Thursday 21 July 2016

The High Court under the microscope: Crown Melbourne Limited v Cosmopolitan Hotel (Vic) Pty Ltd [2016] HCA 26

High Court of Australia Report and Summary
As a young lawyer living in Australia, one of the things I am most excited about is the access to justice. That means that as Australians and more generally, members of the world we have a right of access to all legal judgments passed down by the courts. Therefore, I would like to summarize a recent high court decision which I’m sure you will all find very exciting. The judgment was handed down on the 20th of July 2016.

The title of the case is Crown Melbourne Limited v Cosmopolitan Hotel (Vic) Pty Ltd. The following is only intended to be a summary of the case and will not include all the detail held by the original judgment.

The judges:

French.
 Robert Shenton French was born in March 1947 and is the twelfth and current Chief Justice of the High Court of Australia. He is from Western Australia and is commonly described as a social progressive judge.

Kiefel.
Susan Mary Kiefel is a Justice in the High Court of Australia and was born in January 1954. She left school at fifteen and is only the third women ever to have been appointed as a judge to the High Court. She’s from Queensland Australia and has a keen interest in comparative law.

Bell.
Virgina Bell is a justice of the High Court of Australia and was sworn in on the 3rd of February 2009. She was one of the first to work at the Redfern Legal Center and has a strong commitment to social justice. However, she does caution against labeling judges and prefers to allow her actions show her true beliefs.

Gageler.
Stephen Gageler is a Justice in the High Court and was previously working as a barrister in Sydney, New South Wales. He was born in July 1958 and has made a name for himself as being someone who is keen to separate himself from the pack. He prefers to write alone and firmly believes in considering public policy when determining a result.

Public policy is a general term meaning to think about the well-being and overall impact on the community.

Keane.
Justice Keane was appointed in 2003 and comes from Queensland Australia. He is often called a ‘speedy judge’ by the media. The term refers to his reputation for fast work and an eye for attempting to minimize the growing complex and expense process that is litigation. In an interview with the Australian, another judge commented that he is ‘a leader in embracing electronic filing and organization of its workload.’

Nettle.
Geoffrey Nettle is called by the attorney general one of Australia’s finest jurists. He caused some controversy as he is the oldest judge to be appointed to the position as judges are required to retire at the age of seventy. With great wit, he told an audience ‘any damage I may do now is limited.’ He’s an approachable judge with an incredible diversity of interest and experience.

Gordon JJ:
Michelle Gordon was appointed to the court in June 2015. Before her appointment, she was a judge in the Federal Court of Australia. Justice Gordon has much experience from her previous experience in the Federal Court.  She is also highly regarded by the legal community.

 The case

Parties (members) to the case:

Appellant: Crown
Respondent: Cosmopolitan

The big issue:
Crown made a statement to Cosmopolitan that they would be ‘looked after at renewal time.’ The court had to consider whether this statement meant that Cosmopolitan had a guaranteed future with the lease.

Court history:

The VCAT determined that the declaration implied that Crown had to renew the leases for five years on terms that they could decide. The Tribunal also concluded that if they were wrong, then the tenants were estopped from denying the existence of the collateral contract.

Terms:

VCAT: Victorian Civil and Administrative Tribunal (Australia)

Estopped: Refers to the legal doctrine of contract law ‘estoppel.’ That means when a promise is made that a second party relied and acted on they are entitled to have it enforced in a court of justice.

Collateral contract: The happens when one contract already exists but another promise or condition connected to that contract forms another contract – called a subsidiary contract.

Facts of the case:

Crown owns the Melbourne Casino and the Entertainment Complex. The tenants then had two leases where they operated two restaurants. In 2005 lease negotiations began and the new leases offered by the Crown were limited to five years. They also did not contain an option for renewal and only required for the Crow­­­­n to give six months’ notice to let Cosmopolitan know whether they would:

A)    Renew the lease and the terms
B)    Allow the tenant to occupy the premises on a monthly basis after the expiry date
C)    Require the tenant to leave

Part of this agreement also mean that Cosmopolitan had to pay for and run a major refurbishment. The resident’s representative did express concern about renovation costs and attempted to solicit a promise of lease extension from the crown. However, Crown was unwilling to do this.

The contract was signed in 2005 and delivered to the Crown in March 2006.

In 2008 tenders were requested by Crown for new leases. Cosmopolitan put their bids in during March 2009. Crown rejected them and required them to vacate the premises by August 2010 when their 2005 lease expired.

In 2010 Cosmopolitan brought the issue to VCAT and complained that Crown had suggested to their legal representative that they'd have an extra five years of tenancy on their lease. They said that the refurbishments would not have occurred without this promise.

They claimed two things:
1.    The promise created a collateral contract
2.    If it did not create a collateral contract, Crown was estopped from not extending their lease.

Both claims have the same effect. The Crown would not be able to refuse to extend the lease.

VCAT did not find these representations in the terms but did find a statement that gave rise to a collateral contract. They rejected evident from Mr. Zampelis, Cosmopolitan’s legal representative but did accept evidence from Mr. Zampelis about assurances sought from Crown about a longer release term. The key piece of evidence was a handwritten note claiming that Cosmopolitan would be ‘looked after’ at renewal time.

VCAT’s original reasoning:

Promissory and Proprietary Estoppel

According to the High Court, VCAT erroneously reasoned in regards to the promissory statement. The promise to renew a five-year lease implied that the renewal would be for the same period. VCAT said that this was the only term that the Crown had to uphold. They did not agree that similar terms and conditions to the 2005 contract had to be applied. The High Court infers that this kind of reasoning is risky as commercial enterprises cannot always be trusted to be fair under circumstances like these.

The enactment of estoppel requires a precise and unambiguous statement; Low v Bouverie. This requires that the person who they are addressed to would understand them in a particular way. They must be capable of misleading a reasonable person in that same situation to believe something that is not accurate. In this circumstance the statement ‘looked after at renewal time’ is not capable of conveying that Crown would extend the lease.

Therefore, the estoppel doctrine does not apply to this circumstance due to the ambiguity of the statement.

Collateral Contract

Hospital Products v US Surgical Corp; a representation made in the course of negotiations may result in an agreement collateral to the main agreement if it can be concluded that the parties intended that representation to be contractually binding or if it has that quality of a contractual promise. The Supreme Court of Victoria said about this case the statement ‘looked after at renewal time’ was too ambiguous to be inferred to mean a contractually binding promise to give an extra five years of lease.
The Supreme Court also said that the statement in question lacked specificity and failed to outline how exactly the Crown would fulfill the promise.

Result:

There was no promise, and there was no contract. The lease was lawfully terminated, and Cosmopolitan are not entitled to a renewal or damages.

What does this mean for me?

It doesn’t add much to the doctrine of estoppel, but overall it does tell you that if you’re in a negotiation process with someone you should always make sure that you’re both being specific. There are a lot of court cases similar to this one where ambiguous statements led to prolonged legal conflict that is often costly and ineffective.

If you’re entering a contractual negotiation like the one above it is advisable that you enlist the services of a registered legal practitioner. You may think solicitors are expensive but court costs are higher!

Highlights from some of the judges:

Gaegeler:

-    The lease did not operate to confer a contractual discretion which is circumscribed by the collateral contract…instead to impose a contractual obligation on Crown to give notice of a decision to be made by Crown outside the terms of the lease.

-    [Crown’s case] assert’s want of contractual certainty [and] contractual completeness.

Keane:

-    The categories of promissory and proprietary estoppel serve a common purpose of protecting a party from a detriment which would flow from a party’s change of position if the assumption or expectation that led to it were deserted. (Giumelli v Giumelli)

-    It would reduce the law to incoherence if a representation to uncertain or ambiguous to give rise to a contract of a variation of contractual rights and liabilities were held to be sufficient to found a promissory estoppel

Nettle:

-    Principal question…is whether the court of appeal was correct to remit the matter back to VCAT on the basis that Crown was estopped from departing from the tenants assumption…that question should be answered no.

-    [about the application of promissory estoppel] The notion of some “lower limit” of the “great area” was misconceived {emphasis not added}

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