Re Allen Reed and Yvonne Reed v James Lawrence Sheehan [1982] FCA 1; (1982) 56 FLR 206 (11 January 1982)

FEDERAL COURT OF AUSTRALIA

Re: ALLEN REED and YVONNE REED
And: JAMES LAWRENCE SHEEHAN [1982] FCA 1; (1982) 56 FLR 206
No. ACTG9 of 1981
Contract - Estoppel

COURT

IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY
GENERAL DIVISION
Fox(1), Blackburn(2) and Deane(3) JJ.

CATCHWORDS

Contract - Licence Agreement with Option to Purchase - Periodical Payments - Varied Time of Payment - Late Payments - Purported Exercise of Option - Whether Conditions of Exercise complied with - Effect of Concessions by Counsel in Course of Argument - Whether Licensors Estopped by Conduct from Relying on Late Payments to Defeat Option.

Estoppel - Contract - Licence and option to purchase - Option conditional upon no breach of contract - Breach of contract by respondent - Purported exercise of option - Whether appellants estopped from alleging breach of contract - Estoppel in pais - Estoppel by representation - Promissory estoppel - Principles - Features of estoppel.

Contract - Licence and option to purchase - Option conditional upon no breach of contract - Breach of contract by respondent - Purported exercise of option - Estoppel - Whether appellants estopped from alleging breach of contract - Estoppel in pais - Estoppel by representation - Promissory estoppel - Principles. The appellants, by a written agreement, granted the respondent a licence to use the hire car number plate A.C.T. H.22 for a specified period. In the same agreement the appellants granted the respondent an option to purchase the number plate provided the respondent was not in breach of the agreement during the term of the licence. Although in breach of the agreement the respondent purported to exercise the option. The Supreme Court of the Australian Capital Territory found that the option had been validly exercised and, on appeal, the respondent conceded that his breaches of the agreement disentitled him from exercising the option unless the appellants were estopped from alleging the breaches.

Held: Fox J. dissenting, allowing the appeal - the conventional estoppel by representation as well as a promissory estoppel have the following relevant features: (1) A representation must be clear and unambiguous before it can found an estoppel.

Low v. Bouverie, (1891) 3 Ch 82; Western Australian Insurance Co. Ltd. v. Dayton [1924] HCA 58; (1924), 35 CLR 355; Newbon v. City Mutual Life Assurance Society Ltd. [1935] HCA 33; (1935), 52 CLR 723; Woodhouse AC Israel Cocoa Ltd. S.A. v. Nigerian Produce Marketing Co. Ltd., (1972) AC 741; China-Pacific S.A. v. Food Corporation of India, (1980) 3 WLR 891, referred to.

(2) Estoppel looks chiefly at the situation of the person relying on the estoppel.

Sarat Chunder Dey v. Gopal Chander Lala (1892), LR 19 I A 203; Craine v. Colonial Mutual Fire Insurance Co. Ltd. [1920] HCA 64; (1920), 28 CLR 305; Taylors Fashions Ltd. v. Liverpool Victoria Trustee Co. Ltd., (1981) 2 WLR 576, referred to.

(3) A person will not be estopped from departing from an assumption or a misrepresentation unless, as a result of adopting it as a basis of action or inaction, the other party will have placed himself in a position of material disadvantage if departure from the assumption is permitted.

Thompson v. Palmer [1933] HCA 61; (1933), 49 CLR 507, applied.

The circumstances in the present case did not provide a proper foundation for either a conventional estoppel by representation or for a promissory estoppel.

HEARING

Canberra, 1981, July 22-23; 1982, January 11. 11:1:1982
APPEAL.

Appeal to the Full Court of the Federal Court of Australia from a judgment of the Supreme Court of the Australian Capital Territory.

The relevant facts of the case are set out fully in the judgment of Deane J. which follows.

A. J. Sullivan, for the appellants.

B. R. Gallen, for the respondent.

Cur. adv. vult.

Solicitors for the appellants: Gallens.

Solicitors for the respondent: Peter Smyth Brewster & Co.
E. F. FROHLICH

ORDER

1. The appeal be allowed.

2. The order of the Supreme Court of the Australian Capital Territory be set aside.

3. The action be dismissed with costs.

4. The respondent to pay the appellants' costs of this appeal.

DECISION

This is an appeal from the Supreme Court of the Australian Capital Territory (Kelly J) in which it declared, in favour of the present respondent, that an option to purchase contained in a written agreement had been validly exercised and it was further ordered that the agreement constituted by the exercise of the option should be specifically performed. The subjects of the option were a hire-car number plate and a radio installed in a motor vehicle which was sold under the same agreement by the defendants (appellants) to the plaintiff (respondent).

The agreement was as follows:

"THIS AGREEMENT made the 29th day of March 1978 BETWEEN ALLEN REED of 203 Atherton Street Downer in the Australian Capital Territory, Hire Car Proprietor AND YVONNE REED his wife of the same address (hereinafter called "the vendors") of the one part AND JAMES LAWRENCE SHEEHAN of 30 Adair Street Scullin in the Australian Capital Territory (hereinafter called "the purchaser") of the other part WHEREAS the vendors have for some time past carried on the business of a hire car and are the owners of a 1975 Ford Sedan coloured white Engine Number JGS7RU46963R AND WHEREAS the purchaser proposes to lease the said motor vehicle AND WHEREAS the purchaser proposes to lease the right to conduct a hire car owned by the vendors by reason of the vendors owning Number Plate ACT.H22 AND WHEREAS the parties hereto have agreed that the vendors will on the 31st day of July, 1980 sell to the purchaser the said right to conduct a hire car by transferring to the purchaser Number Plate ACT. H22 for the agreed figure of TWELVE THOUSAND DOLLARS ($12,000) NOW THIS AGREEMENT WITNESSETH as follows -

1. The vendors shall sell and the purchaser shall purchase the 1975 Ford Sedan motor vehicle Engine Number JG37RU46963R for the sum of Eight thousand dollars ($8,000). The said sum of Eight thousand dollars ($8,000) will be paid upon completion of this agreement which shall take place on the 29th day of March 1978.

2. The vendors further agree to grant a licence to the purchaser subject to the terms and conditions hereinafter contained to permit the purchaser to use the rights attaching to Number Plate ACT.H22 for a period from the date of completion of this agreement until the 30th day of July, 1980.

3. The purchaser agrees to pay a licence fee to the vendors in the sum of Fifty-four dollars thirty cents ($54.30) per week the first payment to be made on the 29th day of March 1978 and each succeeding payment on the Wednesday of each week thereafter until the 31st day of July, 1980.

4. The purchaser will in addition, pay all fees for the registration and insurance of the vehicle and pay all fees payable in respect of the radio hire fee.

5. The purchaser agrees that he will carry on the business of a hire car operator in a proper and efficient manner and will not operate the business other than in the manner in which it is presently being operated.

6. The purchaser will keep the vehicle and the radio in a good state of repair, reasonable wear and tear excepted and will take all proper care in attending to and maintaining the vehicle and radio in good working order. The purchaser will immediately on the termination of the licence hereby granted deliver up to the vendor the radio and Number Plate ACT.H22.

7. This licence is personal to the purchaser and it may not assign the benefit hereof or any part hereof and the purchaser agrees that he will not grant any licence or right to use the radio or Number Plate JG37RU46963R with the rights attaching thereto to any other person.

8. Unless earlier determined in accordance with the provisions hereof this licence shall continue during the term as hereinbefore stated PROVIDED NEVERTHELESS that in the event of default by the purchaser in the observance of or compliance with any of the obligations imposed upon them hereunder the vendors may immediately determine this licence by notice in writing to the purchaser.

9. No provision hereof shall be deemed to have been waived either in whole or in part by the vendors unless such waiver is in writing and signed on behalf of the vendors. Any such waiver shall not affect or prejudice the rights or remedies of the vendors in respect of any future or other breach and (unless expressly so stated) shall not amount to a general waiver of any provision hereof.

10. Any notice may be served on the purchaser by handing the same to him personally or by leaving the same for him or by posting the same in a prepaid envelope addressed to him at his address and any notice may be served upon the vendors by being left at or posted in a prepaid envelope addressed to them at their address.

11. The parties hereto agree that should the purchaser during the term of the licence not be in breach of the licence agreement hereinbefore referred to, the vendors grant to the purchaser an option to purchase the Number Plate ACT.H22 together with the radio installed in the motor vehicle Engine Number JG37RU46963R for the sum of Twelve thousand dollars ($12,000). Such option shall be exercised by the purchaser giving written notice to the vendors of proposing to purchase same not less than one month prior to the 30th day of July, 1980.

12. The parties hereto agree that such sale shall be effected as soon as possible after the 30th day of July, 1980.

13. The parties hereto agree that they will sign all documents and do all things to properly effectuate the terms of this agreement. IN WITNESS WHEREOF the parties hereto have hereunto set their hands and seals the day and year first hereinbefore written."

On 11 May 1980 the respondent gave written notice of the exercise of the option by posting it in a letter addressed to the appellants (see clause 10 of the agreement which provides that posting is service). The letter was not received by the appellants, who did not have actual knowledge of the purported exercise of the option until July of that year. On 14 July 1980 the respondent said to the appellant Yvonne Reed that he would be taking up the option, but on that night she rang him and said:
"You have broken the agreement. You did not notify us 30 days before."
He explained that he had already given notice. Later, the appellants relied on several alleged breaches of the agreement as grounds for not going ahead with the sale. Due exercise of the option, assuming it to have been on foot, is not disputed, but performance of related conditions is. The learned judge found only one condition of its exercise which had not been fulfilled, namely the making of a number of periodical payments of the licence fee by due dates.

In this regard, there had been an alteration of the manner of performance of the original agreement, which provided for weekly payments in advance. The judge found that at some time before 9 May 1978 the respondent had said to the appellants:
"I will pay the licence fee under the agreement by fortnightly payments in advance and will send the payments to you so that you get them on the Tuesday of each fortnight",
or words to that effect. This varied mode of performance was agreed to; it would appear also to have been of advantage to the licensees. His Honour thought that there was an absence of consideration sufficient to constitute a variation of the agreement. He was of the view that the arrangement was for "substituted performance", and this conclusion was not challenged before us.

Yvonne Reed, one of the appellants, kept a record of payments received. His Honour calculated, on the basis of the change agreed to, that there should have been 55 fortnightly payments, and he said:
"Of those 55 payments I am satisfied that 23 were not paid by the appropriate Tuesday. Thirteen were one day overdue, one was two days overdue while nine were overdue by at least five and up to nine days. I note that in one instance the cheque for the fortnightly payment was drawn on the date that it was due while in five instances the cheque for payment was drawn one or two days after the date when the payment was due."
There were no complaints when the payments were made about them being late, each being accepted without reservation or qualification. I am for myself unable to reconcile the record which was kept, in so far as it shows "date due", with the agreement. For example, the due date for the first payment is shown as 28 March 1978, whereas the agreement provided for the first payment to be on 29 March 1978 (which was a Wednesday). Mrs. Reed, who kept the record, gives an explanation of how she calculated the dates, but she seems to have corrected the earlier dates retrospectively, in the light of the altered arrangements; and then, in a separate schedule to have gone back to the Wednesdays. It may nevertheless be the fact that the record was in order except for the false starting point. I shall return to this matter.

Some other events should be mentioned. Mrs. Reed gave evidence in cross-examination that in January 1980 there was a meeting and conversation:
"And tell me this, in January 1980 he was at your place of business, was not he? ---Yes.

And he discussed then the fact, or informed you then, that he was going to exercise the option, did not he?---He made a statement that was completely - to us - it was a shock.

What was that. What was the shock?---He said, 'You are trying to get out of this agreement.'

This was at the same time as you had had your solicitors write to him?---On his receiving the letter.

And he said, 'You are trying to get out of the agreement.'

Do you remember - did you say anything in response?---I said, 'We are not trying to get out of the agreement.'

And he then said he was going to buy the plate, did not he?---I do not think he mentioned that. What he - - -

Did your husband say or did you say that you had been offered a considerable price for it?---No, we did not say what price. We said we had been made an offer in - shortly after Mr. Sheehan took up the plates, it would have been about April 1978. It was only a telephone call.
But when did you mention this to Mr. Sheehan? Was not it at that meeting in January 1980?---It would have been at that meeting in January 1980.

And in fact your husband told him that you had been offered $18,000 for the plates?---We had. We assured Mr. Sheehan that we had an agreement with him and we intended to honour that agreement providing he honoured his side of the agreement."
The reference was to the sale provided for in clause 11 (the option provision). In this connection it might be noted that the last recital of the agreement was in terms of an actual agreement to sell "the said right to conduct a hire car by transferring to the purchaser Number Plate ACT.H22.." There is also evidence of the plaintiff, which the judge apparently accepted, that at this time, and probably as part of the same conversation the respondent told the appellants that he fully intended to take up the option, and they asked whether he wanted to take up some shares at the same time. He said, in effect that he would have to think about the latter.

About 4 June 1980 the plaintiff met the defendants at their business premises and said:
"I may not be able to raise sufficient funds, and am not real sure about passing a medical, particularly in 1981. Would you give me an extension of the lease and an option? There is no hurry, I will call back tomorrow."
The defendants replied:

"That will be all right. We will think it over."

On 11 June there was further conversation at which they were all present. The following exchange took place:
Mr. Sheehan: "What are you going to do?"

Mrs. Reed: "We would prefer to sell."

Mr. Sheehan: "O.K. I won't worry I will pay you out."

Mrs. Reed: "Well, what about an indefinite lease?"

Mr. Sheehan: "I don't want one - make it for 12 months, but only if I don't get finance or pass the medical."

Mrs. Reed: "O.K. We will draw up an agreement."

Mr. Sheehan: "I don't expect it to be on the same terms. I want you to draw up a lease the same as the last one but I am prepared to pay 10% over and above the price to cover inflation if I don't get finance or pass the medical."

There was further discussion, the terms of which were partly in dispute, but the essence of the dispute was resolved by his Honour in favour of the plaintiff. It is not necessary to set them out.

The fresh "agreement" was written out by Allen Reed and given to Mr. Sheehan. It was as follows:
"To whom it may concern

Re re-newing of lease of Hire Car Plate No. H.22 to Mr. James Sheehan. The lease of plates expires on 29.7.80.

I wish to re-new the lease on Hire Car plates H22 for a further 12 months as from 29.7.80 until 14.8.81. Mr. James Sheehan will still have option to purchase plates H22 at the expiry date of lease at the figure of $20,000, dollars, if Mr. Sheehan does not want to purchase such plates he will then hand plates and radio back to Mr. Allen Reed.

The new lease will be at a rental of $60.00 per week plus radio hiring fee of $4.00 per week, subject to re-newal of rent which will be tied to rate of inflation renewal date 1.2.1981."

As already indicated, the arrangement provided for in this document was not carried out. The respondent relied upon it mainly as showing that the option was still treated by the appellants as subsisting as late as 11 June 1980. The crucial word relied on is "still" in the phrase "will still have an option".

When the respondent gave his notice of exercise of option on 11 May 1980, he may have been up to seven days overdue with one licence fee payment; the payment shown in Mrs. Reed's book as due on 7 May is shown as received on 14 May. From 5 June 1980 he was not in arrears according to any manner of reckoning. The rights of the parties between the giving of the notice and 30 or 31 July (the agreement uses both last-mentioned dates) were regulated by the agreement (as altered). In particular, the licence remained on foot and the licensee remained liable to make periodical payments.

Clause 11 is awkwardly expressed. It is there said that it is the grant of the option which is to be subject to the requirement that the purchaser "during the term of the licence not be in breach of the licence agreement hereinbefore referred to. . " The clause has I think been construed on both sides to mean that the grant is on foot from the beginning, and that what was necessary to produce finality of agreement was the giving of the notice, and continuing compliance with the terms of the licence until its termination. The stipulation about not being in breach of the agreement during its term has been treated as a condition precedent to a binding agreement for sale of the number plates and radio. The position would seemingly be the same whether the option were regarded as an irrevocable offer or a conditional contract. It would be a unilateral, "if" situation within the dichotomy drawn by Lord Diplock in United Scientific Holdings Ltd. v Burnley Borough Council ((1978) AC 904, 928-9). This is not to say that the dates for payment of the licence fees were "of the essence" (ibid).

The learned judge from whom this appeal comes found that there had been a failure to comply with the requirements of clause 11, so far only as concerned time of payment, but that, on the basis of an estoppel largely associated with the events of June 1980, the licensors (appellants) could not rely on that failure.

An analysis of the case has so far as I am concerned been complicated by the course of argument before us. To some extent I must travel outside the matters specifically debated, and, in relation to the first two of the principal aspects with which I will deal, behind a concession on the law made by counsel for the respondent in the course of his argument, in response to a question by myself (see p.142 of the transcript).

There are questions concerning the construction, and the application of clause 11. Although I will for convenience continue to all it an option clause, I think it is best seen as providing for the circumstances in which a binding agreement for sale will come into being. The particular term in respect of which the licensee is said to have been fatally in breach is that relating to the time for payment of licence fees, - the date of pre-payment, in fact. An arresting feature of the submission for the appellants is that it claims that once the respondent was one day in arrears with the pre-payment of one amount of rent, the option clause was no longer available to the licensee; no binding sale could thereafter come into being. This is all the more astonishing when, as seems to me plainly to have been the fact, the parties took the view until the last two weeks or so of the term of the licence that the option was still available, notwithstanding that they all well knew of the times at which the payments had been made.

The first question is whether there was a breach. There are several possible constructions of the clause, but, as they were not discussed, I shall confine myself to two.

The learned judge found that there were a number of late payments, basing his calculation on the arrangement to pay fortnightly. As I have said, he found that that arrangement was not a variation of the agreement, but amounted to an arrangement for substituted performance. The concept of substituted performance is based on estoppel or forbearance (Tankexpress A/S v Compagnie Financiere Belge des Petroles S.A. (1949) AC 76,103,104; Electronic Industries Ltd. v David Jones Ltd. 54 SR 102,108,109; and see per Denning L.J. in Charles Rickards Ltd. v Oppenheim (1950) 1 KB 616,622,623). The consequence is that the agreement stands unaltered, and in an on-going contract either party can return to it on giving reasonable notice, unless circumstances have made it too late to do so (Panoutsos v Raymond Hadley Corporation of New York (1917) 2 KB 473; 22 Comm. Cas. 207; Besseler Waechter Glover Co. v South Derwent Coal Co. (1938) 1 KB 408,416,417; Tool Metal Manufacturing Co. Ltd. v Tungsten Electric Co. Ltd. [1955] UKHL 5; (1955) 1 WLR 761; W.J. Alan & Co. v El Nasr Export (1972) 2 QB 189,212-214). In the meantime, neither party can complain if the agreement is performed in accordance with the new arrangement. It is not correct, however, to treat non-compliance or imperfect compliance with the altered arrangement as a breach of the agreement. In the present case the lateness in payment was always so trivial that doubtless the licensors did not consider action towards putting the licensee in breach, as by giving a notice, nor did they threaten to do so.

I do not think clause 11 should be construed so that the phrase "in breach of the licence agreement" embraces the lateness of the payments measured according to the substituted arrangement. On an ordinary grammatical construction the late payments did not constitute breaches of the agreement. It is established that option clauses have to be strictly complied with, so far as concerns time and manner of exercise, but this is because they constitute a unilateral right or power, and it is considered important that the grantor of the option know where he stands (United Scientific Holdings Ltd. v Burnley Borough Council (1978) AC 904,929,945), but the line of cases which I will soon discuss clearly enough supports the conclusion that a condition annexed to an option that a provision or provisions of the principal agreement be complied with is not, or is not as a rule, "strictly" construed. To take one of the cases, Australian Can Co. Pty. Ltd. v Levin & Co. Pty. Ltd. (1947) VLR 332, Lowe J, delivering the judgment of Herring CJ and himself, with which Fullagar J agreed, said at p.336:
"We agree that the plaintiff's right to exercise the option to purchase is subject to a condition precedent, but the meaning of the condition has still to be ascertained. It is to be observed that the defendant's covenant for quite enjoyment is subject to the same condition precedent and we find it impossible not to give the same meaning in each case to the language used. There is a long course of authority which establishes that the language is not to be construed in its strictest sense, and that the condition is complied with if at the time the plaintiff seeks to exercise his right the breach has been remedied (Simons v Associated Furnishers Ltd. (1931) 1 Ch. 379 and the cases there referred to." (The emphasis is mine).
A construction which resulted in the late payments being brought within clause 11 would be more than a strict construction, it is one which is not open, but I refer to the existence of the cases just mentioned, and cite the passage, to show what I believe to be the well established approach to the construction of such provisions.

On this ground alone it is wrong to reach the conclusion that the respondent was in breach of the licence agreement within the meaning of clause 11, and hence unable to take up the option.

There is a second and independent ground fatal to the success of the appeal, which I put forward with more hesitation because it depends on a question of construction which was not argued before us, and upon which views can differ. The line of authority to which I have already referred concerns conditions related to the effective exercise of options, and holds that it is a sufficient compliance if a prior breach or non-performance of a term or condition of the prime agreement (usually a lease or licence agreement) is remedied before the option is exercised, or, in some cases, before the exercise becomes operative. The learned judge, in reliance upon the words "during the term of the licence" in clause 11 held that absence of a breach at any time was necessary, and that bringing performance up to date was not sufficient. As a matter of general principle, I prefer a construction which gives business reality to the transaction; payment of rent or a licence fee a day or two late (or early) is so common that only very positive terms relative to that circumstance should be understood to defeat an option given by the same agreement. The option is, after all, part of the consideration which the licensee receives. The cases to which I refer adopt this approach. They show, for example, that phrases such as "due compliance" are satisfied by late compliance, provided that what has to be done is done in sufficient time. The authorities start with the advice of two judges, Erle and Coleridge JJ in Grey v Friar [1854] EngR 815; (1854) 4 HLC 565. Their effect is expressed by the High Court in Falk v Haugh [1935] HCA 35; (1935) 53 CLR 163 at 177- 8 in the joint judgment of Rich, Dixon, Evatt and McTiernan JJ:
"Thus a condition precedent to a right to renew a lease, requiring that the covenants on the part of the tenant shall have been duly observed and performed, does not mean that the tenant must have strictly observed and performed the covenants all through the term; it is satisfied if the covenants have been so observed and performed that there is no existing right of action under them at the time when the lease is applied for (per Mellish LJ, Finch v Underwood (1876) 2 Ch. D. 310 at 316."
A similar statement is to be found in the judgment of Dixon CJ in MacDonald v Robins [1954] HCA 5; (1954) 90 CLR 515,519 :
"The condition precedent is expressed in the covenant in the lease by the defendant, which confers the option, by the words 'the lessees having duly observed performed fulfilled and kept all the covenants conditions agreements and stipulations herein contained or implied on their part to be observed performed fulfilled and kept'. No doubt these words make it essential to the right to exercise the option that the lessees' convenants in the lease 'have been so observed and performed that there is no existing right of action under them at the time when the' option comes to be exercised, cf. per Mellish LJ, Finch v Underwood (supra), Bastin v Bidwell (1881) 18 Ch.D. 238, Wilson v Stewart (1889) 15 VLR 781."
(See also his Honour's observations at p.521). In Starkey v Barton (1909) 1 Ch. 284, referred to in Falk v Haugh (supra), an option to purchase was given to a lessee. Rent was payable quarterly in advance. The option was exercisable provided that the plaintiff should "in the meantime have duly paid the said rent hereby reserved". The plaintiff did not pay the rent due on 25 December 1907 until 10 January 1908. On 20 March 1908 notice of exercise of the option was given. It was held that "duly" did not mean punctually, and that the condition precedent to the exercise of the option had been fulfilled. Parker J (at 289) made the following pertinent observations:
"The law is quite clear that where there is a condition precedent to the exercise of an option of this sort the condition must be strictly fulfilled, but, on the other hand, there are no special rules of construction by which clauses creating conditions precedent are to be interpreted."
and, later:
"On the other hand, all rent due up to the date at which the option was exercised had in fact been paid, and it had been duly paid in the sense that the payment made discharged the legal obligation and would have been a complete defence to an action for rent or on a covenant for payment of rent, and also, apart from any question of waiver, to an action to endorse the proviso for re-entry."

In Robinson v Thames Mead Park Estate Ltd. (1947) Ch. 334, Evershed J held that work completed out of time, but before notice given, nevertheless satisfied a requirement that a tenant who had purported to exercise an option to continue the tenancy, should have "faithfully performed and observed all her agreements". To the same effect are Simons v Associated Furnishers Limited (1931) Ch. 379; Australian Can Co. Pty. Ltd. v Levin & Co. Pty. Ltd. (1947) VLR 332 and Healy v Southern Milk Transport Pty. Ltd. (1954) VLR 448.

In relation to this line of cases, a question arises whether the licence payments have to be up to date as at the time of giving the notice, or as at the time the option becomes effective. There are practical considerations both ways, which have sometimes been relied upon. Under an agreement such as the present, where the notice may have been given six months before 31 July 1980, subsequent defaults would be a risk to the lessor or licensor if the date of the notice were the critical date. On the other hand, if the later date were selected, defaults might continue for a long time up to then. Kay J in Bastin v Bidwell (supra at 250-3) considered the question whether date of exercise or date of expiry of a notice was the critical date, but did not have to reach a conclusion thereon. In Simons v Associated Furnishers Ltd. (supra) the option was to determine the lease and the condition was that the lessees shall "up to the time of such determination pay the rent and perform and observe the covenants and conditions on their part hereinbefore contained". Clauson J found that the date of determination was the relevant date as at which to decide whether compliance had been brought up to date. Dean J dealt with the question in Healy v Southern Milk Transport Pty. Ltd. (supra at 455-458) which was a case of the renewal of a lease. With expressed reluctance, having in mind the first of the practical considerations mentioned above, he found that the construction of the lease he had before him required him to look to the date of exercise of the option.

As distinct from Healy v Southern Milk Transport Pty. Ltd. compliance with the condition in the present case is not in terms attached to the exercise of the option. As Dean J emphasised, the matter is one of construction.

The form and content of the licence agreement, and the balance of practical considerations seem clearly to lead to the conclusion that 31 (or 30) July 1980 is the appropriate date. What the licensors were concerned with, as at that date, was to ensure that the licence fee, and any other payments for which they could be held responsible, had been paid; there was not to be any continuing relationship. Clause 11 itself refers to breach "during the term of the licence"; in this way it bears a similarity to the clause in question in Simons' case (supra); and is free from the fetter that Dean J found in Healy's case (supra). It matters not that the notice has to be given before the operative date; this was a feature of all the cases cited on this aspect. The sense of the situation, having in mind the language used, is that there will be no binding agreement for sale unless payments are up to date at the time the licence expires, and the time comes when effect is to be given to the agreement. In Grey v Friar eighteen months' notice had to be given to terminate a lease. The House of Lords, as is well known, established the rule of construction which favours terms such as the present being construed as conditions. It is interesting to read the emphasis on practical matters. In relation to the present aspect, Erle J (4 HLC at 599,600; 10 ER 596) said:
"It is said that there would be inconvenience in restricting the power of determining it to the event of all the covenants having been performed, which would be almost an impossibility. To this one answer is, that if the parties agree so to stipulate, the law must give effect to the stipulation. It may also be answered that the stipulation does not mean that there would not have been any breach of covenant during the term, but that when the notice expires there should not exist any cause of action in respect of performance of covenants. The stipulation for arrears of rent being paid, refers to a covenant which had been broken; but all cause of action for the breach having been satisfied by subsequent accord, and the covenant for rent would, within the meaning of this clause, be observed and performed, if all arrears of rent were paid before the expiration of the notice. So the covenant for repair, though broken during the term, would be observed if all repairs were at last completed. So in respect of other breaches; if the damage had been settled by arbitration and the amount paid, or if an action had been brought and the judgment satisfied, the legal duty of the covenanter, by reason of his covenant, would have been so far observed and performed, that all liability in respect thereof would be at an end. In this sense, the stipulation would be free from any hardship towards the lessee, as he might obtain the privilege if he did his duty. This construction does not depend upon giving a peculiar effect to the words of this instrument, for it seems to me that the same principle is applicable to all contracts. The legal effect of the promise in every contract at common law is alternative, either to do the thing promised or make compensation instead. In some contracts the alternative is expressed when liquidated damages are stipulated for, in others the liability arises by implication of law, either to do or to compensate for not doing, according as may be settled by accord, or arbitration, or judgment. In all contracts the legal duty thereunder has been performed, and so the contract may be said in one sense to be performed, when either the thing contracted for has been done, or compensation instead therof has been made."
There does not seem to have been a tendency to treat performance after notice as a requirement of the contract which is normally completed on exercise of the option. The view seems to have been that if there is relevant non-performance, that agreement may be, or become, inoperative.

I therefore am of the opinion that the relevant date at which to test compliance is 31st (or 30th) July. As at that time there were no arrears of rent, and the notice already given became fully effective.

The next consideration is more general, but is in my opinion quite conclusive, apart from what I have already said. It is not covered by the concession. In January 1980 and twice in June 1980 the licensors made it quite plain that the option, or the prospective sale, was still on foot notwithstanding the known situation concerning payments. It is interesting that in the evidence already related concerning the January discussion, Mrs Reed says that the licensors were "shocked" by a suggestion that they were trying to get out of the agreement (for sale). If it adds anything to the present consideration, the inference can be drawn, and I think should be drawn, that neither party at any stage before mid-July 1980 regarded the lateness of payments (according to the substituted arrangement) of any significance so far as concerned the licensee's right to take up the option. The fact, if it be the fact, that the licensors did not know of a possible legal way out of the option arrangement until July 1980 is beside the point. They did have a solicitor write a letter to the licensee dated 15 January 1980, dealing with the production of information concerning registration of the hire car, and threatening that non-production of the registration certificate would be treated as a breach of the licence agreement. No mention was then made about any lateness of payment of the licence fees. If one takes January 1980 as the first time there was any clear statement to the licensee of the licensors' attitude, it is still reasonable to conclude that he thereafter acted and based his plans on that footing. The acquisition of the number plate was after all a matter of major moment to him. It is reasonable to suppose that the prospective sale was of importance to both parties, the licensors not least of all because of the apparent increase in value of the plate.

I doubt whether the preparation of the document of 11 June and the events which followed it by themselves give rise to an effective estoppel if up to 11 June the respondent is to be regarded, and was regarded on both sides, as having lost the option right. What happened at that time is however a further indication of action taken or not taken by the respondent in reliance on the representation that he still did have an option. If there had been any doubt, he could have taken up the offer made on 11 June, or negotiated for some other arrangement. He did neither of those things, plainly believing that he had the option. To that end he had arranged the finance he at first had difficulty in obtaining.

I am of the view that the circumstances gave rise to a clear case of estoppel, under which the appellants, as licensors, were precluded from relying on the lateness of the payments to defeat the option and sale. I say this of course on the basis, contrary to my own view, that each late payment constituted a breach of the licence agreement within the meaning of clause 11. On the factual side, I think it is somewhat unreal to regard events as starting in January 1980. As I have said, a reasonable view of the total circumstances is that the lateness of the payments was not before mid-July 1980 regarded as of significance by the licensors, and certainly not in relation to the sale of the licence plate and radio. What was said and done in January 1980 was eloquent of this fact. There was therefore a common basis upon which they both proceeded; the licensors were not free to resile from this situation without, at least, appropriate notice to the licensee. In January 1980 they plainly stated that the agreement was not affected, the licensee continued to act on this basis, and his belief in the situation could only have been confirmed by what was said and done in June. Trouble did not start to arise until after he expressed his desire to continue with the original agreement rather than take up the new arrangement, which had been proposed as a result of his concern whether he would be able to take up the option and continue to drive the car himself.

The law of estoppel by conduct has become confused by its division into many categories, and many terms are now used with indifferent precision, if indeed it is possible to determine their correct use: estoppel at law, estoppel in equity, proprietary estoppel, promissory estoppel, waiver, election, forbearance, substituted performance, acquiescence, approbation and reprobation are some of the concepts badly in need of orderly and coherent arrangement. This will only flow, I believe, from the determination of a more generic rule or rules, based on the fundamental concept. So far as concerns promissory estoppel Lord Hailsham of Marylebone LC has said (Woodhouse Ltd. v. Nigerian Produce Ltd. (1972) AC 741, 758):
"I desire to add that the time may soon come when the whole sequence of cases based on promissory estoppel since the war, beginning with Central London Property Trust Ltd. v. High Trees House Ltd. (1947) KB 130, may need to be reviewed and reduced to a coherent body of doctrine by the courts. I do not mean to say that any are to be regarded with suspicion. But as is common with an expanding doctrine they do raise problems of coherent exposition which have never been systematically explored."
Oliver J. in Taylors Fashions Ltd. v. Liverpool Victoria Trustees Co. Ltd. (decided in 1979, but reported at (1981) 2 WLR 576) and Robert Goff J. in Amalgamated Investment and Property Co. Ltd. (in liquidation) v. Texas Commerce International Bank Ltd. (1981) 2 WLR 554 have I believe done us a service by their scholarly examination of many of the authorities over a wide field. In the former case, Oliver J., referring to Shaw v. Applegate (1977) 1 WLR 970 said ((1981) 2 WLR at 596):
"So here, once again, is the Court of Appeal asserting the broad test of whether in the circumstances the conduct complained of is unconscionable without the necessity of forcing those incumbrances into a Procrustean bed constructed from some unalterable criteria."

Robert Goff J, in the Amalgamated Investment and Property Co. Ltd. case agreed with what Oliver J had said in Taylors Fashions, and I would respectfully add my agreement. He also had this to say himself ((1981) 2 WLR at 569,570):
"Of all doctrines, equitable estoppel is surely one of the most flexible. True, from time to time distinguished judges have enunciated statements of principle concerning aspects of the doctrine; as, for example, the statements of Lord Cranworth L.C. in Ramsden v Dyson, LR 1 HL 129, 140-141; of Thesiger L.J. in De Bussche v Alt, 8 Ch.D. 286, 314 and of Fry J in Willmott v Barber (1880) 15 Ch. D. 96, 105-106, concerning what is usually called the doctrine of acquiescence; the statement of Lord Kingsdown in Ramsden v Dyson, at pp. 170-171, on what may be called the doctrine of encouragement; and the statement of Lord Cairns L. C. in Hughes v Metropolitan Railway Co., 2 App.Cas. 439, 448, and Denning J in Central London Property Trust Ltd. v High Trees House Ltd. (1947) KB 130, 134, on promissory estoppel. But all these have been statements of aspects of a wider doctrine; none has sought to be exclusive. It is no doubt helpful to establish, in broad terms, the criteria which, in certain situations, must be fulfilled before an equitable estoppel can be established; but it cannot be right to restrict equitable estoppel to certain defined categories, and indeed some of the categories proposed are not easy to defend."

The present case, I believe, comes squarely within pronouncements of high authority which are well known and often cited. In Craine v The Colonial Mutual Fire Insurance Co. Ltd. [1920] HCA 64; (1920) 28 CLR 305, Isaacs J, drawing a firm distinction between waiver and estoppel said at p.327:
"When its true foundations are stated, it will be seen that estoppel is separated from waiver in point of principle by a very broad line of demarcation. First of all, the law of estoppel looks chiefly at the situation of the person relying on the estoppel; next, as a consequence of the first, the knowledge of the person sought to be estopped is immaterial; thirdly, as a further consequence, it is not essential that the person sought to be estopped should have acted with any intention to deceive; fourthly, conduct, short of positive acts, is sufficient."
Dixon J in Thompson v Palmer [1933] HCA 61; (1933) 49 CLR 507, 547 said:
"The object of estoppel in pais is to prevent an unjust departure by one person from an assumption adopted by another as the basis of some act or omission which, unless the assumption be adhered to, would operate to that other's detriment. Whether a departure by a party from the assumption should be considered unjust and inadmissible depends on the part taken by him in occasioning its adoption by the other party. He may be required to abide by the assumption because it formed the conventional basis upon which the parties entered into contractual or other mutual relations, such as bailment; or because he has exercised against the other party rights which would exist only if the assumption were correct."
In Grundt v Great Boulder Proprietary Gold Mines Pty. Ltd. [1937] HCA 58; (1937) 59 CLR 641, 674, his Honour dealt further with the subject:
"The principle upon which estoppel in pais is founded is that the law should not permit an unjust departure by a party from an assumption of fact which he has caused another party to adopt or accept for the purpose of their legal relations."
(See also, in relation to this statement the observations of Lord Denning MR in Moorgate Mercantile Co. Ltd. v Twitchings (1976) QB 225,241). In Hughes v Metropolitan Railway Co. (1877) 2 App.Cas. 439, at 448, Lord Cairns said:
". . . if parties who have entered into definite and distinct terms involving certain legal results - certain penalties or legal forfeiture - afterwards by their own act or with their own consent enter upon a course of negotiation which has the effect of leading one of the parties to suppose that the strict rights arising under the contract will not be enforced, or will be kept in suspense, or held in abeyance, the person who otherwise might have enforced those rights will not be allowed to enforce them where it would be inequitable having regard to the dealings which have thus taken place between the parties."
Bowen LJ in Birmingham and District Land Co. v London and North Western Railway Co. (1888) 40 Ch.D. 268, 286 added:
". . . if persons who have contractual rights against others induce by their conduct those against whom they have such rights to believe that such rights will either not be enforced or will be kept in suspense or abeyance for some particular time, those persons will not be allowed by a Court of Equity to enforce the rights until such time has elapsed, without at all events placing the parties in the same position as they were before."
I do not think it necessary to go further. It seems to me to be quite inequitable for the licensors belatedly to rely on the late payments to bar the sale, having in mind the conduct of themselves and of the licensee, and in law they were not in a position to do so.

I would dismiss the appeal.

I agree with Deane J., and unfortunately differ from Fox J., in thinking that this Court should not decide this appeal otherwise than on the footing of the concession made by counsel for the respondent at the hearing. That concession was that the late payments of the licence fee by the respondent disentitled him from exercising the option, unless the appellants were estopped.

On the question of estoppel, I am in complete agreement with what my brother Deane has written, and I do not wish to add anything.

I would allow the appeal, set aside the order of the Supreme Court, and order that the action be dismissed. The appellants should have their costs of the appeal and of the action in the Supreme Court. I say nothing about the counterclaim, which is still before the Supreme Court.

The appellants, Mr. and Mrs. Reed, were the owners of a hire car business in the Australian Capital Territory. By a written agreement of 29 March, 1978 ("the agreement"), they agreed to sell the motor vehicle used in the business to the respondent, Mr. Sheehan. Completion of the purchase and sale of the vehicle was on that day.

By Clause 2 of the agreement, the appellants agreed to grant to the respondent a licence to permit the respondent "to use the rights attaching to Number Plate ACT. H22" for the period until 30 July, 1980. By clause 3, the respondent agreed to pay to the appellants a licence fee in the amount of $54.80 payable " on the twenty ninth day of March, 1978 and each succeeding payment on the Wednesday of each week thereafter until the thirty first day of July, 1980". Subsequently, there was an oral arrangement between the parties that payment of the licence fee would be made by the respondent fortnightly, instead of weekly, in advance. Nothing turns on the question whether that oral arrangement was contractually binding on the respondent.

During the term of the licence, the respondent was frequently some days late in paying the fortnightly licence fee. There was a number of payments which were more than seven days overdue. Regardless of whether one looks to the terms of the original agreement or to the subsequent oral arrangements that the licence fee would be paid fortnightly in advance, the respondent was, on a number of occasions, in default in paying the licence fee on the due date.

The agreement recited, inter alia, that the parties had agreed that the appellants would, on 31 July, 1980, sell to the respondent the right to conduct a hire car by transferring to the respondent the hire car number plate. Clause 11 of the agreement provided:
"The parties hereto agree that should the purchaser during the term of the licence not be in breach of the licence agreement hereinbefore referred to, the vendors grant to the purchaser an option to purchase the Number Plate ACT.H22 together with the radio installed in the motor vehicle Engine Number JG37RU46963R for the sum of Twelve thousand dollars ($12,000). Such option shall be exercised by the purchaser giving written notice to the vendors of proposing to purchase same not less than one month prior to the 30th day of July, 1980".
Clause 10 of the agreement provided that any notice might be served upon the appellants "by being left at or posted to" them "at their address". On 11 May, 1980, the respondent posted to the appellants a letter giving notice of his intention to exercise the option. That letter was not received by the appellants. It was common ground between the parties, on the hearing of the appeal, that the respondent had complied with the requirement of clause 11 in so far as the manner and form of exercise of the option was concerned.

In the Supreme Court of the Australian Capital Territory, Kelly J. held that, under clause 11 of the agreement, the grant of the option to purchase the hire car plate and radio was conditional upon the respondent not being in breach of the licence agreement at any time during its term and that the various failures to pay the licence fee by the due date had the result that that condition had not been satisfied. His Honour's conclusion in that regard was not challenged by the respondent on the appeal. To the contrary, counsel for the respondent expressly conceded the correctness of the view that the respondent's failure to make some payments of the licence fee on the due date would, in the absence of an estoppel, make it impossible for the respondent effectively to have exercised the option. The question of the intention of the parties as appearing from the contract between them is not an inappropriate matter to be dealt with by concession and, the appeal having proceeded on the basis of the concession, this Court should not go beyond it. That being the case, the only issue between the parties is whether his Honour was in error in holding that the appellants were estopped from relying on the late payment of licence fee to deny the effectiveness of the respondent's purported exercise of the option. It was on the basis of that finding of an estoppel that Kelly J. made the declaration that the option had been validly exercised and the consequential orders against which the appellants appeal to this Court.

The authorities upon which Kelly J. relied to support his finding of an estoppel were cases concerned with estoppel by representation of an existing fact. At a critical point in his judgment, his Honour indicated that the representation which he found had been made by the appellants was a representation to the effect that the appellants would not rely upon the respondent's breaches of the licence agreement to avoid an effective exercise of the option. Such a representation, in those terms, is not appropriate to found a conventional estoppel by representation in that it is a representation as to future conduct or forbearance. It would seem that this aspect of the matter was not debated before his Honour. It appears from his judgment, however, that Kelly J. also held that the appellants had represented to the respondent that the option agreement was still on foot in the sense that there existed no bar to a valid and effective exercise of the option by the respondent. On the appeal, the respondent's case was, as I followed the argument, put somewhat differently from the manner in which it was apparently put in the Supreme Court. A representation that the appellants would not rely upon the respondent's breaches of the licence agreement to avoid an effective exercise of the option was propounded as the basis of an equitable estoppel of the type involved in Central London Property Trust Ltd. v. High Trees House Ltd. ((1947) K.B. 130). A distinct representation to the effect that there existed no bar to a valid and effective exercise of the option by the respondent was propounded as the basis of a conventional estoppel by representation. The alleged representations are said to have been made in the course of conversations between the appellants and the respondent in June and July, 1980. Kelly J. accepted the respondent's evidence as to those conversations and it is to that evidence that I shall refer.

On or about 4 June, 1980, the respondent called upon the appellants at the appellants' business premises. He informed the appellants that he might not be able to raise sufficient funds for the purchase of the hire car plates and radio and that he was not "real sure about passing a medical, particularly in 1981". He asked whether the appellants would give him an extension of "the lease" and an option. The appellants replied: "That will be alright. We will think it over".

On 11 June, 1980, the respondent had a further conversation with the appellants. The respondent asked the appellants: "What are you going to do?" Mrs. Reed replied: "We would prefer to sell". The respondent said: "O.K. I won't worry. I will pay you out". Mrs. Reed said: "Well, what about an indefinite lease?" The respondent replied: "I don't want one - make it for 12 months, but only if I don't get finance or pass the medical". Mrs. Reed answered: "O.K. We will draw up an agreement". The respondent said: "I don't expect it to be on the same terms. I want you to draw up a lease the same as the last one but I am prepared to pay 10% over and above the price to cover inflation if I don't get finance or pass the medical".

Presumably at this stage of the conversation on 11 June, 1980, Mr. Reed wrote out a document in the following form:
"To whom it may concern

Re re-newing of lease of Hire Car Plate No.H22 to Mr. James Sheehan the lease of plates expire on 29 - 7 - 1980.

I wish to re-new the lease on Hire car plates H22 for a further 12 MONTHS. As from 29 - 7 - 1980 until 14-8-1981. Mr. James Sheehan will still have option to purchase plates H22 at the expiry date of lease at the figure of $20,000-00. dollars, if Mr. Sheehan does not want to purchase such plates he will then hand plates & radio back to Mr. Allen Reed.

The new lease will be at a rental of $60-00 per week plus radio hiring fee of $4-00 per week subject to re-newal of rent which will be tied to rate of inflation renewal date 1-2-1981".
This document was handed to the respondent. Mrs. Reed said to him: "If you want to take up the second lease, take it to a solicitor and have it drawn up but you will be liable for expenses".

On 14 July, 1980, the respondent again called upon the appellants. He informed the appellants that he had passed the "medical" and that finance was arranged. He said: "I will take up the option". Mrs. Reed replied: "O.K. we will work things out". It has neither been pleaded nor submitted on behalf of the respondent that the terms of that conversation constituted a fresh independent contract between the parties.

On the night of 14 July, 1980, Mrs. Reed rang the respondent at his home. She said: "You have broken the agreement. You did not notify us thirty days before". The respondent replied: "I have notified you two and a half months before". Referring, apparently, to the draft which had been written out by Mr. Reed on 11 June, 1980, he added: "What about the agreement?" Mrs. Reed replied: "It is not worth the paper it was written on".

On his Honour's findings, the appellants were unaware until the night of 14 July, 1980 that there was any suggestion that the respondent had given notice exercising the option. Certainly, nothing that was said in the conversations which took place in June, 1980, was likely to indicate to them that the respondent believed that he had already exercised the option with the consequence that there was a binding contract for purchase and sale of the hire car number plate and the radio. In the result, the conversations between the parties in June, 1980 must be seen as taking place in a situation where the respondent knew he had purportedly exercised the option but where the appellants believed that no notice exercising the option had been given. His Honour also found that neither of the appellants "was as at 11 June, 1980, indeed, until 14 July, 1980 aware that breaches of the agreement for licence . . . could constitute grounds for avoiding the option".

At least since the time of Coke (Coke's Littleton, 352a), it has been customary to recognize three general classes of estoppel: of record (e.g., judgment), of writing (viz. deed) and in pais (between persons in the land or country (pays) i.e. by conduct). Estoppel in pais includes both the traditional common law estoppel which prevents a party from denying an assumption which formed the conventional basis of a relationship between himself and the other party or which he has adopted against the other party by the assertion of a right based on it and estoppel by representation which was of later development with origins in chancery. Estoppel in pais is also commonly regarded as including, at least under a Judicature Act system such as in the Australian Capital Territory, the overlapping equitable doctrines of proprietary estoppel and estoppel by acquiescence or encouragement. I put to one side, for the moment, the question whether the High Trees House Case (supra) type of equitable estoppel, which is usually and conveniently called "promissory estoppel", exists in the law of the Australian Capital Territory and, if it does, whether it is also included in estoppel in pais or should be consigned to a separate class.

In Thompson v. Palmer ((1933) [1933] HCA 61; 49 C.L.R. 507 at p. 547), Dixon J. discerned a unity of principle underlying the various types of estoppel in pais. His Honour wrote:
"The object of estoppel in pais is to prevent an unjust departure by one person from an assumption adopted by another as the basis of some act or omission which, unless the assumption be adhered to, would operate to that other's detriment. Whether a departure by a party from the assumption should be considered unjust and inadmissible depends on the part taken by him in occasioning its adoption by the other party. He may be required to abide by the assumption because it formed the conventional basis upon which the parties entered into contractual or other mutual relations, such as bailment; or because he has exercised against the other party rights which would exist only if the assumption were correct, as in Yorkshire Insurance Co. v. Craine (1922) 2 A.C. 541, at pp. 546-547; cp. Cave v. Mills [1862] EngR 494; (1862) 7 H. & N. 913, at pp. 927-928; [1862] EngR 494; 158 E.R. 740, at pp. 746-747; Smith v. Baker (1873) L.R. 8 C.P. 350, at p. 357; Verschures Creameries Ltd. v. Hull and Netherlands Steamship Co. (1921) 2 K.B. 608, at p. 612 and Ambu Nair v. Kelu Nair (1933) 60 I.A. 266, at p. 271; or because knowing the mistake the other laboured under, he refrained from correcting him when it was his duty to do so; or because his imprudence, where care was required of him, was a proximate cause of the other party's adopting and acting upon the faith of the assumption; or because he directly made representations upon which the other party founded the assumption. But, in each case, he is not bound to adhere to the assumption unless, as a result of adopting it as the basis of action or inaction, the other party will have placed himself in a position of material disadvantage if departure from the assumption be permitted".

Notwithstanding the fact that estoppel in pais has been in a state of development over the past fifty years, the above comments of Dixon J. still constitute, in my respectful view, a correct statement of an underlying general principle which can be discerned in the established emanations of the doctrine. No such statement of general principle can, however, provide a definitive self-contained guide either to the limitations of the area in which the general principle is relevant or to the content of more particular rules which are applicable either generally or in relation to a particular category or type of case within that area. General principles of the common law neither evolve nor operate in a vacuum. The area and extent of their application is defined and influenced both by their nature and origins and by other competing or auxiliary general principles and specific rules.

There is clear authority that the ordinary doctrine of estoppel by representation is confined to cases where there has been a representation of an existing fact (Jorden v. Money (1854) 5 H.L.C. 185; George Whitechurch Ltd. v. Cavanagh (1902) A.C. 117 at p. 130; Craine v. Mutual Fire Insurance Co. Ltd. [1920] HCA 64; (1920) 28 C.L.R. 305 at p. 324). A representation of an existing fact can of course be of an existing state of mind. An estoppel founded on a representation of an existing state of mind would ordinarily, however, be of little avail since what will normally be involved is subsequent conduct which, while it may not conform with the previous state of mind, is not inconsistent with its previous existence and it would be only a denial of the previous existence of the state of mind that would be precluded by such an estoppel by representation. On the other hand, it is possible to point to statements of high authority to support the existence of a distinct principle of equity which precludes, in certain circumstances, the enforcement of strict rights arising under a contract where there has been a promissory representation that they would not be enforced (see Hughes v. Metropolitan Rail Co. (1877) 2 App. Cas. 439 at p. 448; Birmingham and District Land Company v. London and North Western Railway Company (1888) XL Ch.D. 268 at pp. 277,281 and 286 but cf., Barns v. Queensland National Bank [1906] HCA 26; (1906) 3 C.L.R. 925 at p. 938). It is this principle of equity which has been seen as providing the foundation of the doctrine of promissory estoppel. Where law and equity are fused with equity prevailing, such an equitable doctrine of promissory estoppel can, if accepted, conveniently be treated as an emanation of estoppel in pais in an area where the doctrine of consideration would otherwise have prevailed. If it is so treated however, care needs to be taken to ensure that questions of principle (e.g., whether estoppel in pais generally or promissory estoppel in particular is properly to be regarded as being no more than a rule of evidence or as being incapable of founding a cause of action) are not clouded or foreclosed by an assimilation of doctrines which are not strictly cognate.

Much of the argument on the appeal was concerned with the interesting questions surrounding the content of the doctrine of promissory estoppel and the status of that doctrine in the law of the Australian Capital Territory. There are statements and decisions of high authority which support acceptance of at least a doctrine of promissory estoppel limited in operation to between parties in a pre-existing contractual relationship (see, e.g., Tool Metal Manufacturing Co. Ltd. v. Tungsten Electric Co. Ltd. [1955] UKHL 5; (1955) 2 All E.R. 657 at pp. 660, 674, 685-6; Ajayi v. R.T. Briscoe (Nigeria) Ltd. (1964) 1 W.L.R. 1326 at p. 1330; Calgary Milling Company Limited (1919) 3 Western Weekly Reports 98 at pp. 103-4 and note, generally, Je Maintiedrai Pty. Ltd. v. Quaglia (1980) 26 S.A.S.R. 101). In my view, the acceptance of at least such a limited doctrine is, where law and equity are fused, supported by the rationale of the general principle underlying estoppel in pais, by established equitable principle and by the legitimate search for justice and consistency under the law. Against these considerations which support acceptance of promissory estoppel as part of the law of the Australian Capital Territory, there is the limitation by Dixon J., in Grundt v. Great Boulder Pty. Gold Mines Ltd. ((1938) [1937] HCA 58; 59 C.L.R. 641 at p. 674), of the principle upon which estoppel in pais is founded to the case of an "assumption of fact" and there are statements in both the High Court and the Privy Council which strongly support denial of the doctrine as part of the law of the Australian Capital Territory (see, e.g., Chadwick v. Manning (1896) A.C. 231 at p. 238; Craine v. Colonial Mutual Fire Insurance Co. Ltd., supra, at p. 324; Yorkshire Insurance Co. Ltd. v. Craine (1922) 31 C.L.R. 27 at p. 38). When what was said in the last mentioned three cases is read in the context of the statement in the judgment of the High Court in Barns v. Queensland National Bank (supra, at p. 938) to the effect that the principle enunciated by Lord Cairns L.C. in Hughes v. Metropolitan Railway Co. (supra) is only applicable to a case "where there is something in the nature of what is called a consideration", one cannot but be conscious of the force of the submission that this Court is constrained by authority to decline to recognize what Windeyer J. has described as "a new and growing chapter of our law" (Olsen v. Dyson [1969] HCA 3; (1969) 120 C.L.R. 365 at p. 386). Overall however, my tentative inclination is to accept at least the limited doctrine of promissory estoppel recognized by the Privy Council in Ajayi v. R.T. Briscoe (Nigeria) (supra) (i.e. between parties in a pre-existing contractual relationship) as constituting part of the law of the Australian Capital Territory. It is, however, unnecessary that I express any firm view on the question for the reason that I have reached the conclusion that the circumstances of the present case do not provide a proper foundation for either a conventional estoppel by representation or for a promissory estoppel. In order to explain my conclusion in that regard, it is necessary to examine critically the conversations between the appellants and the respondent which are claimed to provide the foundation of the estoppel by representation and the promissory estoppel which the respondent propounds. Before doing that however, it is convenient to point to three relevant features of the established doctrine of estoppel by representation and the developing doctrine of promissory estoppel.

First, it has long been recognized that a representation must be clear and unambiguous before it can found an estoppel in pais (Low v. Bouverie ((1891) 3 Ch. 82 at pp. 106, 113; Western Australian Insurance Co. Ltd. v. Dayton ((1925) [1924] HCA 58; 35 C.L.R. 355 at p.375 and p. 384) Newbon v. City Mutual Life Assurance Society Limited ((1935) [1935] HCA 33; 52 C.L.R. 723 at p. 738) Woodhouse A.C. Israel Coco Limited S.A. v. Nigerian Produce Marketing Co. Limited ((1972) A.C. 741 at pp. 755-756, 768, 771). "Every estoppell, because it concludeth a man to alleadge the truth, must be certaine to every intent, and not to be taken by argument or inference" (Coke's Littleton, 352b). The requirement that a representation must be clear and unambiguous before it can found an estoppel is applicable to any doctrine of promissory estoppel (see Woodhouse A.C. Israel Coco Limited S.A. v. Nigerian Produce Marketing Co. Limited, supra; China-Pacific S.A. v. Food Corporation of India (1980) 3 All E.R. 556 at pp. 566-567). Second, estoppel in pais looks chiefly at the situation of the person relying on the estoppel (Sarat Chunder Dey v. Gopal Chunder Laha L.R. 19 I.A. 203 at p. 215; Craine v. Colonial Mutual Fire Insurance Co. Limited (1920) 23 C.L.R. 305 at p. 327). This general rule is likewise applicable to any doctrine of promissory estoppel (see Taylors Fashions Ltd. v. Liverpool Victoria Trustees Co. Ltd. (1981) 2 W.L.R. 576 at p. 587). Third, a person will not be estopped from departing from an assumption or a misrepresentation "unless, as a result of adopting it as a basis of action or inaction, the other party will have placed himself in a position of material disadvantage" if departure from the assumption is permitted (per Dixon J., Thompson v. Palmer, supra, at p. 547; and see Tool Metal Manufacturing Co. Ltd. v. Tungsten Electric Co. Ltd., supra, at p. 660; Grundt v. Great Boulder Pty. Gold Mines Ltd., supra, at pp. 674-5; Je Maintiendrai Pty. Ltd. v. Quaglia, supra, at pp. 116-7; Fontana N.V. v. Mautner Vol. 254 Estate's Gazette L.R. 199). Again, this general rule is applicable to any doctrine of promissory estoppel (see Ajaya v. R.T. Briscoe (Nigeria) Ltd., supra, at p. 1330; and Spencer Bower and Turner, The Law Relating to Estoppel by Representation, 3rd Edition, pp. 392-4).

Accepting that the respondent believed that he had effectively exercised the option on 11 May, 1980, the conversation of 4 June, 1980 cannot be seen, from the respondent's viewpoint, as involving any representation or assurance by the appellants that a valid contract had or would result from the exercise of the option. It can only be seen as involving an intimation by the respondent that he might not be able or willing to perform the contract which he believed had come into existence. The only representation made by the appellants was, when looked at from the respondent's point of view, to the effect that they might not hold him to the terms of the contract which he believed existed and which he was intimating that he might not perform.

The express representations made by the appellants in the course of the conversation of 11 June, 1980 were that they would "prefer to sell" and that, if the respondent desired, they would enter into a new licence agreement providing for an increased licence fee and containing an option to purchase for $20,000 as compared with $12,000 under the then current licence agreement. The substance of the conversation was not concerned with whether exercise of the option had resulted or would result in a binding agreement between the respondent and the appellants. It was, from the respondent's viewpoint, concerned with the situation which would exist if the respondent were unwilling or unable to carry out any agreement which had resulted from his purported exercise of the option. The words "still have option" in the draft licence agreement would be appropriate regardless of whether a binding contract had resulted from the purported exercise of the previous option. Again, it may well be that the respondent may have been justified in reading into what Mrs. Reed said to him a representation that the appellants would not require him to observe the agreement which he believed existed. Looked at from the point of view of the respondent, it is, however, impossible properly to draw from anything that was said in that conversation or from the use of the words "still have option" in the draft agreement a clear and unambiguous representation either to the effect that the previous breaches by the respondent of the licence agreement did not constitute a bar to a valid exercise of the option or to the effect that the appellants would not, when the time for final decision arrived, rely upon the late payment of licence fee to deny the existence of a binding agreement. The most that could properly be inferred from the conversation was that neither the respondent nor the appellants were, at that stage, mindful of the possibility that the appellants might be entitled to rely on the breaches of the agreement to avoid any contract which would otherwise result from the exercise of the option. That is a very different thing from a clear and unambiguous representation by the appellants to the respondent to the effect necessary to found either of the estoppels propounded by the respondent.

Nor, in my view, was there anything in the conversation of 14 July, 1980 which can properly be seen as constituting a representation capable of founding one or other of the estoppels propounded by the respondent. It is, in any event, apparent that there is nothing in the evidence which would warrant or support a conclusion that the respondent adopted anything that was said in that conversation as the basis of action or inaction.

It was not suggested on behalf of the respondent that a foundation for the suggested estoppels could be found other than in the conversations to which reference has been made. It follows that the conclusion that one cannot find, in those conversations, a clear and unambiguous representation to the effect alleged by the respondent means that the appellants were not estopped from relying on the late payments of licence fee to challenge the efficacy of the respondent's purported exercise of the option. As has been mentioned, it was conceded that, in that event, the respondent must fail.

In the result, it is unnecessary to consider a number of questions which would have required to have been answered in a manner favourable to the respondent before the respondent would be entitled to succeed. The first of those questions is whether the respondent could properly have been said to have been influenced by, or to have acted on, any such representation in a situation where he alone of the parties knew that he had purportedly exercised the option and where, quite independently of any representation by the appellants, he believed that he was entitled to the benefit of the option (see, e.g., Morrison v. The Universal Marine Insurance Co. ((1873) L.R. 8 Exch. 197 at pp. 205-6). The second question is whether the respondent could, in the relevant sense, be said to have acted upon any such representation to his detriment when the detriment upon which primary reliance was placed was the loss of the opportunity to accept the offer of the draft licence agreement in circumstances where that offer of that draft licence agreement containing the words "still have option" was primarily relied upon as constituting the representation. The third question is whether the respondent is attempting to found a cause of action on estoppel and whether such a use of estoppel is permissible (see, Gilbert J. McCaul v. Pitt Club Ltd. (1959) S.R. (N.S.W.) 122 at p. 129; Low v. Bouverie, supra, at p. 105; N.S.W. Rutile Mining Co. Ltd. v. Eagle Mineral and Industrial Products Pty. Ltd. (1960) S.R. (N.S.W.) 495 at pp.502, 510 and 517 but cf., Hughes v. Metropolitan Railway Co., supra; Burrowes v. Lock [1805] EngR 89; (1805) 10 Ves. Jun. 470; Nocton v. Ashburton (1914) A.C. 932 at pp. 950-951; Crabb v. Arun District Council (1976) Ch. 179 at p. 186; Amalgamated Property Co. v. Texas Bank (1981) 2 W.L.R. 554 at p. 571).

I would allow the appeal with costs, set aside the order of the trial judge and order that the action be dismissed with costs. The appellants' cross action against the respondent remains to be determined by the Supreme Court.