Waltons Stores (Interstate) Ltd v Maher
High Court of Australia · 1988
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
A tenant-to-be let a landowner demolish and build for it, said nothing, then walked away because no one had ever swapped signed contracts. Could silence and a signed counterpart bind it?
In Kramer v Stone, at [36]-[40], the joint reasons of Gageler CJ, Gordon, Edelman and Beech-Jones JJ (Gleeson J dissenting) said that Brennan J's six requirements for equitable estoppel were formulated at a level of generality sufficient to include both an estoppel arising from encouragement by a promise and an estoppel arising from acquiescence, and refined them for encouragement by a promise: a clear and unequivocal promise, a reasonable expectation or intention that the promisee would rely on it, reliance in the general manner expected, and detriment if the promise is not fulfilled. Cite Kramer v Stone for that refinement and Waltons Stores for the original six.
In Sidhu v Van Dyke, at [85], the joint reasons of French CJ, Kiefel, Bell and Keane JJ (Gageler J agreeing) quoted Brennan J's statement that the court goes no further than is necessary to prevent unconscionable conduct, and said that where the unconscionable conduct consists of resiling from a promise or assurance that induced detrimental conduct, the relief that is necessary in that sense is usually that which reflects the value of the promise. That was a proprietary estoppel case about a promise of land. Do not cite Brennan J's limit in Waltons Stores as a rule that relief is compensation.
What happened?
In late 1983 Waltons, a retailer that had to leave its Nowra premises in January 1984, negotiated to lease a new store that Mr and Mrs Maher would demolish a building to make way for and then build to its specification. The solicitors adopted a procedure in which signed counterparts would be exchanged to make the contract. The Mahers' solicitor said the agreement had to be concluded within a day or two or Mr Maher could not complete the work. Waltons' solicitor replied that Waltons had agreed to the amendments, enclosed revised documents, and said Waltons would say the next day if any amendment was not agreed. No such notice came. On 11 November the Mahers' solicitor sent the counterpart deed signed by the Mahers "by way of exchange" and asked for Waltons' signed original in return.
Waltons never signed. It had decided, because of a review of its retailing strategy, to "go slow", and its solicitor held the Mahers' signed counterpart and did not write again. Waltons' officers learned on 10 December that demolition was under way and by about 10 January that the building was going up. On 19 January Waltons' solicitor wrote that Waltons did not intend to proceed. By then the building was about 40 per cent complete. The trial judge, Kearney J, found that the parties had not intended to be bound before exchange, and that finding was not appealed.
What did the Court decide?
The appeal was dismissed with costs, so the orders below stood: a declaration, and damages in lieu of specific performance of the agreement for lease. All five Justices upheld that result. Their reasons are set out under the Proposition.
On the Conveyancing Act 1919 (NSW), s 54A, which requires writing for an action upon a contract for the sale or other disposition of an interest in land, the Justices each concluded that it did not defeat the Mahers: Brennan J because an action to enforce an equity created by estoppel is not brought upon a contract, Deane J because the estoppel outflanked the section, Gaudron J because estoppel on the assumed exchange made compliance irrelevant, and Mason CJ and Wilson J because, as the other judgments showed, there was no substance in the argument.
Proposition
What is the principle?
Mason CJ and Wilson J said that the question was whether promissory estoppel could be driven "one step further by enforcing directly in the absence of a pre-existing relationship of any kind a non-contractual promise on which the representee has relied to his detriment". They noted the force of the objection that this "would outflank the principles of the law of contract", and ended by holding that, in the circumstances, "the appellant is estopped in all the circumstances from retreating from its implied promise to complete the contract". They said that "mere reliance on an executory promise to do something, resulting in the promisee changing his position or suffering detriment, does not bring promissory estoppel into play. Something more would be required." On the facts they found that something more in the urgency of the negotiations and in Waltons' retention of the executed counterpart, with silence, after it knew that costly work was proceeding.
Brennan J distinguished estoppel in pais, which fixes the state of affairs by reference to which the parties' legal relationship is decided, from equitable estoppel, which he called "a source of legal obligation" and "an equity created by estoppel". He held that the Mahers' expectation that Waltons would execute and deliver the original deed raised such an equity. He set out six elements: the plaintiff assumed that a legal relationship existed, or expected that one would exist and that the defendant would not be free to withdraw from it; the defendant induced that assumption or expectation; the plaintiff acted or abstained from acting in reliance on it; the defendant knew or intended that; the plaintiff would suffer detriment if it went unfulfilled; and the defendant failed to avoid that detriment. For the relief, he said that "the satisfaction of the equity calls for the enforcement of a promise only as a means of avoiding the detriment and only to the extent necessary to achieve that object", and that so regarded "equitable estoppel does not elevate non-contractual promises to the level of contractual promises and the doctrine of consideration is not blown away by a side-wind".
Deane J treated estoppel by conduct as one doctrine in law and equity, with promissory estoppel an emanation of it. His primary ground was that the facts established an estoppel precluding Waltons from denying that a binding agreement existed, because its silence caused the Mahers to assume that one had been made. He added that "The doctrine of estoppel by conduct must now be accepted as applying to preclude departure from a represented or assumed future state of affairs in at least some categories of case", and applied it to the Mahers' assumption that exchange was a formality.
Gaudron J distinguished common law estoppel, which operates by reference to an assumption of fact, from equitable estoppel, which "operates so as to compel adherence to an assumption as to rights". She decided the case on the assumption that exchange had taken place, finding that Waltons' imprudence was a proximate cause of the Mahers' adopting and acting on it. On whether an assumption as to a future contractual right would found an equitable estoppel she said it was a matter that did not need to be explored.
Why does this case matter?
Without it, a student facing a promise that failed for want of consideration writes either that reliance makes the promise enforceable as such, or that failure of consideration ends the matter. An examiner who sets an unsupported-promise or failed-negotiation problem is looking for whether you reach for estoppel, say whose reasons you are relying on, and notice how unusual these facts were: commercial parties, represented by solicitors, with a stated understanding that nothing would bind them before exchange. The case is over-cited when those differences are ignored.
Exam and application relevance
Name the route you are using and the Justice whose reasons support it, and cite by Justice, because there was no single set of reasons. Then work through the elements on the facts of the problem: what the defendant did to create the assumption or expectation, whether it knew or intended the other to rely, what the claimant did in reliance, and the detriment if the assumption is not fulfilled. Treat the limit on relief as Brennan J's, and read the recorded treatments for how later High Court decisions have refined his elements and the measure of relief. Do not claim that reliance on a promise makes it enforceable as such.
Check your understanding
1. Why was no contract made in this case, and what did the Mahers do that Waltons knew about before it withdrew? 2. What did Mason CJ and Wilson J say was needed beyond reliance on an executory promise, and where did they find it on these facts? 3. On what assumption did Gaudron J decide the case, and what did she say about deciding it on the assumption that exchange would take place? 4. Brennan J says the doctrine of consideration is not blown away by a side-wind. What is it about the object of the equity that allows him to say so?