Liangis Investments Pty Limited v Daplyn Pty Limited, Jaimey Costin and Harry Victor Costin [1994] ACTSC 31 (31 March 1994)

SUPREME COURT OF THE ACT

LIANGIS INVESTMENTS PTY LIMITED v. DAPLYN PTY LIMITED, JAIMEY COSTIN AND
HARRY VICTOR COSTIN
No. SC 543 of 1993
Number of pages - 11
Appeal - Judgement - Promissory Estoppel

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
HIGGINS J

CATCHWORDS

Appeal - from decision of Master - summary judgment entered on claim for arrears of rent and outgoings - whether there was any arguable defence - whether promissory estoppel arose - whether proof of outgoings before Master was adequate - whether appellants had arguable defence of equitable set-off.

Judgment - whether judgment appealed from is interlocutory or final - applicable test discussed.

Promissory Estoppel - pre-contractual assurance that reduction in rent would be offered to take account of shared usage of common areas - assurance not contained in written contract - whether promissory estoppel can arise and qualify terms of the lease.

Supreme Court Rules, O.15 r.1, O.61A r.5(a), r.6(a), O.64 rr.1, 2, 5(1), 8

Supreme Court Act 1933 (ACT), ss.2, 9(2)(a)

Evidence Act 1905 (Cth), s.7B

Evidence Act 1971 (ACT), s.29(2)

Spurr v Fishpool (1972) 20 FLR 174

Cox Bros (Australia) Ltd v Cox and Another [1934] HCA 16; (1934) 50 CLR 314

Standard Discount Company v Otard de la Grange (1877) 3 CPD 67

Hope v RCA Photophone of Australia Pty Ltd [1937] HCA 84; (1937) 59 CLR 348

Port of Melbourne Authority v Anshun Pty Ltd (No. 1) [1980] HCA 41; (1980) 147 CLR 35

TAG Pacific Ltd and Another v McSweeney and Another [1992] FCA 168; (1992) 106 ALR 651

Landsal Pty Ltd (In Liq) and others v REI Building Society, now The Co-operative Building Society of South Australia (1993) 113 ALR 643

Harry Smith Car Sales Pty Ltd v Claycom Vegetable Supply Co Pty Ltd (1978) 29 ACTR 21

National Westminster Bank P/L v Daniel (1994) 1 All ER 156

Beer v Bowden (1981) 1 All ER 1070

Gollin and Co Ltd v Karenlee Nominees Pty Ltd and Sheralex Nominees Pty Ltd (1982) VR 493

State Rail Authority of New South Wales v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170

Austotel Pty Ltd v Franklins Self Serve Pty Ltd (1989) 16 NSWLR 582

Gibb Australia Pty Limited v Cremor Pty Ltd (SC/ACT; Miles CJ; Gallop and Higgins JJ; 10 July 1992; unreported)

HEARING

CANBERRA, 18 February and 4 March 1994
31:3:1994

Counsel for the Appellants/Defendants: Mr R Arthur

Instructing solicitors: Phillips Fox

Counsel for the Respondent/Plaintiff: Mr R Refshauge

Instructing solicitors: Macphillamy Cummins and Gibson

ORDER

THE COURT ORDERS THAT:
1. The appeal be upheld.

2. The order granting leave to enter summary judgment be set aside. In lieu thereof, the defendants are to have leave to defend the plaintiff's action.

3. The parties each to have liberty to replead.

DECISION

HIGGINS J On 17 January 1994, in a reserved decision, Master Hogan granted liberty to the plaintiff to enter judgment against the defendants in the sum of $54,550.41. The plaintiff was the landlord of certain premises at Kingston in the Australian Capital Territory. The first defendant was the tenant, the second and third defendants were guarantors of the first defendant's liability under the lease. The plaintiff was given leave to amend its Statement of Claim in respect of the balance of its claim. The sum of $54,550.41 represented arrears of rent and outgoings to 3 August 1993. The balance of the claim was for future losses to the plaintiff over the remainder of the lease. The lease was alleged to have been created by an agreement dated 18 March 1992. It was for a term of five years from 9 September 1991. The annual rent was $186,000.00, payable monthly in the sum of $15,500.00.

2. The solicitors for the defendants, by Notice of Motion dated 2 February 1994, sought an extension of time to appeal against this decision. Apparently, the preliminary view had been taken that a summary judgment under O.15 r.1 was a final judgment rather than an interlocutory one.

3. Pursuant to s.9(2)(a) of the Supreme Court Act 1933 (ACT), an appeal lies to a single judge from a decision of the Master "in the case of an interlocutory judgment". Otherwise, the appeal lies only to a Full Court. By s.2 of the Act "judgment" includes "any decree, order or sentence". A "Full Court" means the Court constituted by "not less than 3 Judges sitting together".

4. Order 61A r.5(a) requires that an appeal from an interlocutory judgment of the Master be instituted within five days after the date of the judgment complained of. In any other case, the appeal is to be instituted within 21 days after such date, or "such further time as is allowed by the Court upon application made at any time" (O.61A r.6(a)).

5. It follows, of course, from O.64 rr.1, 2 and 8 that, if the judgment appealed from was "interlocutory", time to appeal expired on 24 January 1994. That limitation, being imposed by the Rules, was capable of extension pursuant to O.64 r.5(1).

6. On 11 February 1994, time to institute an appeal against the Master's decision was extended by Gallop J until 5.00pm that day.

7. If the judgment appealed from was not "interlocutory", the time limited for an appeal would have expired on 7 February 1994. Thus an order extending time, pursuant to O.61A r.6(a), would still have been necessary. That power is, of course, otiose. Order 64 r.5(1) would otherwise provide such power.

8. The appellants and the respondent each submitted that the judgment of the Master was interlocutory. However, an appeal cannot be made competent simply because each side agrees that it is, or, at least, does not contend to the contrary (see Spurr v Fishpool (1972) 20 FLR 174).

Competency of the Appeal - An interlocutory judgment
9. Mr Arthur, for the defendants, referred to Cox Bros (Australia) Ltd and Another v Cox [1934] HCA 16; (1934) 50 CLR 314. In that case, the High Court held that an order giving leave to enter judgment was interlocutory, although the judgment, once entered, would be final. No reasons were offered for that conclusion.

10. The successful argument in Cox Bros (Australia) Ltd and Another v Cox (supra) relied upon Standard Discount Company v Otard de la Grange (1877) 3 CPD 67. In that case, Bramwell LJ noted that the Rules did not automatically effect the entry of judgment following the making of the order. The plaintiff was merely empowered by that order to sign judgment, but was not obliged to do so. Brett LJ agreed with that observation, but added,
(72) "I cannot help thinking that no order in an action will be found

to be final unless a decision upon the application out of which it
arises, but given in favour of the other party to the action, would
have determined the matter in dispute."

11. Cotton LJ conceded that the order, unless set aside, would result in a final judgment being entered. However, his Lordship regarded the order in question as one,

(72) "... which directs how an action is to proceed."

12. Further, his Lordship considered that it would be consistent with the summary nature of an application for summary judgment that appeal rights should be more restricted than for causes generally.

13. The Cox Bros case does not seem consistent with Hope v RCA Photophone of Australia Pty Ltd [1937] HCA 84; (1937) 59 CLR 348. In that case judgment was given for the plaintiff on demurrer. The defendant was granted seven days within which to serve further pleas. He did not. Instead he appealed to the High Court. The plaintiff objected to the competency of the appeal.

14. The High Court, (Rich, Dixon and Evatt JJ, Latham CJ (dubitant, not deciding)) declared the order a "final" judgment even though the defendant might have avoided the final effect of the judgment by filing amended pleas.

15. Dixon J expressed his conclusion thus,

"The fact that the defendant might have amended does not affect the
matter because no amendment was made and none of any use could have
been made. No doubt, when liberty to amend is given and exercised,
it might prevent such a judgment operating in its prima-facie
conclusive form."

16. Evatt J had no difficulty distinguishing Cox Bros, but his Honour's grounds for doing so were not expressed.

17. It may be, of course, that the judgment on demurrer could be distinguished on the basis that its legal effect was to preclude the defendant from defending the action unless the defendant could raise effective pleas. In Hope v RCA Photophone of Australia Pty Ltd (supra) the judgment could be seen as final once the defendant failed to replead, whereas in Cox Bros, leave to enter summary judgment is not itself a final order though the judgment entered pursuant to that leave would be final.

18. The reasons given for decision in Standard Discount Company v Otard de la Grange (supra) are less than satisfactory. Any order for judgment may be set aside before judgment is entered pursuant to it. In that sense, no such order is final. Accordingly, the mere fact that judgment might not follow from the making of the order does not appear decisive.

19. Certainly, the reciprocity consideration referred to by Brett LJ in Standard Discount is not now regarded as decisive. In Port of Melbourne Authority v Anshun Pty Ltd (No. 1) [1980] HCA 41; (1980) 147 CLR 35, the order in question was that the action be forever stayed. A refusal of that order would have permitted the action to continue. The legal effect of an order refusing a stay would clearly not be that of a "final" order.

20. Gibbs J, as he then was, held the order made to stay the proceedings was "final",

(38) "If the view expressed in Licul v Corney (1976) 50 ALJR 439,
444, and the true test of finality is whether the judgment or order,
as made, finally disposes of the rights of the parties, it would
seem clear that the order made in the present case was a final
judgment ...
It seems to me that in the present case, as a matter of reality, the
order made does finally dispose of the rights of the parties, and on
that ground I would consider it to be a final order so that the
objection to competency in my opinion ought to be overruled."

21. The only valid rationale referred to in the Standard Discount case, would seem to be that the legal effect of an order under O.15 is to permit the plaintiff to enter final judgment, rather than to cause judgment to be entered unless the order is set aside or stayed. That is despite the fact that in practical terms it determines the cause in question.

22. The decision of the High Court in the Cox Bros case is, however, a binding authority in favour of the competency of this appeal.

23. It is, accordingly, unnecessary to determine whether the fact that only part of the plaintiff's claim, in practical terms, was determined by the order appealed from, would, of itself, render that order interlocutory.

24. In that connection, I observe that in TAG Pacific Ltd and Another v McSweeney and Another [1992] FCA 168; (1992) 106 ALR 651, Olney J considered that an order which decided an issue as to liability only was a final order notwithstanding that damages remained to be assessed.

25. Some doubt was cast on the correctness of that ruling in Landsal Pty Ltd (In Liq) and Others v REI Building Society, now the Co-operative Building Society of South Australia (1993) 113 ALR 643 at 653.

26. The Court (Keely, Burchett and Drummond JJ) commented that the ruling of Olney J in TAG Pacific Ltd and Another v McSweeney and Another (supra),

(653) "... does not appear to be consistent with Computer Edge Pty
Ltd v Apple Computer Inc [1984] HCA 47; (1984) 54 ALR 767 and Miki Shoko Co Ltd
v Merv Brown Pty Ltd (1988) ATPR 40-858 at 49,276, where judgments
including some final orders were held not to be final judgments
because issues related to damages had been left outstanding.
See also Town (Town v Australian Telecommunications Commission (1983)
47 ALR 137) per Sheppard J at 150, Franki J agreeing, and Maybury
v Atlantic Union Oil Co Ltd [1953] HCA 89; (1953) 89 CLR 507 at 515 and Building
Workers' Industrial Union of Australia v Odco Pty Ltd (1991) 99 ALR
735 at 738, which are cases relevant to the question whether an
order determining a preliminary issue is itself final or
interlocutory, and thus appealable as of right or only by leave."

27. In any event, I am satisfied that I have jurisdiction to hear and determine this appeal.

The Issues
28. The issue before the Master was whether, having regard to the facts asserted by the defendants, there was any arguable defence to the claim for arrears of rent and outgoings (see Harry Smith Car Sales Pty Ltd v Claycom Vegetable Supply Co Pty Ltd (1978) 29 ACTR 21).

29. The defendants' objection to the decision of the Master is based, so far as arrears of rent are concerned, on an allegation that prior to execution of the lease Mrs Sotiria Liangis, a representative of the plaintiff, had made a promise that once a tenant was found for an area adjacent to the demised premises, a reduction in rent would be offered to take account of the then shared usage of common areas, including toilet facilities.

30. Mrs Liangis denies that such a conversation occurred. However, to determine the correctness of the Master's decision, it must be assumed that it did. Whether or not the conversation occurred cannot be decided on a summary judgment application.

31. There was a further objection to the Master's decision, being that the claim for outgoings was not properly proved and should not have been included.

The pre-lease conversation re proposed level of rental
32. The terms of the conversation, as alleged by the secondnamed defendant, was,

Mrs Liangis: "The other tenants will need to use the toilets in your
area. Once you have completed your fitout and are open
for business, we will work out the common areas and make
a reduction to your rent."
Mr Costin: "Yes, that is OK."

33. After the lease was signed and registered, Mr Costin alleged he had raised the issue on many occasions but was either given no answer or was fobbed off. Finally, he deposed, the promise was repudiated by Mrs Liangis.

34. The Master simply noted that the alleged conversation, assuming it to have occurred, could not have altered the legal effect of the lease, which required the full rental reserved by it to be paid to the plaintiff.

35. The other areas were, in fact, subsequently let. There was no dispute about that. The other tenants had the use of common areas as from October 1991 or thereabouts.

36. It was the defendants' contention, therefore, that the plaintiff was estopped from demanding the full rental for the period following that date.

37. Clearly, the promise in question was inconsistent with the terms of the registered lease. However, neither the inconsistency, nor the failure to assert that defence earlier, casts such doubt upon the defendants' version of events that the purported defence should be excluded on the basis that it was not bona fide (c.f. National Westminster Bank P/L v Daniel (1994) 1 All ER 156).

38. It is true that the acceptance of the defendants' assertion implies a reduction in rental "to be agreed". The promise was not precise as to the level of reduction proposed.

39. However, I do not think that such an agreement, had it been embodied in the lease, would have failed for uncertainty (see, for example, Beer v Bowden (1981) 1 All ER 1070; Gollin and Co Ltd v Karenlee Nominees Pty Ltd and Sheralex Nominees Pty Ltd (1982) VR 493). It is at least arguable that an expert could fix a reasonable sum to reflect the value of the shared usage.

40. The real issue is whether the Master was correct to hold that the alleged pre-contractual promise could not qualify the terms of the lease subsequently executed.

Can an equitable (promissory) estoppel qualify the terms of a written lease?
41. In State Rail Authority of New South Wales v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170, McHugh JA held that pre-contractual promises are capable of giving rise to an equitable estoppel in respect of the terms of the subsequent agreement.

42. The decision, however, was not a ringing endorsement of that proposition.

43. In that case, assurances had been given that a particular proposed contractual clause, if accepted, would not be enforced in accordance with its terms, but only in much more restricted circumstances. The officer giving the assurances was known to have had no authority to alter the terms of the agreement to reflect those qualifications.

44. Kirby P was prepared to assume that a pre-contractual promise, representation or assurance inconsistent with the subsequent contract could give rise to an equitable estoppel. His Honour was not, however, persuaded that the assurance in question did so in the case before him. He considered that the respondent had been faced with a clear choice. It chose to sign an agreement which did not embody the assurance it had been given. His Honour also expressed concern about the consequences of giving effect to such an estoppel,

(177) "Too great a willingness by the courts to discern, in
pre-contract negotiations, a basis for estoppel will have the
effect of introducing a serious element of uncertainty into our
law of contract. It may also encourage expensive litigation in
which the terms of the writing are put to one side and the courts
busily engaged (as we have been) in a minute examination of the
wilderness of pre-contract conversations."

45. Glass JA was even less enthusiastic. His Honour was prepared to assume, without deciding, that an equitable estoppel could be founded on pre-contractual assurances, but noted that, in the circumstances before him, a representation inconsistent with the contract would be quite incongruous.

46. McHugh JA, in dissent, embraced the concept with considerable enthusiasm, applying it to hold that the respondent was indeed estopped from enforcing the written agreement in accordance with its terms.

47. It is useful to note his Honour's statement of the general principle which he applied.

(193) "... I see no reason why the doctrine (of promissory estoppel)
should be confined to the case of an existing contractual
relationships (sic). The rationale of this branch of equitable
estoppel is that it is unconscionable for a person to resile from
a promise that he will not exercise a right if to do so will place
the promisee, who has acted on the promise, at a material disadvantage.
It may be just as unconscionable to exercise a right acquired after a
promise that any such right would not be exercised if or when acquired.
Indeed the case for applying the doctrine of promissory estoppel
seems particularly strong when the promisee is induced to confer the
right on the promisor by the promise that the right will only be acted
on in special circumstances or at a particular time or place or in a
particular way. I do not think that the court should be deterred from
extending the doctrine of promissory estoppel to a case such as the
present because to do so is to outflank the doctrine of consideration
or the principles relating to collateral contracts ..."

48. In Austotel Pty Ltd v Franklins Self Serve Pty Ltd (1989) 16 NSWLR 582, the defendant ("Austotel") was developing a commercial space for a supermarket. The plaintiff ("Franklins") was desirous of leasing the space. Franklins gave Austotel a letter of intent, but declined to execute a lease. It seems that Franklins hoped to achieve a more favourable outcome on rent than had previously been proposed following a proposal to expand the proposed space. Franklins incurred a great deal of expenditure upon the basis of its expectation, engendered by Austotel, that Austotel was preparing the space in question for it.

49. Kirby P was prepared to accept that an equitable estoppel could arise from encouragement of an expectation that a contract will come into existence, or a transaction be performed. There had to be reliance upon that expectation to the detriment of such a plaintiff, giving rise to a conclusion that to permit departure by the defendant from that position would be unconscionable. In his Honour's opinion, Franklins was not entitled to relief. The grounds for that opinion are relevant,

(585) "We are not dealing here with ordinary individuals invoking
the protection of equity from the unconscionable operation of a
rigid rule of the common law. Nor are we dealing with parties
which were unequal in bargaining power. Nor were the parties
lacking in advice either of a legal character or of technical
expertise."

50. Priestley JA did not agree with this conclusion. His Honour was of the opinion that Franklins was entitled to relief subject to a condition that it pay a suitably higher rent than previously negotiated to take account of the expanded floor space. There was no particular reason for Austotel to have regarded Franklins as an unsuitable tenant.

51. Rogers AJA delivered the deciding opinion. His Honour said that he was, at first, persuaded that the view taken by Priestley JA was the correct one. However, whilst accepting that relief could be given, his Honour decided against that view. In his Honour's view the decisive factor was,

(620) "The deliberate gamble that the plaintiff had embarked on
failed and it is not for equity to put the plaintiff into the
position it would have been in had it never embarked on its gamble.
The magnitude of the risk may not have been manifest but that is
not the point. There is, in my view, a fundamental difference
between a situation where the parties simply fail to address a
question necessary for a complete and concluded agreement and the
present, where there is a deliberate and conscious decision to
refrain from coming to agreement on the term."

52. This was not a case, of course, where the pre-contractual assurance was inconsistent with the subsequent contract.

53. It may be concluded that it is at least arguable that pre-contractual assurances, even if involving the qualification of a subsequently written agreement, may found an equitable estoppel. The party giving those assurances may be prevented from acting contrary to them. That does not depend on whether the assurances were oral or written, or whether the written agreement was in the form of a deed or otherwise.

54. To determine whether the assurance in question is capable of giving rise to an equitable estoppel, there must be evidence of reliance upon it by the person receiving the assurance to that person's detriment.

55. In the present instance, the relevant reliance and detriment could be found in the continued occupation at the old rental without early abandonment, or action to cause earlier re-negotiation of rental.

56. The question is whether it could be held that to insist on the full rental and outgoings, after occupation of the adjacent area by other tenants, is capable of being found to be "unconscionable".

57. Against that view is, of course, the incongruity of the inconsistency between the assurance and the registered lease. That poses an evidentiary difficulty for the defendants. However, the inconsistency does not render it unarguable that it would be unconscionable for the plaintiff to insist on the full rental after occupation by other tenants and use by them of common areas and facilities.

58. It may be, of course, that the first defendant will be found not to need, or not to deserve, the protection of equity. However, that conclusion will depend on whether the relative positions of the parties were such that they were in an equal or unequal bargaining position. It will be relevant to consider whether the first defendant took a deliberate gamble, or whether it acted reasonably in not insisting on a formal written agreement embodying the assurance in question. The first defendant would need to persuade the tribunal of fact that the plaintiff took unfair advantage of the situation.

59. It is enough to say that it is arguable that the plaintiff's insistence on the full rental, without allowance for the shared use of the common areas contrary to a pre-contractual assurance, could be regarded as unconscionable.

Proof of outgoings
60. The Master was satisfied that the quantum of "outgoings" had been established. In so finding, he relied on information contained in a letter from the plaintiff's solicitors. There is no appeal from the Master's decision to admit the letter in evidence.

61. The lease obliged the first defendant to pay 76.66% of the "Lessors Expenses" and of subsequent increases therein.

62. "Lessors Expenses" were defined in cl.1.1 of the lease.

63. The items referred to in the schedule to the solicitors' letter may well, on the face of it, be capable of being "Lessors Expenses". However, there is no explanation for the proportion of the total being reduced from 76.66% to 38.33%, exactly one-half. It is also true to say that there is no proof offered other than Mrs Liangis' assertion that the particulars are "calculated" in that attachment.

64. If it had been asserted that the books and records of the plaintiff demonstrated that the items set out in that letter were sums paid or payable for relevantly identified expenses in respect of the period in question, reliance may have been possible upon s.7B of the Evidence Act 1905 (Cth) or, if still applicable, s.29(2) of the Evidence Act 1971 (ACT).

65. In the absence of any such assertion, the proof tendered before the Master was inadequate.

66. However, had the plaintiff sought leave to supplement its proof, it is possible that such leave might be granted to enable a technical omission, such as I have identified above, to be remedied. The objection to that grant of leave might well be the failure to provide inspection of primary documents as sought by the defendants. That failure would, in any event, have been relevant to any question of costs. Indeed, leave might be made conditional upon such production for inspection.

Possibility of equitable set-off
67. Apart from a denial that the rent claim represents the sum actually due to the plaintiff for rent and outgoings, the defendants propose to rely on a counterclaim by the first defendant.

68. That counterclaim was referred to by the Master. He noted that if the plaintiff had lawfully re-entered, thus determining the lease, its action in barring the defendants from entry might have been lawful. On the other hand, if the plaintiff was found to have barred entry without first lawfully determining the lease, the defendants would not only be entitled to resist the plaintiff's claim for possession and/or damages, but would be entitled to damages for losses caused thereby to the first defendant.

69. The Master regarded the above issue as triable. It may be noted that the plaintiff's claim for future loss, being confined to a claim for damages if the purported re-entry was valid, was not a claim in respect of which summary judgment could be entered.

70. There is an issue as to whether, in the circumstances, the first defendant has a counterclaim against the plaintiff for damages for breach of covenant. If there was a sum due to the plaintiff for rent and outgoings, it would be open to the first defendant to set-off that counterclaim against that debt. That point was affirmed by a Full Court of this Court in Gibb Australia Pty Limited v Cremor Pty Ltd (SC/ACT; Miles CJ, Gallop and Higgins JJ; 10 July 1992; unreported at pp.14-22). In essence, that part of the joint judgment which made reference to equitable set-off pointed out that the supposed rule that a claim for damages for breach of a lease covenant could not be set-off against a claim for rent had no current validity. The Master's decision does not refer to the existence of a possible defence by way of equitable set-off, notwithstanding that there was found by him to be an arguable case that the first defendant was entitled to damages for breach of covenant against the plaintiff. I do not know, of course, whether the defence of equitable set-off was drawn to the Master's attention. It was argued before me, however, and it is a defence open to the first defendant and, hence, to each of the defendants.

71. The circumstances are such that the defendants do have an arguable defence.

72. Even if the factual assertions made by the second defendant are rejected it is possible that the plaintiff could be held to have elected to affirm the lease. It certainly could be taken to have done so by its pleadings. If so, its exclusion of the first defendant would have been wrongful even if the arrears of rent and outgoings as pleaded were then due and owing. The first defendant has a right of set-off of any damage suffered by it as a result of its exclusion from the premises. It is apparent that, as it is arguable that the possible defences exceed the plaintiff's claim, leave to defend should be unconditional.

73. The appeal is upheld. The summary judgment is set aside. In lieu thereof the defendants are to have leave to defend the plaintiff's action.

74. The parties are each to have liberty to replead.

75. I will hear the parties as to further directions and costs.