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}
If you'd like to read the judgement in full it is available online here.
Or you can read other high court cases online here.
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