the trier of fact should not need it, and where their aid may be disproportionate, because the trier of fact may be deterred from independent effort in the task. On the other hand, experts should not intrude into areas where their aid is not sufficient – because their evidence, though perhaps sincere, is not such that a trier of fact can safely act on it, whether by reason of the charlatanry of the witness or the inherent uncertainties of the subject matter. The justification for aspect (b) as a rule lies in the role of the expert. The trier of fact is not to take any conclusion unquestioningly from the expert, any more than the trier of fact is obliged to rely on non‑expert testimony all pointing one way.
The expression “Environmental Site Assessment” has not been used in a technical or scientific sense in this contract. It has not been used as a term of art. The expression “Environmental Site Assessment” is no more a term of art than the expression “Environmental Impact Statement”, an expression frequently used and well understood in the context of major development projects. The report which the defendant sought could have as easily been called a “Site Contamination Assessment”. An Environmental Site Assessment is what its name clearly states, namely, an assessment of the environmental conditions of the site. In relation to a service station such an assessment would be directed to such issues as contamination of the air, soil, or ground water.
Both the plaintiffs and the defendant were familiar with what a report with such an assessment involved. It is apparent from the evidence that it is the kind of report which is usually obtained when a person quits the occupation of a service station site. One’s ordinary experience of commercial affairs tells that it is the kind of report usually obtained when any property has been used for commercial or industrial purposes involving the use of materials which have a potential to contaminate air, soil, or water. One of the purposes of such reports is to ascertain the levels of contamination, if any, so that any liability for making good any contamination can be apportioned among those responsible for it. Such reports might also be required to provide owners of property with information as to compliance with environmental legislation.
An Environmental Site Assessment may serve several purposes. In this case, it was to assess the level of contamination of air, soil, and ground water in and around the plaintiffs’ service station. An examination of the content of the two reports from Coffey Geosciences show that they were both Environmental Site Assessments. Certainly, when viewed together, they constituted such an assessment. The evidence shows that the reports from Coffey Geosciences were directed to the question of possible contamination of the air, soil, and ground water. The defendant sent the report of Coffey Geosciences dated 14 July 2000 to it own environmental consultant, PPK. PPK replied to the defendant by letter dated 21 July. It is apparent from that letter that PPK treated the Coffey Geosciences’ report as an Environmental Site Assessment. PPK called it an “Environmental Site Assessment Report” and noted readings in that report as to contamination by hydrocarbons of the soil, the water table, and air. PPK advised the defendant that it should be cautious and said that the Environmental Site Assessment held insufficient information for the purpose of assessing if the contamination of the site was static, increasing or deceasing, or whether there were any risks to the nearby aquatic habitat. It recommended a thorough review of the environmental health risk status of the site and offered its services. The defendant sought and obtained the Coffey Geosciences’ report of 14 May 2000 and later instructed PPK to conduct an Environmental Site Assessment.

Furthermore, the evidence of Mr Hall did not establish that the reports of Coffey Geosciences were not Environmental Site Assessments. Instead, he said that further work was required. The effect of his evidence was that the reports from Coffey Geosciences constituted an incomplete set of data and, therefore, could not be regarded as providing sufficient evidence on which to determine the contamination status of the site: see para 2.2.5 of his report. The question whether the reports were adequate for the defendant’s purposes was not the question. The condition precedent required no more of the plaintiffs than that they supply an Environmental Site Assessment. If the defendant sought additional information it was at liberty to do so. It could instruct its own environmental consultant. I repeat that the plaintiffs would comply with the condition simply by providing an Environmental Site Assessment. Thus, the only question was whether the two reports from Coffey Geosciences were, in fact, when read together, an Environmental Site Assessment. It is apparent from a letter by PPK that it regarded the reports from Coffey Geosciences as an Environmental Site Assessment but, like Mr Hall, recommended that the defendant obtain further information.
For these reasons, the Coffey Geosciences’ reports were an Environmental Site Assessment and the plaintiffs satisfied the condition precedent by supplying them to the defendant prior to the execution of the lease. Although the defendant exercised its right to obtain further information, the exercise of that right did not mean that the plaintiffs had failed to satisfy the condition precedent. The defendant instructed PPK which conducted the assessment and reported on 25 September 2000. In the result the defendant did not rely on any environmental issue as a ground for not entering into the lease. Finally, the clear fact is that the defendant did not purport to terminate the arrangements or refuse to enter into a lease because of any environmental factors. That fact is a standard by which to test the contention of the defendant at the trial that the plaintiff had failed to provide an Environmental Site Assessment.
A further reason why the Environmental Site Assessment is of little significance is because, as will be seen, the plaintiffs as lessors agreed to indemnify the defendant in respect of any claim, suit, or demand arising out of contamination by hydrocarbons.
This conclusion is not in any way affected by the fact that the plaintiffs, and Mr Whittle in particular, endeavoured to get further environmental reports. Mr Whittle was not a lawyer. He obviously did not wish to insist on the terms of the agreement which he believed had been made and had been performed. His willingness to take steps to get additional environmental information is no more than evidence of the fact that he wished to do all he could to complete the performance of the agreement at the earliest time.
For these reasons, the plaintiffs satisfied both of the conditions precedent. As the evidence shows, the plaintiffs performed all of the works listed in the paragraphs numbered 1 to 3 of the defendant’s letter of 14 May 2000. The only remaining question is whether the parties had agreed the terms of the lease.
In its letter dated 9 June 2000 the defendant accepted the plaintiffs’ proposal that the lease should commence on 1 August 2000. That date was subject to the receipt of the lease document and its execution by 1 July. On 21 June Mr Wellington, the plaintiffs’ solicitor, sent a draft lease to the defendant. In a letter sent by facsimile transmission on 27 June, Mr Hicks informed Mr Wellington that the defendant accepted the lease but did not agree with cl 7.2, which provided that the defendant as lessee was responsible for any residual hydrocarbons and anything incidental to that, including complying with all legislation and the requirements of any Authority, and which provided also that the defendant as lessee indemnify the plaintiffs as lessor against any claim, suit, or demand resulting from the existence of any residual hydrocarbons. On the same day Mr Wellington amended cl 7.2 so that the plaintiffs, not the defendant, were responsible for any residual hydrocarbons and indemnified the defendant against any claim, suit, or demand relating to them. Effectively, Mr Wellington reversed the obligations as stated in the first draft of the lease. By facsimile transmission on 27 June he sent the amended cl 7.2 to Mr Hicks. He asked Mr Hicks to confirm that the changes satisfied the defendant’s concerns as to contamination issues. The relevant part of the facsimile reads:
Please confirm that these changes satisfy your concerns in relation to the contamination issue. As my clients have not seen these changes, I reserve their right to vary them. If the amendments are acceptable to you and my clients, I will finalise the lease and arrange for execution copies to be sent to you.
I look forward to hearing from you.
Mr Hicks did not immediately reply. However, the defendant did not seek to vary cl 7.2. The defendant did not at any time express any dissatisfaction with the terms of the amended cl 7.2. The lease was to all intents and purposes ready for execution by the end of June, or at the latest, early July.
Indeed, a lease in terms satisfactory to both parties was in fact prepared and was ready for execution by 4 October 2000. Mr Hicks expressly acknowledged that it was satisfactory to the defendant. The only change which had occurred after 27 June 2000 was the inclusion of a plan of the site. If it had been requested, a plan of the lease site could have been included before 1 August 2000.
Although the parties had initially agreed that the defendant would enter on 1 August 2000, they later agreed to amend that date to 7 August 2000 to allow Caltex time to decommission the site. By 7 August 2000 the terms of the lease had been agreed and there was nothing to prevent it being executed. The lease included all of the terms which had been set out in the defendant’s letter of 14 May. If it had been requested before 7 August 2000, the plan of the leased site could have been added. The two conditions precedent had been satisfied. Finally, the plaintiffs had completed the renovation of the forecourt by 3 August 2000. In short, all of the terms of the contract had been complied with save for the execution of the lease. However, on 3 August 2000 the defendant sought to impose new terms.
The defendant’s letter of 3 August 2000 was an attempt to introduce new terms into an already existing contract. It was in these terms:
I am writing to confirm the terms and conditions Parnell Mogas require to be met before committing to the Lease the Service Station located at Highway 1, Port Augusta, known as “Andy’s Truck Stop”.
1)Development Application and Building Approval obtained from the Corporation of the City of Pt Augusta, and a copy of the approval forwarded to our office.
2)Immediately Parnell Mogas is notified of the Building Approval being granted Parnell Mogas will obtain, at its own expense, an independent Environmental Site Assessment, ESA.
3)Subject to the results of the ESA, upon Building Approval being obtained, providing this occurs after 1^st September 2000, Parnell Mogas to commence paying 50% of the agreed rental, or $5,750.00 per month until such time as the building works are completed, and the business can commence operating without disruption.
4)Parnell Mogas undertakes that subject to the above it will make all reasonable attempts, as soon as practicable, to commence full operation of the site.
I trust you will find this acceptable, and reconfirm Parnell Mogas’s commitment to a long term successful business association.
The timing of the letter is interesting. It was sent at the very time when the defendant might have expected to have been presented with a lease for execution. In this respect it should be noted that Mr Hicks acknowledged in his evidence that, when he received the amended terms of the lease on 27 June 2000, all of the terms and conditions relating to the letting had been agreed.
Mr Hicks also acknowledged that most of what was contained in Mr Wellington’s letter of 4 August 2000 was true. It was in these terms:
We acknowledge receipt of your fax of 3^rd August 2000 and the copies of letters dated 16^th May 2000 and 3^rd August 2000 with it.
We have spoken to our client Albert Whittle concerning your letter of 3 August 2000.
As has been communicated to you by Mr Whittle, the matters raised in that letter conflict with what has already been agreed. For you to insist on the matters raised in the letter will cause our client significant damage.
We would have hoped that the start of what is to be a long relationship between you and our client could have occurred without the hick up [sic] generated by your letter.
We trust that the matters raised in this letter will quickly and quietly subdue the situation.
We consider that there is ample evidence of an agreement as to terms of Lease having been concluded following your letter to us of 27^th June 2000 and our response to you of that date.
Nowhere in that agreement are there to be found conditions such as those you refer to in your letter of 3^rd August 2000.
The salient facts are as follows:
1.When our client commenced discussions with you concerning leasing the premises, Caltex was a monthly tenant.
2.There was another party interested in leasing the premises from our client but our client chose to deal with you.
3.Your letter to our client of 16^th May 2000 offering to lease the premises sets out the basic terms of your offer. The letter contains, on the second page, the reference to particular improvements being completed.
4.It was never intended that those improvements be completed prior to the commencement of the Lease. It was never stated that they should be. Indeed, you indicated to our clients that you required the Lease to commence on 31^st July 2000 or 1^st August 2000 which clearly confirms the fact, given that the monthly tenancy to Caltex had to be terminated before the works could progress.
5.By your fax to our client of 9^th June 2000, your purported to accept a commencement date of 1^st August 2000. Despite your letter suggesting that that date was proposed by our client, our notes indicate that was a date originally proposed by you. Your letter indicates that you met with Caramag which was preparing the building plans, indicating your preferred site layout. Your requirements relating to the plans required amendments to the plans.
6.On 21^st June 2000, we forwarded to you a draft Lease covering the agreement that had been reached.
7.On 27^th June, you wrote to us accepting the draft Lease except for clause 7.2, stating that you would not accept responsibility for prior contamination.
8.On the same day, we made appropriate amendments to that clause and faxed them to you.
9.At that stage, we suggested that the terms and conditions relating to the letting had been agreed. That is clearly the case.
10.Those terms and conditions do not contain the matters now sought to be introduced by you in your letter of 3^rd August 2000.
11.Based on having reached agreement with you, the following day, on 28^th June 2000, we served notice on Caltex terminating its monthly tenancy.
As one clear month’s notice had to be given, the tenancy would not cease until the end of July 2000.
12.Our client kept you fully informed of all progress with respect to his requirement that Caltex prepare environmental assessment reports.
Our client also advised you and you did not disagree to Caltex having 7 days to decommission the premises post the termination of the Lease on 31^st July 2000.
13.As late as last week, the existing occupier of the premises by way of a licence from Caltex, indicated to our client that it wished to discuss it’s continued occupation of the premises.
That was made known to you, and you confirming your commitment to the site led to our client not progressing the matter with the current occupier.
Given the above, our client’s expectation and what should have happened is that you should have commenced paying the full rent on and from Monday, 7^th August 2000. Our client’s obligation pursuant to the agreed terms was to complete the building within a reasonable time, as no set time was stated.
There was no provision relating to payment of half rental until such time as the building works are completed. That was simply not agreed. What is in the Lease is a provision to the effect that our client will cause as little disruption to your business as is possible during any building works.
Were matters such as those raised by your letter of 3^rd August 2000 raised in June 2000, our client would have acted in a completely different manner. He may have preferred to deal with the other interested party. He may have left Caltex in occupation of the premises on a monthly tenancy until such time as the necessary building approvals (which we understand are a formality) had been attended to or indeed the building substantially completed.
Given the above, we ask that you reconsider your position. We invite you to seek independent legal advice.
For our part, our client will proceed diligently with obtaining necessary approvals in completing the building works in accordance with the Plans.
Please advise us of your attitude as a matter of urgency.
Mr Wellington had sent his letter in answer to the defendant’s letter of 3 August. The effect of Mr Hicks’ evidence in cross-examination was that he admitted that the terms and conditions of the letting had been agreed, that the lease had been agreed, and that the parties had agreed that the defendant would enter on 7 August after Caltex had vacated the service station on 6 August. He also acknowledged in his evidence that what was contained in the letter of 3 August 2000 were new terms and conditions, and that it was a letter he had been instructed to write by Mr Patten, a director of the defendant. The letter of 3 August was plainly an attempt by the defendant to introduce additional terms and conditions into the contract. It changed the terms as to an Environmental Site Assessment from being a term which required an Environmental Site Assessment to be provided to a term which made the contract subject to the results of the Environmental Site Assessment, a clear departure from the terms of the letter of 14 May. To use the colloquial expression, the defendant “attempted to shift the goalposts”.
It might be observed that by about August and September 2000 Mobil Oil, which held a one-half interest in the defendant company, was taking a stronger role. It is reasonable to infer that this is what caused the change in the defendant’s attitude.
In any event, it must be observed that the plaintiffs fulfilled all of the terms which the letter of 3 August required it to perform. It obtained consents for and completed the building work as requested in the letter of 3 August. In addition, the defendant did not terminate because of the environmental condition of the site. In that respect, the defendant’s attitude was in all likelihood the result of the fact that the report from PPK was relatively favourable. PPK had reported to the defendant that as a result of its investigations
… the presence of hydrocarbon impact in site soils and ground water are unlikely to pose a significant risk to onsite workers, however the beneficial use of the aquifer is compromised and may be impacting offsite.
PPK proposed some measures to deal with that latter issue.
Estoppel
In the alternative, the plaintiffs say that the defendant is estopped from denying the existence of a binding contract that required it to take a lease of the plaintiffs’ service station. The plaintiffs ground their case on a promissory estoppel. For the purpose of the issues in this appeal it is sufficient to refer to the decisions of the High Court in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 and in Commonwealth v Verwayen (1990) 170 CLR 394. In the course of their examination of the development of promissory estoppel in Waltons at 404, Mason CJ and Wilson J said:
One may therefore discern in the cases a common thread which links them together, namely, the principle that equity will come to the relief of a plaintiff who has acted to his detriment on the basis of a basic assumption in relation to which the other party to the transaction has “played such a part in the adoption of the assumption that it would be unfair or unjust if he were left free to ignore it”: per Dixon J in Grundt; see also Thompson. Equity comes to the relief of such a plaintiff on the footing that it would be unconscionable conduct on the part of the other party to ignore the assumption. (Citations omitted)
As will be seen, the plaintiffs in this case acted to their detriment on the basis of an assumption that the defendant would take a lease of their service station, and that assumption was grounded on representations of the defendant of such a kind that it would be unconscionable for the defendant to deny the existence of an agreement for lease.
Promissory estoppel extends to representations as to future conduct: Waltons per Mason CJ and Wilson J at 399, and Brennan J at 427 – 428. At 406 Mason CJ and Wilson J said:
The foregoing review of the doctrine of promissory estoppel indicates that the doctrine extends to the enforcement of voluntary promises on the footing that a departure from the basic assumptions underlying the transaction between the parties must be unconscionable. As failure to fulfil a promise does not of itself amount to unconscionable conduct, mere reliance on an executory promise to do something, resulting in the promisee changing his position or suffering detriment, does not bring promissory estoppel into play. Something more would be required. Humphreys Estate suggests that this may be found, if at all, in the creation or encouragement by the party estopped in the other party of an assumption that a contract will come into existence or a promise will be performed and that the other party relied on that assumption to his detriment to the knowledge of the first party. (Citation omitted)
Brennan J at 428 – 429 listed the relevant principles in these terms:
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.
What emerges from these extracts is that the promisor must not only fail to fulfil his promise, but there must also be unconscionable conduct on the part of the promisor, and the promisee must have acted to his detriment in reliance on the promise. For the reasons which follow, this is a case which satisfies the principles expressed above.
Many of the facts which have already been noted also assist in determining whether the defendant is estopped from denying the existence of an agreement for lease. However, I will refer to those facts which point to the existence of the estoppel.
The defendant’s letter of 14 May 2000 had expressed the intention to enter into possession of the service station immediately upon Caltex vacating the site. When Mr Whittle and Mr Hicks conferred on 1 June 2000, Mr Hicks said that the defendant wished to enter in the shortest possible time. That desire was confirmed in the defendant’s letter of 9 June 2000 which stated that the defendant “would prefer to complete the execution” [of the lease] as soon as possible. The letter, however, acknowledged that execution depended on the determination of the vacancy of Caltex. The plaintiffs were clearly induced to act as they did by the fact that the defendant not only expressed its intention to enter into a lease, but also re‑inforced that statement of its intention by stating that it wished to do so in the shortest possible time.

After receiving the defendant’s letter of 9 June, the plaintiffs took all the steps necessary to prepare the site, as well as giving instructions for the preparation of the lease and all other steps necessary to enable the defendant to enter. The plaintiffs arranged for a contract to be let for the works to renovate the forecourt. The work was completed by 3 August, that is to say, several days before the defendant was to enter on the amended date of 7 August 2000.
In September 2000 the defendant applied for development consent and building consent to effect the alterations and improvements to the service station complex. Those consents were ultimately granted in November 2000 and the works were completed at a cost of $57,428. In addition, further work was done to the forecourt at a cost of $142,041. The defendant’s letter of 3 August encouraged the plaintiffs to do those works.
The plaintiffs instructed their solicitors to prepare the lease and the terms of the lease were agreed by the end of June 2000. The plaintiffs incurred costs of $7,750 in relation to the preparation of the lease.
In short, the plaintiffs had every reason to assume that the defendant had a firm commitment to enter into the lease and they expended very substantial sums of money on the basis of that assumption. Not only did they spend money in order to enable the defendant to enter into the lease, they also terminated the tenancy to Caltex.
The defendant knew that all of these works were being undertaken. Mr Hicks knew of the works to improve the forecourt, which were completed before 3 August 2000. He also knew of the plans for the additions and alterations to improve the service station site and, as will be seen, was actively involved in the design of those improvements. The defendant also knew that the plaintiffs were performing the works because they believed that the defendant was committed to taking the lease. Mr Hicks admitted in his evidence that Mr Whittle had said to him that the plaintiffs were not prepared to make improvements to the service station unless someone was committed to take a long‑term lease. As Mr Hicks said, that made commercial common sense. With that knowledge, the defendant stood by and allowed the plaintiffs to expend very substantial sums of money on quite extensive improvements to the service station.
The Environmental Site Assessment is no bar to the estoppel since, for the reasons already given, the defendant at no time relied on it as a ground for not proceeding with the lease.
The defendant was not only aware of all that the plaintiff was doing, but also encouraged it. On 5 June 2000, only a few days after the meeting on 1 June, Mr Hicks met Mr Minas Makridis. Mr Makridis is the person referred to in the paragraph numbered 2 in the defendant’s letter of 9 June 2000. Mr Makridis is a director of Carumag Corporation Pty Ltd, which had been engaged by the plaintiffs to design the additions and alterations to improve their service station at Port Augusta. In the course of the meeting, Mr Hicks required amendments to the proposals. Those amendments were not insignificant. They involved increasing the size of the restaurant and, in addition, providing a designated area of about 60 square metres as a shop. It was necessary for Mr Makridis to alter the plans. This increased the design costs incurred by the plaintiffs. It also added to the capital cost of the additions. Mr Makridis altered them and sent them to Mr Hicks. Mr Hicks also required some slight colour changes and those were made. The plans were agreed in early August. Those plans were essentially the plans for which the plaintiffs sought and obtained development and building consent.
By requiring alterations to the plans and approving those alterations, the defendant induced the plaintiffs to proceed and incur the expenditure not only of design, but also of obtaining all necessary consents, and ultimately, the cost of carrying out the works. The fact that the defendant agreed the terms of the lease was a further inducement to the plaintiffs to proceed with the additions and alterations to the service station after it had completed the works to the forecourt.
Thus, knowing that the plaintiffs were proceeding on the assumption that the defendant was committed to leasing the service station, the defendant
·encouraged the plaintiffs to terminate the tenancy of Caltex, thereby leaving them without a tenant;
·encouraged the plaintiffs to incur the cost of the preparation of a lease and agreed the terms of the lease;
·induced the plaintiffs to undertake the works to improve the forecourt;
·required the plaintiffs to amend the proposed additions and alterations to the service station in order to accommodate the defendant’s requirements, and so required the plaintiffs to incur the increased costs of those additions and alterations; and
·induced the plaintiffs to proceed with the additions and alterations by requiring them to obtain all development consents and incur the cost of obtaining those consents.
I adapt the remarks of Mason CJ and Wilson J in Waltons at 406 – 407. The defendant was not entitled to stand by in silence when it must have known that the plaintiffs were proceeding on the assumption that they had an agreement, that the terms of the lease had been agreed and that the execution of the lease was but a mere formality.
The defendant was under an obligation to inform the plaintiffs if it did not have a firm intention to proceed. The defendant’s inaction, in all the circumstances, constituted clear encouragement or inducement to the plaintiffs to continue to act on the basis of the assumption which they had made. It was unconscionable of the defendant to do so, knowing that the plaintiffs were exposing themselves to detriment by acting on the basis of a false assumption to adopt a course of action which encouraged them in the course which they had adopted.
Even after 3 August 2000 the defendant continued to encourage the plaintiffs to proceed with the alterations and additions. With that knowledge and after inducing the plaintiffs to act in this way, the defendant unilaterally withdrew from the arrangement. Given what it had induced the plaintiffs to do and given the expenditure that they had incurred to meet the wishes of the defendant, the defendant’s conduct was plainly unconscionable. It was unconscionable of the defendant not to enter into the lease.
Even as late as October 2000 the defendant was taking steps to enable entry to the service station. It applied to the Petroleum Product Retail Outlets Board for suspension of the plaintiffs’ licence on the ground that renovations to the site were being carried out and that the defendant intended to commence operation as soon as practicable. Mr Whittle knew of that application. It is but a further instance of the defendant’s inducements to the plaintiffs.
The fact that the judge accepted Mr Hicks’ version of the conversation between Mr Whittle and Mr Hicks on 12 June 2000 does not alter this conclusion. Mr Whittle’s evidence was that in that conversation he informed Mr Hicks that he had received a “very attractive offer” from another party to lease the premises. Mr Whittle said that Mr Hicks informed him that the defendant was “committed to take the lease on 1 August”. Mr Hicks’ version of the conversation was different. He said that, when Mr Whittle told him of the offer, he replied that Mr Whittle had to make a business decision in Mr Whittle’s own interests and that he would not advise Mr Whittle about it. In my view, the evidence given by Mr Whittle is more consistent with the course of events. The evidence of Mr Hicks is inconsistent with later evidence given in cross‑examination. However, the plaintiffs’ case does not depend upon this conversation. What is of more significance is that the defendant and, in particular Mr Hicks, were well aware of the expenditure being incurred by the plaintiffs with a view to meeting all of the requirements of the defendant.
The plaintiffs suffered a substantial detriment as a result of the defendant’s conduct. The principle underlying the doctrine of promissory estoppel is the prevention of detriment that would result from reliance on promises where the promisor is aware that the promisee is acting to his detriment and it would be unconscionable if the promisor was not bound to his promise. The principle was expressed in these terms by Brennan J in Waltons at 426 ‑ 427:
If the object of the principle of equitable estoppel in its application to promises were regarded as their enforcement rather than the prevention of detriment flowing from reliance on promises, the courts would be constrained to limit the application of the principles of equitable estoppel in order to avoid the investing of a non-contractual promise with the legal effect of a contractual promise. …
The qualifications proposed bring the principle closer to a principle the object of which is to avoid detriment occasioned by non-fulfilment of the promise. But the better solution of the problem is reached by identifying the unconscionable conduct which gives rise to the equity as the leaving of another to suffer detriment occasioned by the conduct of the party against whom the equity is raised. Then the object of the principle can be seen to be the avoidance of that detriment and the satisfaction of the equity calls for the enforcement of a promise only as a means of avoiding the detriment and only to the extent necessary to achieve that object. So regarded, equitable estoppel does not elevate non-contractual promises to the level of contractual promises and the doctrine of consideration is not blown away by a side-wind.
In Verwayen Mason CJ said at 429:
The relevant detriment in a case of equitable estoppel is detriment occasioned by reliance on a promise, that is, detriment occasioned by acting or abstaining from acting on the faith of a promise that is not fulfilled. The relevant detriment does not consist of a loss attributable merely to non-fulfilment of the promise.
Thus, the detriment must result from the promisee relying on the promise or representation made by the promisor. It is manifestly apparent from the facts listed above that the plaintiffs acted to their detriment in reliance on the representations and conduct of the defendant in expressing its intention to enter into a lease of the service station site. They were induced to spend in excess of $200,000.
For these reasons, the defendant is estopped from denying the existence of a binding contract that it would take a lease of the plaintiffs’ service station complex at Port Augusta from 7 August 2000.
Conclusion
I would therefore allow the appeal. The order of the judge of the District Court should be set aside and in lieu thereof there should be judgment for the plaintiffs. The action should be remitted to the District Court for assessment of the damages incurred by the plaintiffs.
VANSTONE J.
Introduction
In the District Court the plaintiffs, now the appellants, sought damages arising from a dispute over a lease. The plaintiffs claimed that they should succeed because a contract had been struck. In the alternative, they claimed that the defendant was estopped, by its conduct, from denying a contract. The trial judge dismissed the claim. The plaintiffs claim the judge’s findings were not open to him.
Background
The plaintiffs, Mr and Mrs Albert Whittle, leased premises located on Main North Road, Port Augusta, to Caltex (Australia) Pty Limited. The premises were operated by a sub-lessee, Mr David Robinson. At the end of 1999 that lease expired and Caltex remained in occupation on a monthly tenancy. By January 2000 Mr Whittle had formulated a plan to upgrade the site. Dates to be mentioned are in 2000.
Mr Whittle wished to secure a long term lessee prior to embarking on such work. In April he met with Mr Robert Hicks of Parnell Mogas Pty Ltd, the defendant on appeal, both at Port Lincoln and at the premises. Then on 16 May, Parnell Mogas wrote to the plaintiffs offering to lease the premises upon certain conditions. How the conditions should be characterised was a matter of dispute at trial, and on appeal. Therefore, I set out the relevant sections of the letter:
Dear [plaintiffs],
I am writing to propose an offer from Parnell Mogas Pty Ltd to Lease the Service Station at Highway 1, Port Augusta, known as “Andy’s Truck Stop”.
…
The Parnell Mogas offer, which is conditional upon the termination of the existing monthly tenancy with Caltex, and Caltex not exercising its rights under clause 7 of the agreement of Lease, is as follows:
…
Improvements:
Parnell Mogas will enter the lease subject to the following improvements being completed:
1)    The realignment of the eastern access, site drainage, and sealing of the forecourt and driveways.
2)    The toilets are upgraded to meet all regulations, including wheel chair access.
3)    The proposed integration of the newly installed office into the main building be completed to include additional restaurant seating for 20 people, and provide for approximately 60 square metre sales room, immediately adjacent to the console.
…
Underground Fuel Tanks:
The existing underground fuel tanks are to be provided for the use of Parnell Mogas.
…
AT & MJ Whittle are to provide an environmental site assessment prior to the execution of the proposed lease.
…
I trust you will find this offer attractive.
Yours faithfully,
R G Hicks
Marketing Manager
On 1 June Mr Whittle and Mr Hicks met again at Port Lincoln. Mr Whittle gave uncontested evidence that he informed Mr Hicks that the development would not proceed without a long term lease. By facsimile letter of 9 June, Mr Hicks informed the plaintiffs that the defendant accepted 1 August as the commencement date of the lease subject to the receipt of lease documentation and execution prior to 1 July. Mr Hicks also advised that while the defendant was eager to complete execution, that was dependent upon the termination of the existing agreement between the plaintiffs and Caltex. The tenancy was terminated, as required.
On 21 June the plaintiffs’ solicitor sent a draft lease to the defendant. In response, Mr Hicks requested that the draft be amended so that the Whittles would be responsible for any contamination of the site prior to the commencement date and Parnell Mogas thereafter. The plaintiffs’ solicitor made the change and sent the amended document on 27 June. The plaintiffs claimed that at least after this correspondence a contract existed. However both draft leases made provision for annexing an Environmental Site Assessment (“ESA”) as stipulated in the 16 May letter of offer. It was common ground that no such document was ever annexed to any version of the lease.
Whether the requirement of providing an ESA was a condition precedent to executing the lease, and whether that requirement was waived or indeed, as later alleged, fulfilled, loomed large both at trial and on appeal. The defendant argued, and the trial judge found, that there was a “clear difference” between the provision of an ESA report (which he found never occurred) and the allocation of responsibility for contamination of the site. The judge found that the defendant was, throughout, insistent upon requirements in relation to both matters.
The outgoing tenant, Caltex, was required to provide environmental reports to the plaintiffs so that its liability for the condition of the site could be quantified. To this end, on 19 May and 14 July, Caltex provided reports furnished by Coffey Geosciences Pty Ltd (“Coffey”) purporting to assess the groundwater and human health risk respectively. Mr Whittle said he received these reports, and two others, and passed them on to Mr Hicks. There was no evidence that any correspondence or advice from Mr Whittle accompanied them, but it appears their provision was referable to the ESA required by the defendant. The reports did not satisfy the defendant. In a letter to Caltex of 27 July, Mr Whittle advised that he and Parnell Mogas required a summary of the conclusions to be gleaned from the reports, outlining the type and severity of risk and the remedial work required in relation to contamination. Caltex agreed to carry out further work, resulting in a third report, dated 2 August. Again, Mr Whittle refused to release Caltex from its environmental obligations. The defendant remained concerned as to a potential health risk at the site. A further report, relating to air quality, was produced, dated 30 August. Again Mr Whittle declined to release Caltex from its obligations to address contamination under the previous lease.
At about this time Mobil, the ultimate holding company of the defendant, assumed greater control of it. Counsel for the plaintiffs suggested that a consequence of this was a change of heart about formalising the agreement. An alternative view suggested that the negotiating process was continuing, albeit with the defendant’s operations managed more closely by Mobil. By letter of 3 August to the plaintiffs, Mr Hicks asserted that Parnell Mogas was not yet committed to lease the premises. He nominated the events which the defendant required to occur before signing. These were listed as:
1)Development Application and Building Approval obtained from the Corporation of the City of Port Augusta and a copy of the approval forwarded to our office.
2)Immediately Parnell Mogas is notified of the Building Approval being granted Parnell Mogas will obtain, at its own expense, an independent Environmental Site Assessment, ESA.
3)Subject to the results of the ESA, upon Building Approval being obtained, providing that occurs after 1^st September 2000, Parnell Mogas to commence paying 50% of the agreed rental, or $5,750.00 per month until such time as the building works are completed, and the business can commence operating without disruption.
4)Parnell Mogas undertakes that subject to the above it will make all reasonable attempts, as soon as practicable, to commence full operation of the site.
The response of the plaintiffs’ solicitor to Mr Hicks, on 4 August, foreshadowed the issues which arose at trial. He asserted that an agreement as to terms of the lease had already been reached in the exchange of letters of late June. He said that agreement did not include the terms enumerated in Mr Hicks’ letter of 3 August. It was suggested that had the issues raised in the 3 August letter been ventilated in June, the plaintiffs might have negotiated with another interested party, or continued Caltex’s monthly tenancy pending progress in relation to the building developments.
Mr Whittle then had discussions with representatives of the defendant over several telephone calls. Mr Whittle said in evidence that Mr Hicks told him that Parnell Mogas was “still going to be there” but that the directors were making it “difficult to get a decision”. Mr Whittle said that the defendant’s chief executive officer, Mr Patten, then telephoned him. Mr Patten sought the “withdrawal” of the 4 August letter. He said that the company had a new direction and that all decisions were coming from overseas. Mr Whittle claimed Mr Patten said that he “expected at some stage we would get the lease signed but … he wouldn’t have [it] signed under threat of legal action.” Mr Whittle said that after that conversation he believed that the parties were “still proceeding” and, in compliance with Mr Patten’s request, instructed his solicitor to “withdraw” the letter.
The plaintiffs pointed to other evidence they said supported the defendant’s intention to proceed. That included arrangements made by it with third parties in preparation to operate at the site. However, that evidence is consistent as much with an expectation or hope of achieving agreement, as it is with a contract already being in place.

On 10 September Mr Whittle wrote to Mr Hicks. He expressed an intention to release Caltex from its environmental obligations with respect to the site upon the completion of the final Coffey report. Accepting that there had been various difficulties in finalising a lease agreement he proposed a new commencement date of 1 October. He stipulated a rent of $8,200 per month, from 1 October until council approval was granted and the building was completed. For the period to follow, he required a ten year lease incorporating all the conditions of the June draft, with a monthly rent of $11,500.
The plaintiffs’ solicitor wrote to Mr Hicks again on 4 October enclosing a further lease, which was substantially similar to the earlier draft, but providing for a reduced rental until the completion of the restaurant extensions and a starting date of 1 October. This seems to be part of the later sequence of events which counsel asserted constituted an agreement.
On 9 October Mr Patten replied directly to the plaintiffs advising them that until the conditions in the letter of 3 August were fulfilled, the defendant would not be making “further arrangements to lease the site”. He said if that was unacceptable, they should negotiate with other parties. Mr Whittle gave evidence that prior to this letter Mr Hicks had told him that he was free to take any better offer.
The parties’ dispute crystallised in the plaintiffs’ solicitor’s letter of 4 December to Mr Hicks in which the plaintiffs asserted that the agreement was effected by the 16 May letter and that they planned to seek another lessee.
At trial the plaintiffs claimed damages for work done and loss of rent and capital value. In dismissing the claim the trial judge found that no contract had been formed and that the defendant was not estopped from denying there was a contract. The appeal attacks both findings.
Grounds of Appeal
The primary submission of Mr Walsh QC, for the plaintiffs, was as to estoppel. He submitted that an equitable estoppel in the form of promissory estoppel arose from the conduct of the defendant prior to 3 August and, failing that, that a separate promissory estoppel arose on the basis of its conduct after that date. He further submitted that the trial judge failed to deal, in his reasons, with some of the evidence tending to prove unconscionable conduct by the defendant.
In the alternative Mr Walsh submitted that a contract had been struck at one of two stages of the negotiations. I propose to deal first with this question of whether an agreement was ever reached.
Was a binding contract formed?
Mr Walsh attacked the judge’s finding that no contract had been formed.
He submitted that the judge erred in finding that the conditions in the letter of 16 May were conditions precedent to the formation of a contract, or, if they were, that they had not been either waived or fulfilled. Those conditions related to termination of the Caltex tenancy, development of the site and provision of an ESA.
Mr Walsh’s position was that the only precondition to entry by the defendant into the lease was the termination of the Caltex tenancy. He argued that the other stipulations were, in effect, conditions subsequent to formation of the contract. As to those, he submitted they were either met by the time occupation was to occur, or were acknowledged by Mr Hicks as only to be complied with in the future.
However, the plain words of the letter of 16 May indicate that there were several “preconditions” demanded by the defendant before signing a lease. One of those was the provision of an ESA report. Such a report was to be provided “prior to the execution of the proposed lease”. As to waiver of that precondition, Mr Whittle’s own evidence did not support Mr Walsh’s submission. Mr Whittle did not claim in evidence in chief that the ESA condition was waived by Mr Hicks at the 1 June meeting or indeed at any time after the end of May. Indeed he acknowledged in cross-examination that the obligation to provide the ESA remained after this time. No doubt it was this evidence which led to a later amendment of the plaintiffs’ pleadings to raise the assertion that the condition had, in any event, been complied with. Not surprisingly, the trial judge accepted the evidence of Mr Hicks that no waiver as to any condition had ever been given. On appeal, counsel for the plaintiffs instead concentrated his challenge on the failure to find that there was compliance with the condition precedent.
The trial judge accepted the evidence of the defendant’s expert, Mr Hall, to the effect that the Coffey reports did not constitute an ESA, as comprehended by the 16 May offer. No evidence challenging this opinion was adduced at trial. Upon the appeal, Mr Walsh submitted that it was the intention of the parties as to what constituted an ESA, rather than expert opinion adduced at trial, that ought to govern the interpretation. However, to say as much does not deny the defendant’s right to call evidence as to what, in the relevant industry, is comprehended by the expression “environmental site assessment”. Such an opinion could amount to a relevant factor.
In respect of the parties’ intention Mr Walsh submitted that the judge should have found that Mr Hicks’ understanding that Caltex would provide an ESA constituted a concession. The implication, Mr Walsh suggested, was that such a report would satisfy the precondition of an ESA report. As support for this position Mr Walsh pointed to a document entitled “Proposal to Head Lease and Operate Andy’s Truck Stop Pt Augusta By Parnell Mogas Pty Ltd April 2000” in which it was specified that Mr Whittle would obtain an ESA from the existing tenant, Caltex. One difficulty with this argument is that Mr Whittle did not say in evidence, nor was Mr Hicks cross-examined to suggest, that provision of the Coffey reports amounted to compliance with the condition. At that stage the plaintiffs’ case was that the ESA condition had been waived. The suggestion of compliance arose for the first time when the plaintiffs were permitted to file a Reply after the close of the defendant’s case. Mr Whittle was not recalled after that time, although leave was given to both parties to call further evidence.
In any event, it seems to me there is, in principle, a difference between the parties’ expectations as to what would occur, as opposed to the question of whether what was provided amounted to an ESA report. Plainly the documents provided needed to contain certain minimum data. Moreover, the very requirement of provision before execution of the lease indicates that the defendant was not prepared to commit to a lease until the content of the ESA was known. The trial judge accepted that it was the policy of the defendant company to obtain such a report before leasing premises. I consider there is no inconsistency between Mr Hicks’ expectation, coupled with provision of the Coffey reports, and the finding, by the judge, that no ESA was provided. Nor, in my view, was the judge obliged to deal with the argument in an evidentiary vacuum.
Although Mr Hicks’ evidence on this point was not without significance, the judge’s finding against the plaintiffs was supported by other evidence which went to the question of intention, namely the defendant’s continuing dissatisfaction with the Coffey reports. No grounds upon which to overturn this finding of non-compliance have been made out. Resolution of the issue was very much a matter of fact for the judge. Therefore I consider there is no reason to overturn the trial judge’s finding that the provision of an ESA report was a condition precedent to execution of the lease.
This finding alone is sufficient to dispose of the argument that a contract was formed either late in June or in October. However, for the sake of completeness, I shall deal briefly with the remaining conditions.
The position is less clear in relation to the conditions which deal with building developments. The wording in the letter of 16 May is at least capable of being understood to mean that fulfilment is not a prerequisite to the execution of a lease. There was also some evidence from Mr Hicks to the effect that he did not expect the plaintiffs to spend money completing the building developments prior to the execution of a formal lease. This would tend to support a finding that the development conditions were conditions precedent to performance, rather than conditions precedent to formation. However, such a finding would not, of itself, avail the plaintiffs. The conditions would still have needed to be fulfilled before any obligation of contractual performance upon the defendant would arise.
According to Mr Hicks’ evidence, accepted by the judge, the understanding was that these developments were to be completed by 1 August, when the defendant was to take possession of the premises. Mr Hicks said that only later did it become evident that not all could be, and at no stage were the conditions waived. At best for the plaintiffs, the failure to fulfil the building development conditions by 1 August would have rendered voidable any contract that had been formed: Perri v Coolangatta (1982) 149 CLR 537; Meehan v Jones (1982) 149 CLR 571. On that analysis the defendant’s new offer on 3 August would not have been contrary to any contractual obligations and Mr Whittle’s protests would have been unwarranted. In any case, I do not consider this situation to have arisen. The non-fulfilment of the ESA condition meant that no contract formed. The learned trial judge’s finding that no contract arose was well open to him. The preparation of further draft leases in the subsequent months does not weaken his conclusion. If anything it fortifies it. None of these were signed, and the preconditions set out by the defendant in the letters of 16 May and 3 August were not fulfilled. For the reasons I referred to earlier, the plaintiffs’ alternative contention fails.
Estoppel
On appeal, the principal argument advanced by counsel for the plaintiffs was as to promissory estoppel, arising from conduct prior to 3 August. At trial the main evidentiary basis for an estoppel was a conversation which Mr Whittle claimed he had with Mr Hicks on 12 June, in relation to a “very attractive offer” he had from another party to lease the premises. He related that, in response, Mr Hicks said that Parnell Mogas “was committed to take the lease on 1 August.” However, Mr Hicks’ version of the conversation was quite different. Mr Hicks said that when Mr Whittle told him of the offer, he replied that the decision facing Mr Whittle was a business decision to be made in Mr Whittle’s own interests and that he (Mr Hicks) could not advise him. The judge accepted Mr Hicks’ version of that conversation.
The plaintiffs’ attack on the judge’s finding focussed upon his having ignored a passage of evidence, the admissibility and use of which was contested. That evidence was this. A former director of the defendant, Mr John Parnell, gave evidence for the plaintiffs. He said that Mr Patten had told him that Mr Whittle had advised Mr Patten by telephone, sometime after 4 May, that he had a firm offer from a third party to purchase the premises and that in response, Mr Patten had told Mr Whittle that an agreement was in place and that he would insist on it being fulfilled. In his evidence Mr Whittle had not claimed any such conversation with Mr Patten. (That of itself casts doubt on Mr Parnell’s reliability on this issue.) As already noted, Mr Hicks gave evidence of such a conversation, but denied giving Mr Whittle any directive. Mr Patten was not a witness at trial. Mr Walsh submitted that in light of Mr Parnell’s evidence, the failure to call Mr Patten to deny the conversation led to an inference against the defendant and was a factor to be brought to account in determining what were the terms of the conversation.
He further submitted that the conflict in the evidence as to whether there was any direct communication between Mr Patten and Mr Whittle should not stand in the way of a finding that Mr Patten’s attitude was that Mr Whittle must stand by the contract and that his stance was communicated to Mr Whittle through Mr Hicks. That was suggested, notwithstanding Mr Parnell’s clear evidence that he was told of a conversation between Mr Whittle and Mr Patten.
Mr Walsh admitted that the evidence of Mr Parnell was, on its face, hearsay. But as I understood him, he put that it was admissible as an exception to that rule, being evidence of an admission against interest. If that were so, then he asserted that the failure to call Mr Patten gave rise to a Jones v Dunkel inference tending to undermine Mr Hicks’ evidence. (See Jones v Dunkel (1959) 101 CLR 298.)
The admissions exception to the hearsay rule applies where the statement in question was made by a party against that party’s interest in the relevant proceedings. In the case of a corporation, admissions can be made through an officer of the corporation with implied or ostensible authority to make statements on the corporation’s behalf: Fraser Henleins Pty Ltd v Cody (1945) 70 CLR 100. In determining whether such authority is present, relevant factors include the officer’s seniority, his function, and the circumstances in which the admission is made: Pomeroy v Rural Hotels Pty Ltd (1973) 5 SASR 191.
However, an admission must be made to a third party; an entity cannot make an admission to itself. For corporate parties this means that statements made ‘within’ the corporation will not constitute admissions. In Finance & Guarantee Co Ltd v FCT (1970) 44 ALJR 368, Owen J, doubting the earlier decision of Re Devala Provident Gold Mining Co Ltd (1883) 22 Ch D 593, held that a chairman’s address to shareholders at an annual general meeting could be used in evidence by a third party as an admission. But central to his Honour’s decision was his conclusion that the company was a public one and records of such meetings were published to the stock exchange and the wider public.
However, statements made between officers or employees of a company would appear to be in a different category. In Brian Gardner Motors Pty Ltd v Bembridge [2000] WASCA 400 it was held that statements made in a conversation between a finance officer and a manager did not amount to admissions on behalf of their company. Similarly in Guarnaccia v Rocla Concrete Pipes Ltd [1976] VR 302, an internal report from one branch of a company to another was held not to be an admission by the company. In both cases, the lack of a third party to whom the statement was made was decisive of the issue.
In the present case the evidence was of assertions made by Mr Patten to Mr Parnell, one of its directors. The statements were allegedly made in a discussion about a business venture of the defendant. This discussion may not have been formal in nature, but both Mr Patten and Mr Parnell were clearly acting in their capacities as officers of the defendant. No third party was involved. In my view such statements would not constitute admissions on behalf of the defendant. Mr Parnell’s evidence of the statements is therefore inadmissible for the (hearsay) purpose of proving the truth of what was related. In those circumstances, no adverse inference arose from the failure to call Mr Patten and the judge was correct to disregard that submission and indeed Mr Parnell’s evidence of what he claimed he was told.
Therefore, I consider that the judge’s finding against Mr Whittle’s claim of an assurance given to him by Mr Hicks is not open to attack. That finding had the effect of markedly undermining any scope for the operation of equitable estoppel.
Mr Walsh further submitted that the trial judge failed to consider and deal with what he described as concessions made by Mr Hicks in evidence. The first of those was that Mr Whittle had informed Mr Hicks on 1 June that he would not proceed with the developments until the defendant was committed to the lease. Mr Walsh submitted that since the developments did in fact proceed, this was evidence that the defendant induced the plaintiffs to assume that a binding agreement existed. I do not consider this point to be of much significance. No doubt many tentative views are expressed during evolving negotiations. There is no particular reason to place emphasis on this one. Mr Whittle might have changed his position or misunderstood it, or simply have backed his judgment. The so-called concession did not weaken Mr Hicks’ evidence.
Mr Walsh also relied upon Mr Hicks’ evidence that he was aware prior to 3 August of the cancellation of Caltex’s tenancy and the commencement of development work on the premises. The fact is that Mr Whittle allowed the work to start without a lease being signed. No doubt he did so because he believed that the lease would be signed. Perhaps both parties did. But I do not think that avails the plaintiffs. As already noted, the judge accepted that Mr Hicks advised Mr Whittle that he was free to make his own business decision.
In relation to the period after 3 August 2000, Mr Walsh submitted that the defendant continued to act “as if there was to be an agreement.” For instance, it applied to the Petroleum Products Retail Outlets Board for suspension of the licence pending the completion of renovations. Mr Whittle said that during discussions following the letter of 3 August Mr Patten and Mr Hicks advised that the lease would be signed. In August and September Mr Hicks attended on, and made suggestions to, Mr Whittle’s architect, draftsman and surveyor. Mr Hicks said to Mr Whittle that the defendant would accept the lease on varied terms. Yet no response was received when a lease in those terms was sent. Mr Walsh submitted that these factors led the plaintiffs to assume that there was an agreement and that the trial judge failed to take into account this evidence. He contended that this material was sufficient to give rise to an estoppel.
Estoppel – legal principles
The relevant principle underlying equitable estoppel is, in general terms, that equity will come to the relief of a plaintiff who has acted to his detriment, by reason of a basic assumption which the other party has induced, to the extent that it would be unconscionable for that other party to depart from it: Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 per Mason CJ and Wilson J at 399-404; per Brennan J at 428-9; per Deane J at 443; per Gaudron J at 458-9.
In terms of this case it seems to me that to demonstrate estoppel, the plaintiffs had to show, at least, that the defendant induced in them an assumption or belief that both parties were bound by an agreement; that the defendant knew that the plaintiffs were acting – on that basis – to their detriment and failed to disabuse them, and that, in the circumstances, their failure to make good the assumption was unconscionable.
No estoppel arises
In view of the judge’s finding that the 12 June conversation claimed by Mr Whittle with Mr Hicks – the “very attractive offer” conversation – was not as described by him, it is difficult to see exactly what conduct by the defendant could ground an estoppel.
The correspondence and evidence of oral communications viewed as a whole present as an ongoing negotiation. The judge was justified in finding that there was no inducement by the defendant to the plaintiffs to adopt the assumption that an agreement had been reached. Merely acting in the hope, assumption or expectaton that an agreement will be reached does not give rise to an estoppel. The plaintiffs’ unsuccessful attempts at procuring a signature on behalf of the defendant on a lease document, the fact that the proposed starting date passed without occupation commencing and the absence of a formal acknowledgment of compliance with any of the conditions, should all have put Mr Whittle on notice that there were problems with respect to any agreement. He perhaps took a risk in terminating the Caltex lease and starting work on redevelopment, but the evidence of inducement is slim. I consider that none of the matters highlighted by Mr Walsh could amount to unconscionable conduct by the defendant.

The trial judge found that it was made clear to Mr Whittle that the plaintiffs were free to negotiate with other parties. He also found that after 3 August, although serious negotiations were taking place, no binding agreement was entered into and it was never held out by Parnell Mogas that such an agreement would be made.
This finding was open to the trial judge. However, even further, it is hard to see any room for the operation of promissory estoppel in the face of the judge’s finding that the offer to lease was conditional upon provision of an ESA and that no such assessment was provided, nor the condition requiring it ever waived. How could equity imply a promise to complete the transaction in such circumstances? The room for operation of estoppel must be slight indeed where a conditional offer is made and the condition is found to have not been met. (See Attorney-General (Hong Kong) v Humphreys Estate (Queen's Gardens) Ltd [1987] AC 114.) The plaintiffs’ case on estoppel must fail.
Conclusion
For these reasons I consider that the attack on the judge’s findings fails. I would dismiss the appeal.
LAYTON J. I have had the opportunity of reading the draft reasons for decision of Vanstone J. I agree that the appeal should be dismissed. I agree in a general sense with her Honour’s reasons for so concluding but in addition I add the following reasons.
There were two major issues on this appeal. The first was whether the parties had entered into a binding contract for the lease of premises. The second issue, which was the major issue before us on appeal, was whether the respondent was estopped from denying the existence of a binding contract which required it to lease the appellants’ service station.
In relation to the issue of whether there was a binding contract reached between the parties, a primary obstacle as the matter was addressed at the hearing before us, was the identification of the terms of the Agreement to Lease which was said to be binding. This appeared to be highly mobile and at one point, three separate agreements were proffered, comprising various combinations of documents and communications. This lack of clarity was a poor starting point upon which to found both the formation of a contract as well as the estoppel arguments.
The most beneficial interpretation of this confusing contractual scenario is contained in the reasons of Vanstone J and centres around the letter of 16 May 2000 and the two draft leases. I agree with the decision of the trial Judge. I also agree with the conclusion reached by Vanstone J, that in the circumstances of this case the requirement for the appellants, “to provide an environmental site assessment prior to the execution of the proposed lease” (“an ESA”), was a condition precedent to the formation of the Agreement to Lease and was not either a condition subsequent or a condition of performance.
As to whether this condition was fulfilled, the evidence before the trial Judge consisted of evidence given by the respondent’s expert Mr Hall, that the Coffey Reports did not constitute any ESA as comprehended in the 16 May 2005 offer. No objection was taken to him giving such evidence and no evidence was called to contradict his opinion.
Further at the trial, Mr Whittle did not give evidence that the two Coffey Reports amounted to compliance with the condition. Also, Mr Hicks was not cross examined to suggest that the provision of the Coffey Reports amounted to compliance. The argument addressed to this Court on appeal was to the effect that it was for this Court to assess whether the condition had been fulfilled, having regard to the intention of the parties as to what constituted an ESA which agreement had not been addressed before the trial Judge.
In my view it is not for this Court on appeal to make an assessment on such a factual issue on which there was ample evidence to support the finding of the trial Judge and which was in no way dependent on credit. Views may differ as to what constitutes an ESA and whether this is a matter for expert evidence only.
I consider that having regard to the evidence at trial there was no error of the trial Judge in finding that the provision of an ESA was a pre-condition, that it had not been fulfilled and it had not been waived.
It follows, that in my view there was no binding contract between the parties for the lease of the premises and further it is my view that the appellants were not under any illusion that they had fulfilled this pre-condition.
Turning now to the question of estoppel. The lack of clarity as to the terms of the Agreement and the fact that it was a pre-condition of the contract that an ESA be provided, which it was not, significantly hampers the appellants’ argument that there was an estoppel.
Whilst one has considerable sympathy for the appellants who had spent money anticipating that the respondent would finalise an agreement to lease their premises, that in my view is insufficient. The respondent’s apparent change of heart, disappointing and even opportunistic as it appears to have been, does not of itself fulfil the essential requirement for promissory estoppel. As Mason CJ and Wilson J said in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 406:
… failure to fulfil a promise does not of itself amount to unconscionable conduct, mere reliance on an executory promise to do something, resulting in the promisee changing his position or suffering detriment, does not bring promissory estoppel into play. Something more would be required.
Their Honours then referred to the case of Attorney-General (Hong Kong) v Humphreys Estate (Queen’s Gardens) Ltd [1987] 1 AC 114 and said at 406 that the “something more” required to found promissory estoppel:
… may be found, if at all, in the creation or encouragement by the party estopped in the other party of an assumption that a contract will come into existence or a promise will be performed and that the other party relied on that assumption to his detriment to the knowledge of the first party.
Further as Brennan J said at 423:
It is only if a party induces the other party to believe that he, the former party, is already bound and his freedom to withdraw has gone that it could be unconscionable for him subsequently to assert that he is legally free to withdraw.
There were many actions of the respondent which provided encouragement to the appellants to proceed with the alterations and additions, which encouragement was given both before and after 3 August 2000. Such conduct was not such as to induce the appellants to assume that there was in fact an agreement to lease which had been made with the respondent such that to depart from that assumption would be unconscionable. For the reasons I have previously given, the appellants were aware of the obligation to provide an ESA prior to the execution of the lease, Mr Whittle did not give evidence that in his view the obligation had been fulfilled and there was no conduct of the respondent which induced the appellants to assume that the pre-condition had been fulfilled. On the contrary for the reasons set out in [55] and [58] of the judgment of the trial Judge, the failure to fulfil the condition was expressly indicated as a concern to the respondent.
In short there was no assumption by the appellants that a lease agreement had been entered into, let alone that this assumption was induced by unconscionable conduct of the respondent. For these reasons therefore I consider that promissory estoppel did not apply. I therefore consider that the appeal should be dismissed.