Wright & Anor v Hamilton Island Enterprises Ltd

[1998] QSC 29

IN THE SUPREME COURT

OF QUEENSLAND  No.  8981 of 1996

[Wright & Anor v Hamilton Island Enterprises Ltd]

BETWEEN:
  JACKI WRIGHT
  First Plaintiff
AND:
  PLANLEY PTY LTD
  Second Plaintiff
AND:
  HAMILTON ISLAND ENTERPRISES LTD
  ACN 009 946 909  Defendant

CATCHWORDS:     CONTRACT - Estoppel - Estoppel by representation - Oral representations - Estoppel by convention or common assumption - Collateral contract - Detriment.

Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582
The Commonwealth v Verwayen (1990) 170 CLR 394

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387       

Counsel:Mr M. Hinson for the plaintiffs

Mr C. Hampson QC for the defendant

Solicitors:O’Shea Corser & Wadley for the plaintiffs

Minter Ellison for the defendant

Hearing dates:   2-6, 9-13, 16-19 and 24 February 1998  

REASONS FOR JUDGMENT  -  THOMAS J.

Judgment delivered 17 March 1998

I incorporate as part of these reasons the reasons stated in pages 1-35 in Grace & Ors v Hamilton Island Enterprises Ltd (No. 8976 of 1996).  These contain, inter alia, the principal findings concerning dealings involving the present plaintiffs and my interpretation of the evidence as a whole.

Additional facts

Ms Wright was originally a freelance journalist who met Mr Keith Williams in 1987 and for a time accepted his offer to come to Hamilton Island as entertainment manager and media liaison officer.  She resigned from that position at the end of 1987 but decided to remain on the island, after being offered the concession for “The Sportsman’s Lounge”, which Mr Williams was then intending to establish.  At that time it had not been constructed and Mr Williams expected this to take about four months.  In the meantime Ms Wright obtained employment from other concessionaires including as a manager.  Neither The Sportsman’s Lounge, nor a Thai restaurant which Mr Williams also contemplated creating and for which he promised Ms Wright the licence, eventuated.  Instead, in December 1990 Mr Williams offered, and Ms Wright accepted the concession to the Airport Bar.  Mr Williams made clear representations, both in 1987 and again in December 1990 concerning the renewability of the five-year licences and it is unnecessary to extend the summary of representations to Ms Wright contained in the reasons in the Grace action.

I was impressed with Ms Wright’s honesty and, I think, accuracy of recollection and have no hesitation in acting on her evidence.  I also accept that she received some degree of reassurance from Mr Palmer and from Mr Ellett when she subsequently explained her position to those persons.

Estoppel

The plaintiffs assert an equitable estoppel and an estoppel by convention preventing the defendant from denying the existence of an agreement for renewal of the subject licence agreements.  It is convenient to consider firstly the estoppel based upon representations.  I am content to adopt the defendant’s submissions as to the applicable principles, namely that the necessary elements of such an estoppel are:

“(a)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 unexpected legal relationship;

(b)the defendant has induced the plaintiff to adopt that assumption or expectation;

(c)the plaintiff acts or abstained from acting in reliance on the assumption or expectation;

(d)the defendant knew or intended him to do so;

(e)the plaintiff’s action or inaction will occasion detriment if the assumption or expectation is not fulfilled;

(f)the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise.”^[1]

[1]Per Brennan J in Waltons Stores (Interstate) Ltd v. Maher (1988) 164 CLR 387, 428-429; cf. S & E Promotions Pty Ltd v Tobin Brothers Pty Ltd (1994) 122 ALR 637, 652-655.

The further need for unconscionability in permitting a defendant to depart from the necessary assumption is well stated in the following passage:

“For equitable estoppel to operate there must be the creation or encouragement by the defendant in the plaintiff of an assumption that a contract will come into existence or a promise be performed or an interest granted to the plaintiff by the defendant, and reliance on that by the plaintiff, in circumstances where departure from the assumption by the defendant would be unconscionable”.^[2]

[2]Priestley JA in Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582, 610.

On the view I take of the evidence in this case there can be no doubt that elements (a), (b), (c) and (d) are fully established.

Parties

The company Planley Pty Ltd is owned and controlled by Ms Wright.  Since about 1995 her business on Hamilton Island has been run by means of that company.  During this hearing, leave was granted to join that company as a plaintiff, presumably out of an abundance of caution.  However I think that the joinder was unnecessary.  Ms Wright is in a position to terminate or control Planley’s involvement as and when she chooses, and she remains the concessionaire and the person entitled to protect it and obtain its advantages.  No submissions to the contrary were made, and, on the question of detriment, Planley is simply to be regarded as the vehicle by which Ms Wright has continued to operate her business and exercise her business capacity.  It was not a contracting party, and has no special nexus that would entitle it to maintain an estoppel against HIE with respect to representations made to Ms Wright.

Detriment

So far as the element of detriment is concerned, Ms Wright would suffer detriment if HIE were permitted to resile from its assurances.  Mr Manning’s report (not challenged) supports this, quantifying a loss of value of the business, with a total loss of goodwill upon termination of tenure.  In addition there is the circumstance that she has changed her life and it is to be inferred that she would encounter difficulty in reestablishing herself after a substantial period out of circulation while she was engaged in the present business.  By pursuing this isolated track she has lost opportunities that cannot now be known let alone replicated.  I hold that she has suffered and will suffer detriment by acting, and by abstaining from acting, on the faith of promises that HIE now refuses to fulfill.^[3]

[3]Test stated by Brennan J in The Commonwealth v Verwayen (1990) 170 CLR 394, at p 429.3.

Unconscionable

I have no doubt that in the circumstances, HIE’s termination of the licence was “unconscionable”.  That is an awkward word, but I take it to convey something that is against conscience.  In my view, for the company to go back on the expectations that it actively promoted would be dishonourable, even if HIE is now of the view that it would be economically advantageous.  I find the unconscionable factor exists in this case.

Representations as pleaded

It may be noted that the representation pleaded on Ms Wright’s behalf is of promises of renewal “provided she met Mr Williams’ high standards”.  Although the evidence resoundingly establishes the promises of renewal I do not think that it establishes a proviso in these precise terms.  The pleading is probably derived from her letter of 28 August 1996 to Mr Wynn, but the short summary that she expressed in that letter does not outweigh the substantial evidence of the actual representations made in the course of various conversations.  The overall effect of the representations seems to me to be a promise of renewals provided she was not in breach of the licence.  In other words, the pleader has pleaded a higher requirement of performance on Ms Wright’s part than was necessary.  On a practical level, breach and failure to satisfy Mr Williams’ high standards might be seen as virtually the same thing, but the actual representations given in evidence would primarily call for a finding of promise of renewal provided the concessionaire was not in breach.  If it were necessary to amend the statement of claim to this effect I would grant leave to do so.  I would add that on the footing that the representation was precisely that which has been pleaded, this would not make Mr Williams’ subjective judgment or even his presence a necessary factor in a determination of whether the condition was satisfied.  Mr Williams’ system and standards were well known and were written into the licence agreement, and in the event of the departure of Mr Williams from the scene, meaning could still be given to such a condition.

Conclusion on estoppel

I am satisfied that the representations^[4] were made and that they are sufficiently certain in their meaning to be a proper basis for an estoppel.  All the necessary elements of the estoppel (described as elements [a] to [f] above) are established.  I am also satisfied that departure from the assumption by the defendant would in the present circumstances be unconscionable.

[4]See inter alia the table at p 34 of the Grace reasons for judgment.

Ms Wright’s claim of estoppel based on representations is made out.  There should be a declaration that the defendant is estopped from denying the existence of an agreement for renewal of Ms Wright’s licence.

There remains however (for determination if necessary in the trial of the so-called “quantum” issues) the question whether the “minimum equity” needed to avoid the relevant detriment will be by continuation of an injunction, or by the payment of damages.^[5]  To use the phrases of McHugh J in Verwayen, should HIE be permitted to pay for the detriment, or should the detriment be avoided by enforcing the promise?^[6]  The pre-trial direction given on 19 December 1997 reserved this question to the quantum trial, as it would seem desirable to have some notion of the likely quantum before finally determining the appropriate form of relief.  The plaintiff has succeeded in this trial in establishing her right to a declaration which entitles her to the enforcement of an equity by one or other of these means.  Until such time as that question is resolved by the court or by the parties, there should be an injunction restraining HIE from terminating the licence or dispossessing the plaintiff.

[5]Verwayen, op cit, at 412, 417, 429, 441-442, 446-448, 462, 487, 500-501.

[6]Ibid at 501.

Estoppel by Convention or Common Assumption

For the same reasons as are contained under this heading at pp 43-44 of the Grace judgment, I consider that Ms Wright has also established an entitlement to relief on this alternative basis.

Rectification and Collateral Contract

It is not now necessary to discuss these alternative claims in any detail.  I am not satisfied that rectification is an appropriate remedy in the present circumstances.  However I consider that the case of collateral contract has been made out.  The statements were promissory.  I reject the submission that the statements are inconsistent with the main contract.  The promises were of renewals, and there is nothing inconsistent between a grant of a five-year term and a promise of renewals thereof.  Clause 14 (the holding over clause) was submitted to be inconsistent with these promises.  However in my view if the licence had been renewed as promised, clause 14 would not have come into operation.  Accordingly I see no inconsistency.  There is room for the application of clause 14 when, for example, by reason of breach, or for other valid reason, a licence is not renewed.  There is no such evidence in the present case.

The essential warranty in my view is that HIE would renew the licence for further periods of five years for so long as Ms Wright wished to have it renewed provided that she was not in breach at the time of renewal.

Special Defences

Special defences pleaded by HIE (laches, acquiescence, delay and counter-estoppel), on the facts as I have found them, have no application in the present case.

Orders

I shall hear submissions from the parties as to the orders that should now be made.