HIGH COURT OF AUSTRALIA
FRENCH CJ,
KIEFEL, BELL, GAGELER, KEANE, NETTLE AND GORDON JJ
CROWN MELBOURNE LIMITED APPELLANT
AND
COSMOPOLITAN HOTEL (VIC) PTY LTD &
ANOR RESPONDENTSCrown Melbourne Limited v Cosmopolitan Hotel (Vic) Pty Ltd
[2016] HCA 26
20 July 2016
M253/2015
ORDER
1.Appeal allowed with costs.
2.Set aside orders 2 to 6 of the Court of Appeal of the Supreme Court of Victoria made on 8 April 2015, and in their place order that the appeal to that Court be dismissed with costs.
3.Special leave to cross-appeal granted, limited to ground 4 of the Notice of Cross‑Appeal dated 24 December 2015.
4.Cross-appeal dismissed with costs.
On appeal from the Supreme Court of Victoria
Representation
B W Walker SC with N D Hopkins QC for the appellant (instructed by Minter Ellison Lawyers)
M R Pearce SC with R S Hay QC for the respondents (instructed by Mills Oakley Lawyers)
Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.
CATCHWORDS
Crown Melbourne Limited v Cosmopolitan Hotel (Vic) Pty Ltd
Contract – Collateral contract – Where tenants held five year leases under which they operated two restaurants – Where clause of leases required landlord to give notice that leases were to be renewed or continued or the premises were to be vacated – Where in course of negotiations for further leases landlord made statement to tenants that they would be "looked after at renewal time" – Where landlord required tenants to vacate premises on expiration of leases – Whether statement gave rise to collateral contract – Whether statement promissory in nature – Whether obligation uncertain.
Estoppel – Whether statement to tenants that they would be "looked after at renewal time" could give rise to estoppel – Whether statement capable of conveying to reasonable person that tenants would be offered further lease – Whether expectation acted upon by tenants.
Appeals – Procedure – Where question whether statement amounted to binding contractual promise – Whether question of fact or question of law.
Words and phrases – "certainty", "collateral contract", "oral contract", "promissory estoppel", "proprietary estoppel", "question of fact", "question of law", "reasonable correspondence", "remittal".
Victorian Civil and Administrative Tribunal Act 1998 (Vic), s 148.
FRENCH CJ, KIEFEL AND BELL JJ. In proceedings brought by the respondents ("the tenants"), the Victorian Civil and Administrative Tribunal ("the VCAT")[1] found that the appellant ("Crown") made a statement to the tenants in the course of negotiations for their leases, to the effect that the tenants would be "looked after at renewal time". The VCAT determined that the statement gave rise to a collateral contract which obliged Crown to offer a renewal of the leases for five years on terms to be decided by Crown. The VCAT further determined that should that conclusion be wrong, it would have also accepted the tenants' submission that Crown was estopped from denying the existence of the collateral contract. It ordered that Crown pay the first respondent[2] $467,505.00 and the second respondent[3] $1,143,167.00 in damages for breach of that agreement.
[1]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225.
[2]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2013] VCAT 106.
[3]Fish and Company (Vic) Pty Ltd v Crown Melbourne Ltd [2013] VCAT 105.
The primary judge[4] and the Court of Appeal of the Supreme Court of Victoria[5] held that the VCAT was in error and that the statement did not give rise to an enforceable obligation pursuant to a collateral contract. The primary judge also held that no estoppel arose. However, the Court of Appeal ordered that the matter be remitted to the VCAT for further determination on the issue of what relief could be given, on the basis that the statement founded a promissory estoppel.
[4]Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614.
[5]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771.
For the reasons which follow, the Court of Appeal was correct to conclude that there was no collateral contract but it was in error in remitting the issue of estoppel. The tenants could not succeed on that issue.
Background
Crown is the owner of the Melbourne Casino and Entertainment Complex. The tenants held leases of two areas in the Complex in which, after 1 September 2005, they operated two restaurants. Before 1 September 2005, other companies controlled by Mr Zampelis (director of the tenants) had operated those restaurants under leases from Crown which expired at the end of May. In early 2005 negotiations commenced between the tenants and Crown for new leases. It may reasonably be inferred from the discussions which followed that the representatives of both parties were experienced in negotiations of this kind.
The new leases which were offered by Crown were limited to a term of five years and did not contain an option for renewal. Clause 2.3 of each lease provided only that Crown was to give at least six months notice to the tenants prior to the expiration of the lease stating whether:
"(a)the Landlord will renew this Lease, and on what terms (this may include a requirement to refurbish the Premises or to move to different premises …);
(b)the Landlord will allow the Tenant to occupy the Premises on a monthly tenancy after the Expiry Date; or
(c)the Landlord will require the Tenant to vacate the Premises by the Expiry Date."
It was a condition of the leases that a major refurbishment of the premises be undertaken by the tenants. Mr Zampelis, the tenants' representative in the negotiations, was concerned about the cost of the refurbishment and sought to obtain a commitment from Crown to enable the tenants to continue to trade for a further five years. Crown, for its part, was unwilling to offer any further term on the lease. Leases in the terms offered by Crown, and limited to a term of five years, were signed by the tenants in November 2005 but were not delivered to Crown until March 2006 when Crown demanded them ("the 2005 leases").
In October 2008 Crown invited tenders for new leases of the premises and the tenants put in tenders in March 2009. In December 2009 Crown gave notice, pursuant to cl 2.3(c), requiring them to vacate the premises on the expiration of the 2005 leases, 31 August 2010.
In July 2010 the tenants brought proceedings in the VCAT in which they alleged that a series of representations had been made by representatives of Crown to Mr Zampelis, to the effect that the tenants would be given a further term of five years following the expiration of the 2005 leases. These representations were said to amount to a promise that Crown would exercise its power under cl 2.3(a) of the 2005 leases and offer a renewal for a further five year term. The tenants claimed to have been induced by the representations to execute the leases and to carry out the refurbishments. Two, alternative, legal consequences were said to follow from the promise: a collateral contract, by which Crown was obliged to offer the tenants further five year leases, came into existence, or an estoppel arose which prevented Crown from denying that obligation. Importantly, the terms of the further leases were said to be the same (or the same, mutatis mutandis) as for the 2005 leases.
The VCAT did not find[6] that Crown's representatives had made representations in the terms claimed, but it did find[7] that the statement referred to at the outset of these reasons gave rise to a collateral contract. The compensation which it ordered that Crown pay for breach of its obligation, to offer a renewal of the leases for a further term of five years, was assessed[8] by reference to the profits the tenants would have made under hypothetical renewed leases.
[6]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [117]-[120].
[7]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [173]-[176].
[8]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [188].
The decision of the VCAT was set aside on appeal to the Supreme Court of Victoria[9]. The Court of Appeal[10] granted the tenants leave to appeal but dismissed the appeal save with respect to the estoppel issue, which it remitted to the VCAT for determination of "what equitable relief, if any, should be granted", in accordance with the Court of Appeal's reasons.
[9]Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at [98].
[10]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 812 [200].
The evidence and the VCAT's findings
Mr Zampelis gave evidence before the VCAT that in meetings with Mr John Williams and in a chance encounter with Mr Lloyd Williams, both representatives of Crown, Mr Zampelis had been assured that the 2005 leases would be renewed after their five year term. Mr Zampelis said that in a further meeting between himself and another Crown representative, Mr Boesley, in December 2005, at which others including Mr Zampelis' bank manager were in attendance, Mr Boesley gave him the same assurance. He said that Mr Boesley repeated this assurance in a telephone conversation following the meeting and in another conversation in February 2006, shortly prior to the executed leases being handed over to Crown.
The VCAT did not accept Mr Zampelis' evidence of having received assurances in these terms. It considered[11] that Mr Zampelis was prone to embellishment and exaggeration about Crown's statements. It gave[12] detailed reasons for its finding that it was improbable that Crown made the alleged promise to grant a renewal for the further term. It did accept[13] that Mr Zampelis sought assurances from Crown about a longer lease term, because he believed that a longer trading period was necessary to recoup the substantial costs of refurbishment. And it accepted that a meeting took place in December 2005.
[11]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [69].
[12]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [70].
[13]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [40].
The VCAT preferred[14] to rely upon evidence of a hand-written note, which had been made by Mr Zampelis' bank manager, of the conversations which had taken place at the December meeting. It accorded, to an extent, with aspects of Mr Zampelis' version of what had been said. On the basis of this evidence, the VCAT found[15] that on or about 6 December 2005 Mr Boesley made a statement to the effect that:
"if Mr Zampelis spent the money that, under Crown's leases, the tenants were required to spend to achieve a major refurbishment to a high standard, he would be 'looked after at renewal time', and that the leases had been limited to a five year term only because they would thereby be aligned with other tenants' leases."
The VCAT made[16] a specific finding that Crown had not expressly stated that it would renew the 2005 leases, but that Mr Boesley had said only that Mr Zampelis (and therefore the tenants) would be looked after at renewal time.
[14]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [83].
[15]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [84].
[16]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [134].
The VCAT's reasoning
It is the process of reasoning which the VCAT then undertook which is in issue. It first determined[17] that the statement that Mr Zampelis would be "looked after at renewal time" was promissory in nature. Whilst it accepted[18] that the words "looked after", viewed in isolation, were vague, it considered that in context and objectively, a reasonable person would consider that the statement amounted to a promise that Crown would give a notice under cl 2.3(a) that it would renew each of the 2005 leases. This was held to be sufficient to give rise to a legal obligation.
[17]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [133].
[18]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [135].
Because the promise to renew was of an existing five year lease, the VCAT considered[19] it to be necessarily implied that the renewal would be for the same period. This was the only term which the VCAT identified as present in the offer which Crown was obliged to make; Crown was otherwise able to stipulate the terms. It rejected[20] the tenants' claim that the promise meant that the leases were to be renewed on the same terms and conditions as the 2005 leases, or on the same terms and conditions as the 2005 leases with necessary changes (mutatis mutandis).
[19]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [139].
[20]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [141].
In the VCAT's view, the promise Crown made did not require Crown to offer any particular terms to the tenants, other than the five year term. The terms which Crown was to offer were at its discretion. The VCAT did not suggest that there was any criterion by which the discretion was to be exercised.
The VCAT did not accept[21] Crown's argument that any such obligation on Crown's part was too uncertain to be enforceable. It considered that the terms and conditions could be ascertained with certainty when Crown provided them in the notice for renewal pursuant to cl 2.3(a). That is to say, it did not matter that the terms were whatever Crown decided them to be, it was sufficient for an enforceable agreement that they would be ascertainable at that point.
[21]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [140].
The VCAT appears to have been of the opinion that commercial realities would produce acceptable terms. It accepted that the terms of the promise left Crown with the right to impose terms and conditions which were so onerous that the tenants could not accept them. However, it went on to say[22]:
"No doubt that is an unrealistic scenario, because the stipulation of unreasonably onerous terms in notices of renewal would jeopardise Crown's tenancies generally. One would expect a notice of renewal to stipulate terms and conditions that had reasonable correspondence with terms and conditions that had appeared in the lease that Crown was proposing to renew."
The VCAT did not identify the basis for this view. No evidence was identified to support it.
[22]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [139].
The VCAT assessed the damages to which the tenants were entitled by reason of Crown's failure to renew the lease for a further five years on the basis of the profits the tenants would have made in that period. That was the measure of damages which the tenants had claimed, but of course on the basis of the collateral contract for which they contended.
For reasons which are not entirely clear, the VCAT did not make orders for damages at the conclusion of its reasons. It had a further hearing[23] where it "ruled" on Crown's submission that its findings permitted an award of only nominal damages. It rejected that submission and, at a later hearing, awarded damages as it had previously assessed, which is to say for loss of profits in the sums referred to above[24].
[23]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 1407 at [44].
[24]See [1] above.
The VCAT dealt with the issue of whether the statement could also be said to found a promissory estoppel as an alternative to the conclusion it reached concerning a defence raised by Crown that the collateral contract was unenforceable by reason of s 126(1) of the Instruments Act 1958 (Vic). That provision required that a disposition of an interest in land be in writing. The VCAT held[25] that s 126 did not apply to the collateral contract because the collateral contract was not one for an interest in land, but for a notice that Crown would renew a lease. Alternatively, an estoppel[26] of the kind referred to in Waltons Stores (Interstate) Ltd v Maher[27] was made out, because the promise made created an expectation upon which the tenants relied in entering into the leases and they suffered a detriment when that expectation was not fulfilled.
[25]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [171].
[26]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [172].
[27](1988) 164 CLR 387; [1988] HCA 7.
A collateral contract?
In Hospital Products Ltd v United States Surgical Corporation Gibbs CJ explained[28] that 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 the representation be contractually binding. It may be so concluded if the representation has the quality of a contractual promise, as distinct from a mere representation. The question of intention is adjudged by reference to the words and conduct of the parties, but it is an objective test – of what a reasonable person in the position of the parties would necessarily have understood to have been intended.
[28]Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 61-62; [1984] HCA 64.
In the Supreme Court of Victoria, Hargrave J considered[29] that a reasonable person in the parties' situation could not have understood the statement that the tenants would be "looked after at renewal time" to amount to a binding contractual promise to renew the 2005 leases for a further five years. The statement was no more than "vaguely encouraging". The Court of Appeal agreed with his Honour's assessment[30]. That assessment is plainly correct.
[29]Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at [38]-[39].
[30]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 786 [59]-[60] per Warren CJ, 808 [179] per Whelan JA, 814 [206] per Santamaria JA.
On the appeal before Hargrave J the tenants conceded that the question to which Gibbs CJ referred in Hospital Products was one of mixed fact and law. That is clearly correct. Whilst regard is had to the facts – what was said and done – questions as to what a representation objectively may be taken to convey, and whether it has the qualities which the law requires for it to amount to a binding contractual promise, are questions of law.
In a passage in his speech in Heilbut, Symons & Co v Buckleton, Lord Atkinson said[31] that the existence or non-existence of the intention in the mind of the party who warrants the truth of a fact is a question for the jury. The question of fact to which his Lordship referred was one as to the subjective intention of a party, which is relevant in making out a fraudulent misrepresentation. Viscount Haldane LC[32], with whom Lord Atkinson concurred[33], and Lord Moulton[34] were clearly of the opinion that the question whether there was an intention to create a collateral contract was a question of law.
[31]Heilbut, Symons & Co v Buckleton [1913] AC 30 at 43.
[32]Heilbut, Symons & Co v Buckleton [1913] AC 30 at 36-37.
[33]Heilbut, Symons & Co v Buckleton [1913] AC 30 at 39.
[34]Heilbut, Symons & Co v Buckleton [1913] AC 30 at 50-51.
The tenants applied to this Court for special leave to cross-appeal on the ground that no question of law was involved in the question whether there was a collateral contract (or an estoppel) and therefore no appeal to the Supreme Court lay under s 148 of the Victorian Civil and Administrative TribunalAct 1998 (Vic). That application was heard with argument on the appeal and was refused. In the course of argument the tenants contended that any question respecting the construction of an oral contract is a question of fact and therefore questions as to the promissory nature of the statement made by Crown were only questions of fact for the VCAT.
The tenants' submissions in this regard proceeded upon a misapprehension of what the authorities they relied upon actually say. It is certainly the case that the question as to what was actually agreed between the parties, which is to say the terms of the consensus reached, is a question of fact[35]. That is what is meant by the reference in those cases to the "construction" of the contract. Questions as to the terms of any offer and any consensus reached, including the subject matter of any agreement[36], are questions of fact. But questions whether a statement has a quality which the law requires and whether, objectively, it could be said to be intended to be contractually binding are questions of law.
[35]Deane v The City Bank of Sydney (1904) 2 CLR 198 at 209; [1904] HCA 44; Carmichael v National Power Plc [1999] 1 WLR 2042 at 2049‑2050; [1999] 4 All ER 897 at 904. See also Gardiner v Grigg (1938) 38 SR (NSW) 524 at 532; Thorner v Major [2009] 1 WLR 776 at 794-795 [58]; [2009] 3 All ER 945 at 965.
[36]Handbury v Nolan (1977) 13 ALR 339 at 341.
The statement found to have been made by Crown's representative, that the tenants would be "looked after at renewal time", could not possibly have been understood to bind Crown to offer a further five year lease. It did not have the quality of a contractual promise of any kind.
It is possible that the statement could be understood as addressed to the tenants' concerns about whether they would not recoup the costs of the refurbishment that the 2005 leases, which they were about to enter into, required. Crown was aware of these concerns. But this was not the case the tenants pursued. Their case depended on a promise by Crown that it would do much more than ensure that the tenants were not out of pocket.
Hargrave J also held[37] that even if Crown came under the obligation which the VCAT identified as arising from the statement, the obligation was illusory and unenforceable, because it contained no criteria by which Crown was to exercise its discretion or by which the terms could be ascertained. It was no answer to say, as the VCAT did, that it would have been commercially unrealistic to stipulate onerous terms. A further issue with which his Honour also dealt[38], whether the obligation to offer to renew under cl 2.3(a) was inconsistent with the choices given to Crown in cl 2.3 of the 2005 leases[39], may be put to one side. It is not necessary for the determination of this appeal.
[37]Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at [72]-[74].
[38]Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at [76]-[81].
[39]See Hoyt's Pty Ltd v Spencer (1919) 27 CLR 133; [1919] HCA 64.
The problem regarding the enforceability of the obligation which the VCAT considered arose from the statement is not so much one concerning the uncertainty of its terms as the lack of them[40]. On basic principles, there can be no enforceable agreement to renew a lease, breach of which sounds in damages, unless at least the essential terms of such a lease have been agreed upon[41].
[40]See Whitlock v Brew (1968) 118 CLR 445 at 454; [1968] HCA 71.
[41]Thorby v Goldberg (1964) 112 CLR 597 at 607; [1964] HCA 41; Beattie v Fine [1925] VLR 363, referred to in Placer Development Ltd v The Commonwealth (1969) 121 CLR 353 at 360; [1969] HCA 29.
In their submissions on this appeal, the tenants sought to rely upon that part of the VCAT's reasons[42] which suggested that Crown was likely to stipulate terms that had a "reasonable correspondence" with the terms and conditions of the 2005 leases. The tenants further submitted that there was no real difference between what the VCAT found that Crown was able to do pursuant to cl 2.3 – dictate the terms of the renewed lease as it saw fit – and the argument the tenants had put to the VCAT – that the existing terms would apply mutatis mutandis. The difficulty with this latter submission is that the VCAT expressly rejected[43] this argument. The collateral contract which it identified clearly reserved the terms to be offered to Crown's discretion.
[42]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [139].
[43]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [141].
The views that the VCAT expressed about the terms of the renewed leases bearing a "reasonable correspondence" with the 2005 leases were mere conjecture, made in passing. As Whelan JA observed[44], they were not findings as to Crown's future conduct. Although the VCAT subsequently sought to explain[45] its assessment of damages by reference to these statements as "findings" relating to expectation damages, that is clearly incorrect. As the VCAT itself acknowledged, the tenants had not advanced a case for damages based upon an agreement of this kind. In any event the views were expressed by the VCAT in the context of its discussion of the agreement reached between the parties, not its assessment of damages. Finally, as a matter of law[46], there was no evidence to support a finding about what Crown might do.
[44]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 804 [157].
[45]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 1407 at [35], [42].
[46]Kostas v HIA Insurance Services Pty Ltd (2010) 241 CLR 390 at 418 [90]-[91]; [2010] HCA 32.
It remains to add that the tenants' claim was not based upon an agreement whereby Crown would make an offer on terms at its discretion. No such agreement is identified in the VCAT's reasons. During argument on this appeal the tenants acknowledged that the agreement identified by the VCAT was not one in the nature of an agreement to make an offer, such as a right of pre-emption. The damages it awarded are not referable to such an agreement, as such damages could only have been nominal. It assessed damages for loss of profits on the basis of an enforceable agreement for the renewal of the leases for a further term of five years.
Estoppel?
It has long been recognised that for a representation to found an estoppel it must be clear[47]. In Low v Bouverie, it was said[48] that the language used must be precise and unambiguous. This does not mean that the words used may not be open to different constructions, but rather that they must be able to be understood in a particular sense by the person to whom the words are addressed. The sense in which they may be understood provides the basis for the assumption or expectation upon which the person to whom they are addressed acts. The words must be capable of misleading a reasonable person in the way that the person relying on the estoppel claims he or she has been misled[49]. The statement that the tenants would be "looked after at renewal time" is not capable of conveying to a reasonable person that the tenants would be offered a further lease.
[47]Legione v Hateley (1983) 152 CLR 406 at 435; [1983] HCA 11.
[48]Low v Bouverie [1891] 3 Ch 82 at 106.
[49]Low v Bouverie [1891] 3 Ch 82 at 113.
In submissions on this appeal the tenants for the first time sought to characterise the estoppel for which they contended as a proprietary estoppel. The tenants may have been encouraged to do so by the reasons of Warren CJ[50], where reference was made to cases where a party was held to be estopped from resiling from their promise to grant a proprietary interest notwithstanding the lack of precise detail in the promise[51]. This is not a case of that kind. It appears that the tenants sought to characterise the estoppel as proprietary because they considered that a less stringent view is taken for the test for certainty of the representation in cases dealing with promises with respect to interests in land than is the case with respect to other interests.
[50]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 790 [83].
[51]See, eg, Giumelli v Giumelli (1999) 196 CLR 101; [1999] HCA 10; Wright v Hamilton Island Enterprises Ltd (2003) Q ConvR ¶54-588.
The tenants conceded that a consideration of the requirements of proprietary and promissory estoppels might require the resolution of a question, as yet unresolved, as to whether there is a single, unified doctrine of estoppel[52]. They did not explain how that resolution is to be achieved.
[52]See Giumelli v Giumelli (1999) 196 CLR 101 at 112-113 [7].
This is not the case to consider these questions. Whether the estoppel claimed is proprietary in nature has never been an issue in these proceedings and has not been the subject of any substantial argument. It has never been the tenants' case that the estoppel in question was proprietary rather than promissory. It is to be inferred from the VCAT's decision[53] concerning s 126(1) of the Instruments Act that it was the tenants' submission that the subject matter of the promise in question was not an interest in land.
[53]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [171].
In any event, the tenants' case fails at another level. Not only must the representation be such as to be able to create the assumption or expectation in question, it must be shown that that assumption was in fact acted upon[54]. This derives from the basal purpose of the doctrine of estoppel, which is to avoid a detriment by compelling the party who has created an assumption, or expectation, on which the innocent party has acted, to adhere to it[55]. Attention is then directed to the expectation said to have been created by Crown and whether Mr Zampelis acted upon it.
[54]Low v Bouverie [1891] 3 Ch 82 at 111.
[55]Thompson v Palmer (1933) 49 CLR 507 at 547; [1933] HCA 61; Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641 at 674-675; [1937] HCA 58; Legione v Hateley (1983) 152 CLR 406 at 437.
The expectation the VCAT said Crown engendered in the tenants was that they would be offered further five year leases at renewal time on terms to be decided by Crown. But that is not what the tenants submitted that Mr Zampelis was led to believe. They submitted[56] that he said that he assumed that there would be a renewal of the leases, or an offer of renewal, on the same terms and conditions as the 2005 leases. That is what the tenants argued induced him to hand over the executed leases. It was not his evidence, and it was no part of the tenants' case, that he had acted on the basis of an expectation in the terms identified by the VCAT.
[56]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [137].
Remittal?
Whelan JA[57] was cognisant of this problem for the tenants' case. However, his Honour did not proceed simply to dismiss their appeal but instead remitted the issue of estoppel to the VCAT for further determination. The basis for doing so was said to be that the parties had not had the opportunity to make submissions on the basis of the VCAT's findings. This was undoubtedly correct, but the point is that submissions were not made because it was not part of the tenants' case that a more limited promise was made by Crown to Mr Zampelis.
[57]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 812 [198]-[200].
His Honour did not suggest that either of the parties had been denied procedural fairness; rather his Honour seemed to think that the tenants' case could be regarded as encompassing Crown being estopped from resiling from whatever representation it was found to have made[58]. Such an approach encourages the prolongation of litigation, litigation which is intended largely to be concluded in the VCAT.
[58]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 811 [195].
His Honour considered[59] that the only matter to be dealt with by the VCAT on remittal was what relief, if any, should be granted with respect to the promise it found. His Honour said that the representation has been found and Crown has resiled from it. That left only the issue of relief. This reasoning overlooks the requirement, essential to a conclusion that a party is estopped from denying a promise made, that the expectation it engendered was in fact acted upon by the person to whom it was made.
[59]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 812 [200].
Mr Zampelis did not have an expectation of the kind to which the VCAT's findings refer. The tenants could never make out an estoppel unless they were given the opportunity to alter Mr Zampelis' evidence. There was no utility in the order for remittal. It should not have been made.
Conclusion and orders
The appeal from the Court of Appeal should be allowed. We agree with the orders proposed by Keane J.
GAGELER J. Substantially for the reasons given by Gordon J, I would grant special leave to cross-appeal on the ground that there was a binding and enforceable collateral contract between Crown and each Tenant as found by VCAT, allow the cross-appeal on that ground, and make consequential orders reinstating the decision of VCAT. That disposition of the cross-appeal operating to remove the substratum of the appeal, I would dismiss the appeal accordingly.
The collateral contract found by VCAT comprised a promise made by Crown to each Tenant in consideration of the Tenant entering into that Tenant's lease with Crown for a term of five years. Crown's promise was that, at least six but no more than 12 months before the expiry date of the lease, Crown would give the Tenant a notice under cl 2.3(a) of the lease. The notice would state that Crown would renew the lease, which in the context of a notice under cl 2.3(a) would mean that Crown would renew for a further term of five years. The notice would go on to state the terms on which Crown would renew the lease. The choice of the terms to be included in the promised notice was to be left to Crown[60]. Like any other notice under cl 2.3(a) of the lease, the promised notice was to constitute an offer to renew the lease which the Tenant could in turn choose to accept within 60 days by giving notice to Crown under cl 3.1 of the lease.
[60]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [133], [139], [141]-[142], [168], [173]-[176].
Crown's promise under the collateral contract was therefore a promise to make an offer on terms which, if accepted by the Tenant, would result in a new agreement for lease for a further term of five years.
Crown's argument that the collateral contract was inconsistent with the lease was accepted by the primary judge[61] and by the Court of Appeal[62]. The argument is met in this Court by the reasoning of Nettle J[63] and of Gordon J[64]. Their reasoning, with which I agree, makes redundant the Tenants' invitation to reopen and overrule Hoyt's Pty Ltd v Spencer[65] and Maybury v Atlantic Union Oil Co Ltd[66].
[61]Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at [80].
[62]Cosmopolitan Hotel (Vic) Pty Ltd v Crown MelbourneLtd (2014) 45 VR 771 at 787-788 [65]-[70], 809 [186].
[63]Reasons of Nettle J at [203]-[205].
[64]Reasons of Gordon J at [264].
[65](1919) 27 CLR 133; [1919] HCA 64.
[66](1953) 89 CLR 507; [1953] HCA 89.
The critical point of distinction between the present case and each of those cases is that cl 2.3 of the lease did not operate to confer a contractual discretion which is circumscribed by the collateral contract. The clause operated 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 obligation to give notice under the collateral contract did not conflict with its obligation to give notice under the lease. To the contrary, the two obligations operated in harmony: performance of the obligation to give notice under the lease was necessary to constitute performance of the obligation to give notice under the collateral contract; giving one notice would satisfy both obligations.
Crown's separate and logically anterior argument denies the existence of the collateral contract. Crown's grounds of appeal from VCAT to the Supreme Court articulated the argument in terms that "the 'promise' [found by VCAT to have been made by Crown] was uncertain and/or incomplete and/or illusory". That argument too was accepted by the primary judge[67] and by the Court of Appeal[68]. Although now also accepted by other members of this Court, I consider it to be answered by the reasoning of Gordon J[69]. I write separately to expose my understanding of the principles which inform my support for the answer given by her Honour.
[67][2013] VSC 614 at [73].
[68](2014) 45 VR 771 at 786-787 [62]-[64], 809 [185].
[69]Reasons of Gordon J at [265]-[266].
Blurred from the outset, the various strands of Crown's argument denying the existence of the collateral contract are related, but conceptually distinct[70]. One strand asserts want of contractual certainty. Another asserts want of contractual completeness. The last involves the assertion of "the illusion of a contract where there is none"[71]. I will consider those strands separately in that order.
[70]See generally Powell v Jones [1968] SASR 394 at 397-403 (referred to with approval in Godecke v Kirwan (1973) 129 CLR 629 at 641-642; [1973] HCA 38); Carter, Carter on Contract, vol 1 (at December 2015, Service 43) at [04-090], [04‑120].
[71]Placer Development Ltd v The Commonwealth (1969) 121 CLR 353 at 369; [1969] HCA 29.
Crown's assertion of want of contractual certainty is in substance an assertion that what was said by Mr Boesley, as agent for Crown, to Mr Zampelis, as agent for the Tenants, was so obscure or imprecise as to be incapable of supporting attribution to Crown and to the Tenants of any particular contractual intention[72]. The contractual intention required to provide contractual certainty, of course, is not the subjective intention of either or both of the parties but such mutual contractual intention as the words and conduct attributed to the parties might convey to a reasonable person having the background knowledge reasonably available to both of them.
[72]Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 at 437; [1968] HCA 8.
What the words of Mr Boesley and the conduct of Mr Zampelis would have conveyed to a reasonable person who had the background knowledge reasonably available to Crown and to the Tenants is a question of fact[73]. That is precisely the question of fact which VCAT considered and answered in concluding that the words of Mr Boesley that Mr Zampelis would be "looked after" when the time came for Crown to consider renewing the leases, and the conduct of Mr Zampelis in subsequently returning the executed leases, gave rise to the collateral contract under which Crown promised to give a notice under cl 2.3(a) in consideration of each Tenant entering into the lease.
[73]Gardiner v Grigg (1938) 38 SR (NSW) 524 at 532 (citing Maskelyne v Stollery (1899) 16 TLR 97 and Heilbut, Symons & Co v Buckleton [1913] AC 30).
Whatever view might be taken were VCAT's conclusion of fact to be the subject of a hypothetical appeal by way of rehearing, I do not consider VCAT's conclusion to have been flawed in any way which would make that conclusion susceptible to being overturned on an appeal to the Supreme Court on a question of law under s 148 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic). That the finding was open on the evidence before VCAT is demonstrated by the reasoning of Gordon J[74]. The careful and detailed analysis of the evidence before VCAT undertaken by the primary judge, as endorsed by the Court of Appeal and explained by Nettle J[75], does not in my opinion support the drawing of an inference that VCAT either failed to take any part of that evidence into account or failed to consider that evidence in its totality.
[74]Reasons of Gordon J at [252]-[253].
[75]Reasons of Nettle J at [192]-[193].
Before recording its findings of primary fact, in particular its findings as to exactly what Mr Boesley said and exactly what Mr Zampelis subsequently did, VCAT acknowledged that there were features of the evidence which would support a view that it was "improbable" that Crown promised to renew the leases[76]. There could be no suggestion that VCAT did not take those features of the evidence into account in making the findings it did as to what was said and done. Equally, however, nothing in the structure or content of the balance of VCAT's reasons provides any basis for inferring that VCAT either forgot or ignored those same features of the evidence, or any other feature of the evidence, in going on to make findings about contractual intention which VCAT recorded in terms of what a reasonable person with knowledge of the facts and circumstances would have concluded from the words and conduct earlier found[77]. That deals with Crown's assertion about contractual certainty.
[76]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [70].
[77]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [135], [141].
Crown's conceptually distinct assertion of want of contractual completeness is an assertion which necessarily attempts to build on the incontestable understanding that a contract can arise only if parties have reached a present agreement "upon all the terms which they regarded or the law requires as essential for the formation of legally binding relations"[78], it being "implicit in the very notion of consensus that the minds of the parties should have met in praesenti and not merely that it is hoped or expected that they will meet in futuro"[79].
[78]RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH & Co KG (UK Production) [2010] 1 WLR 753 at 771 [45]; [2010] 3 All ER 1 at 18.
[79]Powell v Jones [1968] SASR 394 at 398. See also Whitlock v Brew (1968) 118 CLR 445 at 456, 460; [1968] HCA 71.
Consistently with that understanding[80]:
"It is established by authority, both ancient and modern, that the courts will not lend their aid to the enforcement of an incomplete agreement, being no more than an agreement of the parties to agree at some time in the future. Consequently, if [a] lease provided for a renewal 'at a rental to be agreed' there would clearly be no enforceable agreement."
Crown's assertion of want of contractual completeness seems to be that, if the law will not recognise an agreement to agree, the law will not recognise an agreement to make an offer.
[80]Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600 at 604; [1982] HCA 53.
I cannot accept that to be so. There is a material difference between an agreement to agree and an agreement to offer. To agree to agree is to defer the whole or some part of an agreement to the future. To agree to offer is to enter into a present agreement to propose terms capable of resulting in a further future agreement if accepted. The agreement to make an offer is an agreement that is complete in itself. So much has been recognised in numerous cases in which a right of first refusal or pre-emption has been recognised as enforceable[81].
[81]See generally Chitty on Contracts, 32nd ed (2015), vol 1 at 279-280 [2-134].
That leaves just one of the three conceptually distinct strands of Crown's argument remaining to be considered: the assertion that the collateral contract found by VCAT is illusory because it leaves the choice of the terms on which Crown will renew the lease to Crown. It is important to be clear about the root principle sought to be invoked. The principle, as classically stated, is as follows[82]:
"wherever words which by themselves constituted a promise were accompanied by words which showed that the promisor was to have a discretion or option as to whether he would carry out that which purported to be the promise, the result was that there was no contract on which an action could be brought at all. The doctrine was an old one. In Leake on Contracts, 3rd ed, p 3, it was expressed thus:—'Promissory expressions reserving an option as to the performance do not create a contract.'"
[82]Loftus v Roberts (1902) 18 TLR 532 at 534; applied in Beattie v Fine [1925] VLR 363 at 369 and Placer Development Ltd v The Commonwealth (1969) 121 CLR 353 at 356, 359-361, 369-370; and distinguished in Thorby v Goldberg (1964) 112 CLR 597 at 605; [1964] HCA 41 and Meehan v Jones (1982) 149 CLR 571 at 581; [1982] HCA 52.
The principle is thus one which has application where parties have reached a present agreement but where their present agreement has "left to the option of one party not only the mode of performance but whether there shall be any performance at all"[83]. But while "[i]t is an objection to a contract if one party is left to choose whether he will perform it", "it is an entirely different matter if there is an obligation to do a specified thing of a general description but it is left to the party who is to perform it to choose the particular thing that he will do in performance of it"[84]. A hypothetical illustration of that critical distinction is that "[a]n arrangement with an artist that he should for a specified fee paint a portrait of a particular person if the artist, upon seeing the proposed sitter, should decide to do so would be no contract to paint a portrait whereas an arrangement that the artist would for a specified fee paint a portrait of such person as he, the artist, should choose would be a contract"[85].
[83]Powell v Jones [1968] SASR 394 at 397.
[84]Thorby v Goldberg (1964) 112 CLR 597 at 613.
[85]Thorby v Goldberg (1964) 112 CLR 597 at 613.
What the illustration demonstrates is that, in order to determine whether or not an agreement has left a party with a choice as to whether or not to perform a promise, it is first necessary to be quite clear about the content of the promise in question. Where, as here, the promise is no more and no less than a promise to make an offer, the promisor cannot be said to be left with a choice as to whether or not to perform the promise merely because the terms of the offer to be made are left to the promisor.
The orthodoxy of that ultimate proposition can in turn be given concrete illustration by reference to the facts and outcome of a first instance English decision noted by Gordon J[86]. There a provision in a written contract for the conveyance of land was interpreted as imposing an obligation on the vendor, "should she wish to sell ... to make an offer to the purchaser at the price and at no more than the price at which she is, as a matter of fact, willing to sell". The obligation was held to be binding and enforceable. In explaining the operation of the contractual obligation, it was said in that case that "[i]f that offer is accepted by the [purchaser], then there will be a purchase at a figure which has been agreed upon"; "[i]f the offer is rejected, then cadit quaestio"[87].
[86]Smith v Morgan [1971] 1 WLR 803; [1971] 2 All ER 1500.
[87]Smith v Morgan [1971] 1 WLR 803 at 808; [1971] 2 All ER 1500 at 1504.
Crown's obligation under the collateral contract found by VCAT was to give each Tenant a notice amounting to an offer which the Tenant would be able to accept. That was the long and the short of it. The fact that the choice of the terms on which Crown would make that offer was left to Crown did not render the obligation to make an offer illusory: that Crown could choose the terms did not contradict its obligation to make an offer.
Finally, it is necessary to note two potentially important issues which were not raised in the appeal or the cross-appeal to this Court and to which no argument has been directed. One issue concerns whether Crown might have been constrained by an implied obligation to act honestly or honestly and reasonably in choosing the terms on which it would offer to renew the leases[88]. The other issue concerns the measure of the Tenants' damages for Crown's breach of its obligation to make an offer. Neither is without difficulty, and the two are interrelated. I say nothing about either.
[88]Cf Meehan v Jones (1982) 149 CLR 571 at 581, 590-591.
KEANE J. Two issues are presented for determination by the Court. The issue on which special leave was granted to appeal to this Court from the Court of Appeal of the Supreme Court of Victoria is whether an assurance given by the appellant landlord ("Crown") that the respondent tenants ("the tenants") would be "looked after at renewal time" could lead to further leases by way of estoppel.
The second issue, which arises only on the tenants' cross‑appeal, but which is logically anterior to the issue raised on appeal, is whether an enforceable collateral contract came into force between Crown and the tenants whereby Crown was obliged, on the expiration of the leases, to grant the tenants a new lease on terms having a reasonable correspondence with the terms of the original leases. This issue was resolved in favour of the tenants by the Victorian Civil and Administrative Tribunal ("the Tribunal"), but against the tenants by the primary judge in the Supreme Court of Victoria and then by the Court of Appeal. The tenants require a grant of special leave to raise this issue[89].
[89]High Court Rules 2004 (Cth), r 42.08.4.
The second issue is so closely related to the first that it would be distinctly unjust to determine the first issue without also determining the second[90]. Accordingly, special leave should be granted to allow that part of the cross‑appeal to proceed.
[90]cf Director of Public Prosecutions v United Telecasters Sydney Ltd (1990) 168 CLR 594 at 602; [1990] HCA 5.
The tenants also sought to cross‑appeal to argue that the appeal by Crown to the Supreme Court from the decision of the Tribunal was not "on a question of law" as required by s 148 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) ("the VCAT Act"). This argument had not been raised before the primary judge; it was raised for the first time in the Court of Appeal and resolved against the tenants unanimously in that Court[91]. The conclusion of the Court of Appeal in this regard is consistent with that of the Full Court of the Federal Court of Australia in Haritos v Federal Commissioner of Taxation[92]. This Court refused an application for special leave to appeal against the decision in Haritos[93]. In these circumstances, the interests of justice do not warrant the grant of special leave. Accordingly, the Court refused special leave to raise this issue on the tenants' cross‑appeal[94].
[91]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 785 [54]‑[56], 807 [172]‑[174].
[92](2015) 233 FCR 315.
[93][2015] HCATrans 337.
[94][2016] HCATrans 103.
The proceedings
The tenants commenced proceedings in the Tribunal[95], claiming that Crown assured them that, if they entered leases in respect of certain restaurant premises for a five year term, Crown would offer to renew the leases for a further five year term. That assurance was said to amount to a collateral contract between Crown and the tenants. It was also claimed that Crown was estopped from denying that it had promised to offer the tenants a further term of five years. These claims were based on statements, to which reference will be made later in these reasons, allegedly made by representatives of Crown to Mr Nicholas Zampelis, as representative of the tenants, in the course of negotiations for the leases. The tenants claimed that, acting in reliance on the assurance that Crown would grant them further five year leases on the same terms as the original leases, they undertook a major refurbishment of the premises in the expectation that they would thus be able to recoup the cost of the refurbishment[96]. Crown denied that the alleged statements were made.
[95]Pursuant to s 89 of the Retail Leases Act 2003 (Vic), the Tribunal has exclusive jurisdiction to hear and determine a "retail tenancy dispute".
[96]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [26].
The tenants also claimed that Crown had engaged in misleading or deceptive conduct or unconscionable conduct in contravention of the Retail Leases Act 2003 (Vic) or the Fair Trading Act 1999 (Vic) ("the statutory claims"). It is common ground that the statutory claims were not the subject of separate consideration in the Tribunal, in the Supreme Court or in the Court of Appeal. They were not agitated in this Court.
The tenants sought to recover the loss of profit that they would have made during the term of the further leases which they contended Crown was obliged to grant them. The tenants did not pursue any claim based on their inability to recoup expenditure made on refurbishments under the original leases, and in this Court expressly disavowed such a claim. The relief they sought was that sum of money necessary to put them in the position they would have been in had Crown kept what was advanced as a promise having contractual force[97].
[97]Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272 at 286 [13]; [2009] HCA 8; Clark v Macourt (2013) 253 CLR 1 at 7 [10]‑[11], 11 [26]‑[27], 18‑19 [59]‑[61], 30 [106]; [2013] HCA 56.
The Tribunal upheld the tenants' claim based on collateral contract[98], and ordered that Crown pay damages of $1.6 million plus interest calculated from the commencement of the proceedings[99].
[98]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225.
[99]Fish and Company (Vic) Pty Ltd v Crown Melbourne Ltd [2013] VCAT 105; Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2013] VCAT 106.
Crown appealed to the Supreme Court. The primary judge (Hargrave J) granted leave to appeal and overturned the decision of the Tribunal[100]. The tenants appealed to the Court of Appeal. The Court of Appeal (Warren CJ, Whelan and Santamaria JJA) allowed the appeal and ordered that the proceeding be remitted to the Tribunal for further determination[101]. Crown appealed to this Court pursuant to special leave to appeal granted by Keane and Nettle JJ on 11 December 2015.
[100]Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614.
[101]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771.
The Tribunal upheld the tenants' claim on the basis of lost profits, finding an enforceable collateral contract between the parties that Crown would offer further leases to the tenants, and then assessing their loss on the basis that the offers would have led to leases on the terms assumed by the Tribunal. For the reasons which follow, the primary judge and the Court of Appeal were correct to conclude that the Tribunal erred in law in failing to appreciate that the contract by reference to which it assessed damages was illusory. The cross‑appeal should be dismissed.
As to the estoppel issue raised on the appeal to this Court, the parties were at odds as to whether the tenants had invoked promissory estoppel or proprietary estoppel as the alternative basis for their claim. Their dispute was driven by the apprehension that the requirement of certainty of the promise relied upon by the representee is less stringent in the case of proprietary estoppel than in the case of promissory estoppel. The dispute as to taxonomy need not be resolved in order to determine the estoppel issue in this case.
On the findings of fact made by the Tribunal, the tenants' refurbishment of the premises was not, in fact, induced by an expectation of the grant of further five year leases on terms corresponding to the original leases. The statement found to have been made by Crown was not that which Mr Zampelis said he relied upon; and the statement which was found to have been made could not reasonably have engendered the expectation on which he claimed to have acted. Accordingly, the claim made by the tenants is not made out. They did not seek to establish any lesser claim, and so the Court of Appeal erred in remitting for further consideration by the Tribunal a claim that had not been advanced or litigated by the tenants. Crown's appeal should be allowed.
In order to explain these conclusions more fully, it will be necessary to examine in some detail the reasons of the Tribunal, the primary judge and the Court of Appeal. Before turning to consider those reasons, it is desirable to set out the relevant background.
Background
Crown owns the Melbourne Casino and Entertainment Complex. From 1 September 2005 to 31 August 2010, the tenants each operated a restaurant at the Complex. Mr Zampelis was a director of each of the tenants.
Prior to 1 September 2005, other companies controlled by Mr Zampelis operated the two restaurants as the lessees of the restaurant premises. The leases in respect of the restaurant premises were due to expire in May 2005, and so negotiations began at the start of 2005 in respect of new leases between Crown and the tenants.
The tenants each entered into a deed of lease, expressed to operate from 1 September 2005. Each lease provided for an expiry date of 31 August 2010. Clause 2.3 of each lease provided:
"At least 6 months, but no more than 12 months before the Expiry Date, the Landlord must give notice to the Tenant stating whether:
(a)the Landlord will renew this Lease, and on what terms (this may include a requirement to refurbish the Premises or to move to different premises ...);
(b)the Landlord will allow the Tenant to occupy the Premises on a monthly tenancy after the Expiry Date; or
(c)the Landlord will require the Tenant to vacate the Premises by the Expiry Date."
Clause 3.1 of each lease provided that:
"If the Landlord gives the Tenant a notice under clause 2.3(a) and the Tenant wishes to renew this Lease, the Tenant must, within 60 days of that notice, give notice to the Landlord that the Tenant agrees to renew this Lease and accepts the Landlord's terms."
Part N of each lease concerned the tenants' obligations to undertake work, repairs, maintenance and refurbishment of the restaurant premises. Clause 85 of each lease, titled "Major Refurbishment", provided:
"85.1The Tenant must complete a Major Refurbishment of the Premises, at it's [sic] own cost and to the full satisfaction of the Landlord, before 1st December 2005
85.2The Major Refurbishment must be undertaken in full compliance with Part N of this Lease including all necessary approvals by the Landlord."
"Major Refurbishment" was defined in cl 1 of each lease to mean a comprehensive renovation of the restaurant premises in accordance with the tenants' design concept.
The refurbishment of the restaurant premises was intended to be completed before the Commonwealth Games were held in Melbourne in March 2006. The works were carried out by the tenants and completed shortly after the commencement of the Commonwealth Games at a cost of approximately $4.65 million.
During the negotiations for the leases, the tenants proposed that the leases should be for a term of 10 years or, alternatively, that they should contain an option in their favour to renew for a further five year period. The incorporation of one of those options was said by Mr Zampelis, who conducted the negotiations on behalf of the tenants, to be necessary to ensure that the tenants would have sufficient time to recover the capital expenditure on the refurbishment of the restaurant premises. What was said in these negotiations was controversial, and will be discussed in relation to the decision of the Tribunal.
The leases were signed by the tenants in November 2005. The tenants did not deliver the signed leases to Crown until March 2006. It is to be noted that a period of four months elapsed between the signing of the leases by the tenants and the delivery of the leases to Crown. This period was occupied by the tenants' continuing attempts to obtain Crown's agreement to a lease term that extended beyond the expiry date or an option to renew. Crown declined to amend or include a provision in the leases to reflect the tenants' concerns, and in March 2006, at Crown's insistence, the tenants returned the signed leases, unaltered, to Crown.
In October 2008, Crown commenced a tender process for new leases of the restaurant premises. The tenants submitted a tender. In December 2009, Crown informed the tenants that their tender was unsuccessful and provided the tenants with notice, in accordance with cl 2.3(c) of the leases, requiring them to vacate the restaurant premises at the expiration of the leases.
The decision of the Tribunal
Before the Tribunal, the tenants' case was that representatives of Crown made statements to Mr Zampelis which amounted to a promise that Crown would offer new leases to the tenants for a further term of five years by giving notice under cl 2.3(a) that it would renew the leases[102]. Mr Zampelis' evidence was that in the course of negotiations between the tenants and Crown in December 2005, Mr Boesley, a representative of Crown, said that if the tenants spent money on refurbishment that resulted in a high quality finish to the two restaurants, there would be leases for a further term and the tenants would be looked after at renewal time[103]. Mr Boesley denied making such a statement[104].
[102]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [8].
[103]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [71], [84], [118].
[104]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [79].
The Tribunal did not accept Mr Zampelis' evidence in its entirety, observing that "Mr Zampelis was prone to embellish and exaggerate when giving evidence about statements or conduct of Crown."[105] The Tribunal resolved the conflict of testimony by reference to a note written on a page of a copy of one of the leases in the margin adjacent to the "Expiry Date" by Mr Craig, an employee of the tenants' bank. The Tribunal accepted Mr Craig's evidence that he had written the note within one or two weeks of a meeting with Mr Boesley[106]. The note said, relevantly:
"whilst this is a 5 yr term this is standard for Crown and aligns with other venues. Have however been with [Mr Zampelis] at several meetings when discussions have confirmed that further terms will be provided as they have in the past. [Mr Boesley] (Crown) was talking to [Mr Zampelis] one time and intimated that fit out should be high quality as this would reflect well and not to worry as he would be looked after at renewal time. So he should complete fit-out with this in mind and not scrimp on finishing to save a few dollars just because of the lease term."
[105]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [69].
[106]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [75].
The Tribunal concluded that, given Mr Craig's role as the tenants' banker and the context in which the note was made, the note was likely to be a "careful and reasonably accurate record of the substance of what Mr Boesley said to Mr Zampelis"[107].
[107]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [83].
The Tribunal did not accept Mr Zampelis' evidence that Mr Boesley gave the tenants an assurance of a further lease term. The Tribunal found that the statement that Mr Boesley actually made to Mr Zampelis was to the effect that[108]:
"if Mr Zampelis spent the money that, under Crown's leases, the tenants were required to spend to achieve a major refurbishment to a high standard, he would be 'looked after at renewal time', and that the leases had been limited to a five year term only because they would thereby be aligned with other tenants' leases."
[108]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [84].
The Tribunal concluded that the statement found to have been made by Crown through Mr Boesley was "promissory in character"[109].
[109]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [133].
Mr Zampelis' evidence of the expectation upon which the tenants acted did not reflect the statement found to have been made on behalf of Crown. That evidence was that the tenants acted upon the expectation that Crown would renew each lease on the same terms and conditions as the original lease. The Tribunal noted that at the hearing the tenants' case as to the assurance given by Crown moved from that starting position to the position that the promise was to renew each lease on the same terms and conditions as the original lease, mutatis mutandis[110]. The Tribunal rejected both of the tenants' positions, concluding that Crown could stipulate whatever terms it saw fit, including terms "so onerous that the tenant[s] would be compelled not to accept them."[111]
[110]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [137].
[111]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [139].
The Tribunal did not regard the promise as lacking sufficient certainty to give rise to an enforceable collateral contract[112], stating that:
"the way in which terms and conditions of a renewed lease could be ascertained with certainty was by Crown stipulating in its notice given under clause 2.3 what they were to be."
[112]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [139].
The Tribunal held[113] that, although the phrase "looked after" was "vague"[114], in the context in which the statement was made:
"[a] reasonable person would have concluded that the promise ... carried with it the consequence that the terms and conditions of the renewed lease would be those specified in the notice, whatever they were."
[113]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [141].
[114]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [135].
The Tribunal held that the collateral contract was not inconsistent[115] with the written terms of the main contract, being the leases. The Tribunal reached that conclusion on the basis that cl 2.3 did not confer any new right on Crown that it did not already enjoy as lessor at the expiration of the leases[116].
[115]See Maybury v Atlantic Union Oil Co Ltd (1953) 89 CLR 507; [1953] HCA 89.
[116]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [145]‑[148].
In the upshot, the Tribunal held that the representation gave rise to a collateral contract obliging Crown to give a notice to the tenants that it would renew each of the leases[117], and that the tenants entered into the leases in reliance upon that promise[118]. It is to be noted that the Tribunal regarded the terms of any offer of renewal as a matter for Crown. In particular, it is to be noted that, at this stage of the Tribunal's reasons, there was no suggestion that Crown's liberty to stipulate the terms on which it would be willing to grant a further lease was constrained by considerations of reasonableness or by what might be acceptable to the tenants. Consistently with the terms of cl 3 of each lease, Crown was entitled to set the terms of the new leases, and the tenants could take or leave them.
[117]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [142].
[118]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [168].
The Tribunal then proceeded to assess the damages recoverable by the tenants on the basis that Crown "probably would have offered terms and conditions that had reasonable correspondence with those that had been in the expired lease."[119] On this basis, the tenants were held to be entitled to damages for breach of contract which reflected the profit that they would have made from the further term[120]. It is apparent that the assumption on which damages were assessed involved a substantial departure from the Tribunal's earlier conclusion that "the terms and conditions of the renewed lease would be those specified in the notice, whatever they were." The Tribunal's earlier conclusion recognised that Crown was fully entitled to stipulate the terms of the renewed leases having regard to its own commercial interests; but the assessment of damages assumed the contrary for reasons which cannot satisfactorily be explained as a finding of fact on the evidence before the Tribunal. Nor is the assessment of damages for the loss of expected profit satisfactorily explained on the basis that Crown is bound by the conduct of its case to accept that the tenants were entitled to recover damages measured by reference to their expectations. While Crown contested the quantification of the tenants' damages by reference to their expectation loss, Crown's primary case was always that the tenants should not recover anything by way of damages, assessed by reference to the tenants' expectations or otherwise.
[119]Fish and Company (Vic) Pty Ltd v Crown Melbourne Ltd [2013] VCAT 105 at [53]; Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2013] VCAT 106 at [53].
[120]Fish and Company (Vic) Pty Ltd v Crown Melbourne Ltd [2013] VCAT 105 at [3]; Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2013] VCAT 106 at [3].
The Tribunal's view as to the terms of renewal that Crown would probably have stipulated was not a finding of fact based on evidence of Crown's likely attitude. Moreover, the assumption on which the Tribunal proceeded was inconsistent with cl 3 of each lease, which entitled Crown to act in its own interests in setting the terms of the new leases. In light of the circumstance that Crown did not wish to renew the tenants' leases, it is likely that it would have stipulated onerous terms as the price of surrendering its commercial preference to terminate its relationship with the tenants. The tenants might well have found such terms unacceptable. Be that as it may, given that Crown was not obliged to be "reasonable" in stipulating the terms of the further leases, it is, at best for the tenants, entirely speculative whether the terms of the offer would have been acceptable to, and accepted by, the tenants. On no view of the Tribunal's findings of fact was there a sufficient basis in law for the assessment of damages which the Tribunal proceeded to make.
The Tribunal seems to have imposed upon the parties a "reasonable" solution to their unresolved differences in order to measure the damages to which the tenants were entitled. In proceeding in this way, the Tribunal was not engaged in an exercise in fact‑finding. The solution which the Tribunal imposed did not reflect the Tribunal's finding of fact as to the assurance that was actually given by Crown to the tenants. An assurance that Crown would offer each tenant a lease on terms acceptable to Crown which might be so onerous that the tenants would not accept them, even if contractually binding, would hardly be of any value at all. In any event, perhaps not surprisingly, the tenants did not seek damages measured on this basis. It was simply no part of the tenants' case that they were entitled to damages representing the value of the opportunity to consider an offer of further leases.
It is also to be noted that the award of damages was not calculated by reference to any suggestion that the tenants were worse off because they entered the leases with Crown and carried out the refurbishments than if they had walked away from the negotiation. No comparison was made between the tenants' financial position at the expiration of the leases and their position had they not obtained the leases and traded under them. The tenants did not seek to show, for example, the value of expenditure on refurbishment the cost of which had not been recouped during the term of the leases.
The Tribunal also noted that if its conclusion as to the existence of a collateral contract were wrong, it would accept the tenants' alternative submission based on estoppel. The Tribunal said that it would hold that Crown was "estopped in equity from denying the existence of the collateral contract."[121]
[121]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [172].
Relevant to an aspect of Crown's argument in this Court is the Tribunal's rejection of a submission by Crown that the tenants could not succeed in the proceedings because the collateral contract was not in writing. Such a requirement is imposed on contracts for the sale or other disposition of an interest in land by s 126(1) of the Instruments Act 1958 (Vic) ("the Instruments Act"). The Tribunal held that the collateral contract was not for the disposition of an interest in land, but rather for an option to renew[122].
[122]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [171].
The appeal to the primary judge
As the Tribunal was not constituted by its President or a Vice President, it was uncontroversial that Crown could appeal from the orders of the Tribunal to the Trial Division of the Supreme Court with leave of the Trial Division pursuant to s 148(1)(b) of the VCAT Act.
Collateral contract
The primary judge held that the Tribunal's conclusion in favour of the existence of a collateral contract advanced by the tenants did not accommodate its factual findings relating to the negotiations between the parties[123]. The primary judge concluded that a reasonable person in the position of the tenants would not have understood the representation found by the Tribunal as a promise by Crown to take any particular action[124]. The representation was[125]:
"too vague to found any objectively reasonable understanding to the effect found, and Mr Zampelis did not give evidence that he understood the statements in that sense."
[123]Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at [38]‑[39].
[124]Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at [39].
[125]Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at [42].
The primary judge concluded that the putative collateral contract that obliged Crown to make an offer to the tenants to renew the leases was not sufficiently certain to be enforceable[126]. His Honour also held that if he were wrong on the certainty point the collateral contract was unenforceable by virtue of its inconsistency with the leases[127].
[126]Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at [73].
[127]Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at [80].
Estoppel
On the estoppel issue, the primary judge addressed[128] the requirements for an estoppel summarised by Brennan J in Waltons Stores (Interstate) Ltd v Maher[129]. The primary judge concluded that[130]:
"the meaning which the Tribunal attributed to the statements was not that which a reasonable person in the position of the parties in the relevant surrounding circumstances would have understood the statements to mean".
[128]Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at [87].
[129](1988) 164 CLR 387 at 428‑429; [1988] HCA 7.
[130]Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at [88].
His Honour said that[131]:
"In determining whether a representation is sufficiently precise to support an estoppel, the Court examines the sense in which the representee understood the representation and relied upon it, and then determines whether, in the context of the facts of the particular case, it was reasonable for the representee to understand and rely upon the representation in that sense."
[131]Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at [89].
On the issue of the tenants' understanding of the representation, the primary judge observed that[132]:
"An analysis of the evidence and the Tribunal's findings demonstrates that there was a disconformity between Mr Zampelis's evidence of his understanding of the statements and the meaning which the Tribunal gave to those statements."
[132]Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at [93].
The primary judge held that this "disconformity" meant that the sense in which Mr Zampelis said he understood the statement was "wholly unreasonable ... [s]o the estoppel case falls at the first hurdle."[133]
[133]Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at [94].
The decision of the Court of Appeal
The Court of Appeal granted leave to appeal from the decision of the primary judge, and allowed the appeal.
Collateral contract
Warren CJ accepted that the primary judge was right to hold that the collateral contract was illusory and unenforceable for want of certainty as to the terms of the renewed leases[134]. Her Honour also agreed with the primary judge that the terms of the alleged collateral contract were inconsistent with the leases[135].
[134]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 786‑787 [64].
[135]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 787‑788 [65]‑[70].
Whelan JA, with whom Santamaria JA agreed, held that the Tribunal failed to conduct an objective assessment of the parties' intentions from the totality of the evidence, and so incorrectly applied the legal principles relevant to a determination of what the parties' intentions were[136]. His Honour further held that "[t]he statement which [the Tribunal] found was made is not capable of bearing the meaning [the Tribunal] attribute[d] to it."[137] This was said to be because the phrase "looked after" could have many meanings. Whelan JA agreed with Warren CJ that the legal obligation imposed by the collateral contract as defined by the Tribunal was illusory[138]. His Honour also agreed with the primary judge and Warren CJ on the inconsistency issue[139].
[136]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 808 [179].
[137]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 808 [182].
[138]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 809 [184].
[139]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 809 [186].
Estoppel
As to whether Crown was estopped from denying the existence of a collateral contract, Warren CJ held that the primary judge was correct to hold that the Tribunal did not analyse the claim on the basis of the meaning attributed to the statement by the tenants, but on the basis of the meaning that the Tribunal attributed to the statement[140]. Her Honour held that the Tribunal should have considered the sense in which the tenants understood the representation and whether it was reasonable for them to rely upon it[141]. Warren CJ went on, however, to hold that the primary judge was wrong to hold that the requirement for certainty to found a promissory estoppel was not satisfied[142].
[140]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 789 [77].
[141]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 789 [78].
[142]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 790 [80].
In this regard, Warren CJ referred to observations by Hodgson JA in Sullivan v Sullivan[143] to the effect that a promise or representation may support an estoppel even though it is not sufficiently certain to operate as a contract.
[143](2006) 13 BPR 24,755 at 24,768 [84].
Warren CJ stated[144]:
"there is a lower standard of certainty for estoppel than in contract law and therefore the fact that the representation was not sufficiently certain to establish a collateral contract does not mean that it is not sufficiently certain for estoppel."
[144]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 790 [84].
Her Honour concluded that, while the promise was open to different interpretations, it was sufficiently certain to give rise to an estoppel[145]. Her Honour held that the tenants "would be entitled to the minimum equity", and to that end "they would need to establish what was the lower limit of the representation made to them and then, what they are entitled to in order to achieve equity."[146] On that footing, her Honour would have allowed the appeal and remitted the matter to the Tribunal.
[145]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 791 [89].
[146]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 792‑793 [97].
Clause 3.1 of each lease provided that "[i]f [Crown] gives the Tenant a notice under clause 2.3(a) and the Tenant wishes to renew this Lease, the Tenant must, within 60 days of that notice, give notice to [Crown] that the Tenant agrees to renew this Lease and accepts [Crown's] terms".
Clause 85 of each lease, entitled "Major Refurbishment", provided that "[t]he Tenant must complete a Major Refurbishment of the Premises, at it's [sic] own cost and to the full satisfaction of [Crown], before 1st December 2005". "Major Refurbishment" was defined in each lease to mean "a complete removal of all existing fitout, fixtures, fittings, furnishings, plant and equipment from the Premises by the Tenant and replacement with a completely new fitout, inclusive of new fixtures, fittings, furnishings, plant and equipment, graphics and signage in accordance with the Tenant's refurbishment and redecoration concept for the Premises".
In December 2009, Crown gave notice to the Tenants that it would not renew the leases.
Collateral contract
Applicable principles
There may be a contract ("the collateral contract") for which the consideration is the making of some other contract ("the main contract")[273]. Each contract is complete. Each contract has an independent existence and legal effect. Like all contracts, the collateral contract alters the contractual relations of the parties, but it does not, cannot, and is not intended to, alter the terms of the main contract. The parties "shall have and be subject to all (not some only) of the respective benefits and burdens of the main contract"[274].
[273]See Hoyt's Pty Ltd v Spencer (1919) 27 CLR 133 at 145-148; [1919] HCA 64.
[274]Hoyt's (1919) 27 CLR 133 at 146 (emphasis in original).
As Knox CJ explained in Hoyt's Pty Ltd v Spencer, a "distinct collateral agreement, whether oral or in writing, and whether prior to or contemporaneous with the main agreement, is valid and enforceable even though the main agreement be in writing, provided the two may consistently stand together so that the provisions of the main agreement remain in full force and effect notwithstanding the collateral agreement"[275] (emphasis added). To similar effect, in a passage later quoted in Maybury v Atlantic Union Oil Co Ltd[276], Isaacs J said in Hoyt's[277]:
"The truth is that a collateral contract, which may be either antecedent or contemporaneous … being supplementary only to the main contract, cannot impinge on it, or alter its provisions or the rights created by it". (emphasis in bold added)
[275](1919) 27 CLR 133 at 139.
[276](1953) 89 CLR 507 at 518; [1953] HCA 89.
[277](1919) 27 CLR 133 at 147.
Some discontent has been expressed with what is often referred to as "the rule in Hoyt's v Spencer"[278]. The Tenants submitted that, if necessary, Hoyt's and Maybury should be reconsidered. However, as will become apparent, that question need not be addressed in this matter.
[278]See, eg, Seddon, "A Plea for the Reform of the Rule in Hoyt's Pty Ltd v Spencer", (1978) 52 Australian Law Journal 372.
For a statement to form the basis of a collateral contract, the statement must be "promissory and not merely representational"[279]. A statement will be promissory if it was "reasonably considered" by the person to whom it was made as "intended" to be a contractual promise[280]. It must also be shown that the person to whom the statement was made "intended" to accept the statement as a contractual promise[281]. The relevant "intention" of the parties is to be judged objectively, that is, "deduced from the totality of the evidence"[282], by reference to what a reasonable person in the position of the parties would have understood[283]. And as with any contractual promise, the statement must be sufficiently certain[284].
[279]J J Savage & Sons Pty Ltd v Blakney (1970) 119 CLR 435 at 442; [1970] HCA 6; Ross v Allis-Chalmers Australia Pty Ltd (1980) 55 ALJR 8 at 10-11; 32 ALR 561 at 565-567.
[280]Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 61; [1984] HCA 64.
[281]Hospital Products (1984) 156 CLR 41 at 61.
[282]Hospital Products (1984) 156 CLR 41 at 61 citing Heilbut, Symons & Co v Buckleton [1913] AC 30 at 51.
[283]Hospital Products (1984) 156 CLR 41 at 61-62.
[284]See, eg, Thorby v Goldberg (1964) 112 CLR 597 at 607; [1964] HCA 41; Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 at 436-437, 441; [1968] HCA 8.
As seen earlier, the consideration for the collateral contract may be the making of the main contract. Whether the making of the main contract was consideration for the collateral contract can be determined by considering whether the promisee relied upon the promissory statement in entering into the main contract[285].
[285]See, eg, Savage (1970) 119 CLR 435 at 442; Ross (1980) 55 ALJR 8 at 11; 32 ALR 561 at 567.
Importantly for this matter, as is clear from the explanation by Knox CJ in Hoyt's, a collateral contract may be oral or in writing. This case concerns the former possibility.
Whether the parties have the requisite "intention" to create an oral contract[286], and, if so, the terms of that oral contract[287] and the interpretation of that oral contract[288], are questions of fact. Of course, if there is only one construction open, a judge is bound to treat the construction as a matter of law[289]. Those propositions have a historical basis – juries were often illiterate and could not interpret written contracts, but could interpret oral contracts – as well as a practical basis because of the different evidence admissible in relation to oral and written contracts[290].
[286]See Heilbut [1913] AC 30 at 43, 50-51; Couchman v Hill [1947] KB 554 at 558; cf Oscar Chess Ltd v Williams [1957] 1 WLR 370 at 375, 378; [1957] 1 All ER 325 at 328, 330-331.
[287]Handbury v Nolan (1977) 13 ALR 339 at 341; Gardiner v Grigg (1938) 38 SR (NSW) 524 at 532, 537.
[288]Deane v The City Bank of Sydney (1904) 2 CLR 198 at 209-210; [1904] HCA 44; Handbury (1977) 13 ALR 339 at 346, 348-349; Gardiner (1938) 38 SR (NSW) 524 at 537; Thorner v Major [2009] 1 WLR 776 at 794-795 [58], 800-801 [80]‑[83]; [2009] 3 All ER 945 at 965, 970-971 citing Carmichael v National Power Plc [1999] 1 WLR 2042 at 2048-2051; [1999] 4 All ER 897 at 902-905.
[289]See, eg, Deane (1904) 2 CLR 198 at 209; Handbury (1977) 13 ALR 339 at 346; Gardiner (1938) 38 SR (NSW) 524 at 537; Heilbut [1913] AC 30 at 36; Oscar Chess [1957] 1 WLR 370 at 375; [1957] 1 All ER 325 at 328. That was not the position in this case: see, eg, Cosmopolitan [2012] VCAT 225 at [71]‑[85].
[290]Carmichael [1999] 1 WLR 2042 at 2048-2049; [1999] 4 All ER 897 at 902-903; Thorner [2009] 1 WLR 776 at 800-801 [83]; [2009] 3 All ER 945 at 971.
The matters of primary fact or inferences from primary fact may include what was said, how that was understood, what was intended by the maker of the statements and how the statements should reasonably have been understood[291]. That is not to say that there are not questions of law involved in this matter. The Hoyt's issue – whether the collateral contract may consistently stand together with the main contract – is one. The questions of whether the terms as interpreted are legally incomplete, in the sense that essential or critical terms are yet to be determined, or whether the terms as interpreted are illusory, are two others.
[291]Thorner [2009] 1 WLR 776 at 800-801 [81]-[83]; [2009] 3 All ER 945 at 970-971.
Issue and approach
In light of the above principles, whether a collateral contract was formed may be addressed by asking four questions: (1) Was the statement promissory and sufficiently certain?; (2) Did Mr Zampelis rely upon the statement?; (3) Was the alleged collateral contract consistent with the leases?; and (4) Was the alleged collateral contract not illusory, but complete?
The answer to each question is "Yes". The Tenants and Crown made a collateral contract, which Crown breached.
Promissory and sufficiently certain?
The statement made by Crown's representative to Mr Zampelis was promissory and sufficiently certain[292]. To explain why, it is first necessary to consider cl 2.3 of each lease. Clause 2.3 is directed primarily to when Crown was required to give notice of how it proposed to deal with its reversionary interest, as lessor, under the leases.
[292]See [230] above.
A reversionary interest arises when the holder of an interest in land grants a lesser interest to a third party without disposing of his or her entire interest in the property[293]. The creation of Crown's reversionary interest as lessor was an essential part of the grant of each lease[294]. Those interests arose by operation of law, not express grant. As each lease had no option for the Tenant to renew, one aspect of Crown's reversionary interest was the right to offer and grant to the Tenant (or some third party) a lease that would commence after the determination of that Tenant's existing lease on such terms as Crown saw fit. Crown had that right throughout the term of each Tenant's lease, not only after the lease determined[295].
[293]See, eg, Wik Peoples v Queensland (1996) 187 CLR 1 at 91; [1996] HCA 40; Western Australia v Ward (2002) 213 CLR 1 at 216-217 [482]-[483], 222 [501]; [2002] HCA 28.
[294]Commissioner of Taxes (Q) v Camphin (1937) 57 CLR 127 at 133; [1937] HCA 30.
[295]See, eg, Fuller's Theatre and Vaudeville Co v Rofe [1923] AC 435 at 438; Green v Bowes-Lyon [1963] AC 420.
Clause 2.3 addressed the existence of Crown's reversionary interest, not by dealing directly with it, but by imposing a time period in which Crown was obliged to tell each Tenant how it proposed to exercise its rights about what would happen at the end of the lease. Crown had no greater rights under the leases than it had as a result of its reversionary interest by the operation of law. The requirements imposed by cl 2.3 had no legal effect except to fix a time period within which Crown was required to tell the Tenant how it proposed to exercise its rights.
What, then, was the promise? As seen earlier, VCAT found that the statement made by Crown's representative was, in substance, a promise that Crown "would fulfil its obligation under clause 2.3 to give a notice, within the time specified in clause 2.3, stating that it would renew the lease for a further five year term", on the terms specified in the notice[296]. As that interpretation (including how the statement should reasonably have been understood) was a question of fact[297], it was not open to challenge on appeal to the Supreme Court of Victoria, unless the finding was not open on the evidence[298].
[296]Cosmopolitan [2012] VCAT 225 at [176]; see also at [135], [139]-[141].
[297]See [245] above.
[298]cf s 148 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic). See also Roy Morgan Research Centre Pty Ltd v Commissioner of State Revenue (Vict) (2001) 207 CLR 72 at 79‑80 [15]; [2001] HCA 49; Osland v Secretary to Department of Justice [No 2] (2010) 241 CLR 320 at 331-333 [18]-[20]; [2010] HCA 24.
That finding was open on the evidence. It was a promise to give to the Tenants, within the stipulated time period, notice of the terms on which Crown would "renew" the leases for five years. Consistent with the lease terms and Crown's reversionary interest, Crown could have required a move to different premises or stipulated that further refurbishment was required. The promise was not a promise to agree. It was not a promise to enter into a new lease. More particularly, it was not a promise to enter into a new lease on substantially similar terms. It was not an offer of a right of pre-emption. It was not a right of first refusal. It did not purport to impose future contracts on the parties. The promise was, in its terms and effect, a promise to make an offer "to renew" the leases for five years on terms of Crown's choosing[299]. Nothing more, nothing less. That was the finding of VCAT[300].
[299]cf Smith v Morgan [1971] 1 WLR 803 at 807; [1971] 2 All ER 1500 at 1503; Brown v Gould [1972] Ch 53 at 58-59.
[300]Cosmopolitan [2012] VCAT 225 at [135], [139]-[141], [176].
A provision to like effect was to be included in cl 2.3(a) of the leases. Such a promise does not become uncertain simply because it forms part of an oral collateral contract. And it does not become uncertain because, at the time that the promise is made, it is not known whether the offer, when it is made, will be acceptable to the Tenants when it is served on them.
VCAT found that the statement by Crown's representative was a promise; a statement about what Crown would do in the future[301]. That VCAT found that the statement was a promise is unsurprising. That finding was supported by independent evidence from Mr Craig, formerly of the National Australia Bank, which VCAT accepted. Mr Craig's evidence was that, within one or two weeks of the 6 December 2005 meeting, he made a handwritten note of the meeting on a copy of the lease for one of the Tenants. The handwritten note stated[302]:
"[W]hilst this is a 5 year term this is standard for Crown and aligns with other venues. Have however been with [Mr Zampelis] at several meetings when discussions have confirmed that further terms will be provided as they have in the past. David Boesley (Crown) was talking to [Mr Zampelis] one time and intimated that fit out should be high quality as this would reflect well and not to worry as he would be looked after at renewal time. So he should complete fit-out with this in mind and not scrimp on finishing to save a few dollars just because of the lease term. [Mr Zampelis] has also advised that he has had such conversation with Nick Williams and others so this should give bank comfort for longer term." (emphasis added)
[301]Cosmopolitan [2012] VCAT 225 at [133].
[302]Cosmopolitan [2012] VCAT 225 at [74].
VCAT found that the roughly contemporaneous note was likely to be a more reliable account of the conversation than evidence given by one or more of the meeting participants some six years later. Indeed, Crown's representative, Mr Boesley, gave evidence before VCAT in which he acknowledged that the meeting probably occurred and that parts of the evidence given by Mr Craig (and another witness) were probably correct.
What, then, of the complaint that the phrase "looked after at renewal time"[303] was too vague? That complaint should be rejected. As VCAT found, the statement could not be looked at in isolation. It had to be considered in context – by looking at the statement as a whole, the history of the negotiations and the terms of the leases including, in particular, cl 2.3. The question for VCAT was how a reasonable person in the position of the parties with knowledge of those facts and matters would understand the statement. As seen earlier, VCAT found that a reasonable person would conclude that the promise meant that Crown "would fulfil its obligation under clause 2.3 to give a notice, within the time specified in clause 2.3, stating that it would renew the lease for a further five year term", on the terms specified in the notice[304]. That finding was well open on the evidence and is anything but surprising. Before the expiration of each lease, Crown would have three options[305]. Under cl 2.3 of each lease, only one of those options – cl 2.3(a) – could align with "looked after when the time came for Crown to consider renewing the leases". And the one option which could align – cl 2.3(a) – was, in substance, consistent with Mr Craig's handwritten note of what Mr Zampelis had been told by Crown.
[303]See [230] read with [255] above.
[304]Cosmopolitan [2012] VCAT 225 at [176]; see also at [135], [139]‑[141].
[305]See [235] above.
VCAT's analysis of the promissory nature and certainty of the statement was correct.
Reliance
The next question is whether Mr Zampelis relied upon the promise in entering into the leases. That required consideration of two issues: first, when the Tenants delivered the leases; and second, whether the Tenants delivered the leases in reliance on the promise.
The timing of the delivery was important because it was common ground that the Tenants had executed the leases before the promise was made by Crown's representative to Mr Zampelis. However, that fact was not conclusive. The question was whether the leases had been delivered before the promise was made[306].
[306]See Xenos v Wickham (1867) LR 2 HL 296 at 312; Vincent v Premo Enterprises (Voucher Sales) Ltd [1969] 2 QB 609 at 619‑620; Ansett Transport Industries (Operations) Pty Ltd v Comptroller of Stamps [1985] VR 70 at 77-78; Scook v Premier Building Solutions Pty Ltd (2003) 28 WAR 124 at 133 [25]; Segboer v A J Richardson Properties Pty Ltd (2012) 16 BPR 31,235 at 31,242-31,243 [52]‑[60].
Whether there had been delivery, with the intention of being bound, was a question of fact[307]. VCAT found that the leases had not been delivered prior to the promise being made and that the Tenants evinced an intention to be bound by the leases when, but only when, the executed leases were handed over or "delivered" in March 2006[308].
[307]See Xenos (1867) LR 2 HL 296 at 309, 311; Ansett [1985] VR 70 at 78; Segboer (2012) 16 BPR 31,235 at 31,243 [59].
[308]Cosmopolitan [2012] VCAT 225 at [167].
So, did the Tenants deliver the leases in reliance on the promise? That was also a question of fact. VCAT found that the delivery was made to Crown in reliance on the promise[309]. VCAT recognised that different interpretations of the evidence were open and explained why the finding made was preferable.
[309]Cosmopolitan [2012] VCAT 225 at [168].
All of the above findings of fact were open on the evidence. The criticisms by the primary judge and the Court of Appeal of VCAT's approach to, and resolution of, the collateral contract question should not be accepted – they do not account for the factual nature of the relevant inquiries.
Consistent with the leases
The collateral contract was not inconsistent with, and did not impinge upon or alter, the rights under the leases. The collateral contract did not seek to impinge on, alter, or impair, the timing of the notice under cl 2.3. The collateral contract and each lease could "stand together"[310]. The collateral contract was additional to and stood outside the parties' rights and obligations under the leases. It was an agreement that the notice given, within the timing prescribed by cl 2.3, would be a notice which was directed to one of Crown's rights as a result of its reversionary interest, which existed independently of the leases, to offer to "renew" the leases for five years on the terms that Crown specified in the notice. In the context of these leases, that was an agreement which included the possibilities that under the offer the premises would alter or there would be a requirement to refurbish the premises.
[310]Hoyt's (1919) 27 CLR 133 at 139.
Not illusory but complete
Contrary to the conclusions reached by the primary judge and the Court of Appeal, the collateral contract found by VCAT was not illusory[311]. As has been seen, it was an agreement to make an offer. Crown could fix the terms on which it would offer the new leases for five years. But Crown was under an obligation to make an offer of the kind promised. It could not refuse to make an offer at all[312].
[311]See Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at [72]-[73]; CosmopolitanHotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 786-787 [64], 809 [184]-[185].
[312]See Thorby (1964) 112 CLR 597 at 613; cf Placer Development Ltd v The Commonwealth (1969) 121 CLR 353 at 357; [1969] HCA 29.
Nor were the terms of the collateral contract incomplete. Essential or critical terms of the agreement were not "left to be settled by future agreement of the parties"[313]. The collateral contract would have been concluded had Crown made the offer it was obliged to make. That offer must contain all the essential terms necessary for it to be complete upon acceptance[314]. But that does not mean, if there is a contract to make an offer, that those terms must be settled in advance of the offer being made. By its nature, an offer only reflects the will of one of the parties. Had the offer been accepted by the Tenants, a new and independent contract – a lease – would have come into existence at that point. That is not the same as the essential terms of the collateral contract being settled by further agreement between the parties at a later point.
[313]Thorby (1964) 112 CLR 597 at 607.
[314]See Smith v Morgan [1971] 1 WLR 803 at 807; [1971] 2 All ER 1500 at 1503.
Finally, the collateral contract – an agreement to make an offer, not a contract for the disposition of an interest in land – was not required to be evidenced in writing by s 126 of the Instruments Act 1958 (Vic).
Other matters
For the above reasons, VCAT correctly found that there was a collateral contract and correctly concluded that Crown breached that collateral contract when it failed, within the time specified in cl 2.3, to give the Tenants notice that it offered to "renew" the lease for a further five year term on the terms specified in the notice. The Tenants lost the benefit of such an offer. It was a loss of an opportunity[315]. The value (if any) of that offer was the proper basis for assessment of damages. That was not the approach adopted by VCAT.
[315]Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 349; [1994] HCA 4 citing The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 92, 102-104, 118-119; [1991] HCA 54.
VCAT was asked to adopt, and adopted, what was described as an "agreed approach to assessment of damages" for breach of the collateral contract[316]. The damages were calculated by reference to the profits that would have been generated during the term of renewed leases. The Tenants did not contend, or prove, that they were entitled to damages, even nominal damages, for loss of an opportunity or detriment[317]. Indeed, because of the agreed approach to the assessment of damages, VCAT did not make any findings relevant to assessing the value, if any, of the loss of an opportunity or make any finding of detriment. Further, the subsequent assessment of damages by VCAT was the subject of appeal before the primary judge but the relevant appeal grounds were not addressed by his Honour. VCAT's assessment of damages was not relevantly the subject of challenge in the Court of Appeal or in this Court.
[316]Cosmopolitan [2012] VCAT 225 at [21]-[24].
[317]cf Amann Aviation (1991) 174 CLR 64 at 119.
Having regard to the course taken in VCAT in relation to damages, it is not appropriate to remit the matter to VCAT to allow the Tenants to make a wholly different damages case. Nor is it necessary or appropriate to remit the matter to a single judge of the Supreme Court of Victoria to consider so much of the Tenants' application for leave to appeal to that Court as related to the damages issue.
Estoppel
Given the views formed in relation to the collateral contract claim, the estoppel claim does not arise for determination.
Result and orders
For those reasons, the appeal should be dismissed. The Tenants should be granted special leave to cross-appeal on the collateral contract issue, and the cross-appeal should be allowed. The Tenants should be ordered to pay Crown's costs of the appeal and the cross-appeal. Paragraphs 2, 3, 4, 5 and 6 of the Order of the Court of Appeal of the Supreme Court of Victoria of 8 April 2015 should be set aside and, in their place, order that the appeal be dismissed with costs.