Discuss about the Central London Property Trust Limited.
In this question, advised needs to be given to Bertini Italian Restaurant regarding the lease contract for restaurant space that it had entered into Garland Properties Pty Ltd. in this regard, it needs to be mentioned that Garland is the owner of a large commercial property. However, the property was leased to Bertini on month to month basis , while the restaurant was looking for the insurance provided by a long-term contract. Under these circumstances, Bertini asked for a lease period of 10 years along with an option to renew the lease for the next five years. However, Bertini could not get the lease for 10 years. During the negotiations between the parties, it was clear that the property was going to be offered to Bertini or five years lease. However Garland also told Bertini that it should undertake significant refurbishments on the property to the satisfaction of Garland at the beginning of the lease. This was done to make sure that the restaurant is up to the required standard while compared with the other restaurant that were also present in the same commercial companies. However, Bertini was not very sure that their business will be able to cope up with the refurbishments expenses, particularly if a lease for 10 years was not granted to it. It is also worth mentioning at this point that the cost for the refurbishment was going to be around $2 billion. Although Garland was not ready to give a lease for 10 years to Bertini by the stated that if the lease for five years was signed by Bertini and it also refurbish the restaurant according to the desired level of Garland before the Melbourne Expo started, the company will look after the interests of Bertini at the time of the renewal. The representatives of Garland had also stated that the reason includes they were going for five years lease term was to make sure that the lease aligns with the lease of the other tenants, who were present in the complex. However, there was no option to renew in the lease contract, but it was mentioned in the contract that the landlord is required to give a notice to the tenant indicating if the landlord is going to renew the lease or the landlord will allow the tenant who occupied the premises on month to month basis, or if the landlord is going to ask the tenant to vacate the premises after the lease has expired. Six months before the expiry of the lease period, Garland told Bertini that it was not going to renew the lease and therefore Bertini should vacate the premises. Therefore the issue arises if Bertini can rely on a statement made by Garland. According to which the lease was going to be extended for the next five years and similarly the fact that Bertini had spent $2 million in refurbishing the restaurant to the satisfaction of Garland can be taken into consideration while dealing with this issue.
Although an attempt has been made by the High Court in Commonwealth v Verwayen (1990) to unify the law under a single doctrine that is based on unconscionability, still under the common law and quickly, estoppel is governed by different doctrines and rules. Essentially the estoppel, under the common law is related with the rules of evidence. It includes estoppel by judgment, common-law estoppel, estoppel by convention and estoppel by representation. The lawyers call the estoppel by judgment as res judicata. Equity also provides that a party cannot raise an issue in subsequent proceedings if such an issue could have been raised during the prior proceedings (Meagher, Hayden and Leeming 2002). The estoppel by deed, prohibits the party from denying representation that has been made in the recitals of a deed. In the same way, the parties are prevented by the estoppel by convention from denying the agreed or resumed the state of facts on the basis of which the mutual relations between the parties have been formed. According to the common-law estoppel, the parties are prohibited from denying their conduct, while the estoppel by representation prohibits the parties from denying a representation of fact made by them (Robertson 1996).
Equitable estoppels, that are also described as estoppel by acquiescence, estoppel by encouragement and promissory estoppel does not labor under the restrictions that have been provided in Jordan v Money (1854) 5 HLC 185. Particularly the principle of promissory estoppel has been considered an extended by the High Court in a number of decisions. For instance in Legione v Hateley (1983). It was accepted by the High Court that promise the estoppel could be the ground of claim as well as it can also act as a defense. However, on the basis of the facts of the case it was held that the statement, on which the plaintiff had relied upon, was not sufficiently promisingly.
In Waltons Stores (Interstate) Limited v Maher (1988), the court made out a claim on the basis of the doctrine of promissory estoppel. In this case, Jordan v Money was not rejected by the court, but instead it had developed the equitable principle that was applied by the court in Central London Property Trust Limited v High Trees House Limited [1947] where the party was prohibited from resiling from its representation related with the exercise of existing contractual rights. This doctrine was extended in Bank Negara Indonesia v Hoalim (1973) (which had been approved in Saleh v Romanous 2010) as applying to the rights which do not pre-exist but which have come into existence due to the change of the position on part of the representee.
Generally it is overlooked that in Waltons Stores, the majority had discovered different estoppels. In the separate judgment given by Mason CJ and Wilson J, and Brennan J, the case was decided by considering promissory estoppel. On the other hand, Deane and Gaudron JJ had arrived at their decision on the grounds of the common law representation that was made by the appellant or on the grounds of an induced assumption made by the respondent, regarding the fact that the contract in dispute was in existence (Cooke 2000). The practical difference that exists between equitable estoppels and, not estoppel may sound in the different remedies supported by them (Nolan 2000). It also needs to be mentioned that under the common law, estoppel does not result in the creation of a right. The right arises due to the state of facts that are found by the court. On the other hand, equitable estoppels create an equity that in itself is a source of rights. As the common law estoppel does not allow the estopped party from denying a fact, like the presence of contract, theoretically, the other party may be able to cross claim regarding the contract for breach in expectation damages. But equity does not result in giving a rise to a remedy like equitable compensation. That may be payable by the estopped party, and it is limited to making good the detriment suffered by the other party. In Commonwealth v Verwayen (1990), the limitations that have been placed on making out a promissory estoppel were clearly mention when the court characterized the appropriate relief as minimum equity for doing justice.
Therefore it can be said that promising estoppel arises as a result of the representation made by a party regarding future and it has the capacity to create new rights between the parties concerning the property. The doctrine of promissory estoppel is based on unconscionability. Promise the estoppel or proprietary estoppel can be described as a person whose conduct had resulted in an exemption on part of the other person that he or she is going to obtain an interest in the land of the first person. On the basis of such expectation, the other person has altered its position or it has acted to its detriment. The law allows such a person to bring into existence, and equity in favor of such person. The nature and the extent of equity depends on the circumstances. In this way, the doctrine of estoppel is basically based on the main heads. These are assurance, reliance and detriment. A wide range of variation may be present in the quality of assurance that is required to give rise to an expectation. However, it can be said that the evidence is required to establish the following propositions:- (i) that A has given or is going to give an interest in real property to B; (ii) that A is aware of the expectation of B; (iii) B has incurred a detriment by relying on such expectation and made expenditure on the property or has given up the rights that were related the real property; (iv) A can legally pass on the expectation, interest or property to B; (v) A has encouraged B or at least had the knowledge regarding the detriment that was suffered by B.
Even if the heads of proprietary estoppel look like a matter of precedent and logic that has to be settled reasonably, much less certainty is present regarding remedies that may be available on its proof. When a proprietary stoppers has been established, the most likely remedy granted by the court will be an order affecting the gift by conveyance or the transfer of interest. Even if were no transfer or conveyance can be made effectively, the promisee may be required to make do with a lesser remedy of equitable charge. When proprietary estoppel has been established on the grounds of a representation to transfer an interest in land, the prima facie remedy is not to fulfill the promise by the transfer or conveyance of the interest in land but stripping the profit that has been made by the promisor on the basis of his unfulfilled promise.
On the above-mentioned grounds, it needs to be seen if in the present case Bertini can rely on the promise made by Garland. In the present case, Garland has given an interest in the property to Bertini. This interest was given in the form of a lease for the restaurant. At the same time, Garland was aware of the expectation of Bertini that the lease should be extended for 10 years. In fact, Bertini had made a clear demand that the lease for the restaurant should be extended for 10 years. In this way, Garland at knowledge regarding the expectation of Bertini. By relying on the expectation that eventually the lease will be extended for the next five years after the expiry of the first five years, Bertini had spent nearly $2 million on the refurbishment of the restaurant to the satisfaction of Garland. Garland wanted that the restaurant should be refurbished by Bertini so that it becomes comparable with the other restaurants that were present in that commercial complex. Although Bertini was reluctant to spend such a huge amount on refurbishing the restaurant, particularly when the lease had not been extended for the next 10 years, Garland assured Bertini that it will take care of the interests of Bertini after the expiry of the first five years of lease. In this way, by relying on the expectation that the lease will be extended for the next five years, Bertini had made a lot of expenditure on the refurbishment of the restaurant. At the same time, it can also be said that Garland had encouraged by the need to incur the detriment or in other words to make the expenditure for the refurbishment of the restaurant. Garland cannot claim that it was not aware of the expectation of Bertini as Bertini had clearly asked that the lease should be extended for the next 10 years.
A collateral content is created between the parties when one party makes a promise that is independent from the main contract, and the consideration for such promise is neither party entering into the main contract. For instance, A wants to sell his car to B. However B is reluctant to buy the car because he is not show regarding the performance of the car. Under these circumstances, a promise or an assurance is made by A according to which the car can go from 0 to 100 kilometers in 8 seconds. Therefore in this case, the main contract is related with the purchase of the car. On the other hand, the assurance given by A can be described as collateral contract, which exists along with the main contract. The law provides that a collateral contract should be proved strictly. In the same way, a collateral contract may arise only if satisfies the following requirements:-it should be promissory in nature; it should be made with the intention to induce the other party to enter into the contract and it must be consistent with the terms of the main contract. It is also required that the collateral contract should be made before or while the parties are going to enter into the main contract.
According to the standard bargain theory, which has been mentioned in consideration, a promise cannot be considered as binding unless a prize has been paid in return. Such a price could be a promise or an act it could be money also. But there are certain circumstances, when even a non-contractual promise may result in creating binding obligations even if it has not resulted in the right to sue for damages if it is established as being false (Bryan 2012). According to the doctrine of promising estoppel,, which is an equitable doctrine, as is the case with specific performance. As is the case with all other equitable remedies, this remedy is also discretionary, as compared to the absolute right under the common law to sue for damages in case of a breach of contract. A essence of the doctrine of promising estoppel can be described as follows. When a person has caused the other party to act on the basis of an assumption as a part of their relationship, such person is not allowed to depart from it or to act in a way as if it was not so. Therefore the person is not allowed by the law to deny that the assumption is true. If one party had led the other party to believe that the first party is not going to enforce a certain right against them, and the other party has acted on such information, assuming the information to be true, later on. The first party is not allowed to go back and enforce those rights (Silovi Pty Ltd v Barbaro 1988).
Proprietary estoppel is now considered as a part of general equitable estoppel. Proprietary estoppel involves doing something which a person believes to give him a right over land. By putting up a building or making certain improvements to the land, in such a case the actual owner of the land can be estopped from denying the right of the other party (Nolan 2000).
The doctrine of promissory estoppel has a much more restricted role under the English contract law is the way to the law of Australia where it can be used to found a cause of action for the purpose of remedying the non-performance of a promise that is not supported by a consideration (Spence 1999). As compared to the other, the restrictions, in Australia, estoppel can be used as a cause of action and also as a defense (Handley 2010). In this way, in Australia, promise of the estoppel acts as a sword and also as a shield. The concept of equitable estoppel is exclusively found in Australia. It is the result of the fusion of earlier distinct heads of estoppel in Walton Stores v Mehar. In case of promissory estoppel, the party making the representation is estopped from enforcing the contract where doing so would the unconscionable or inequitable due to the reliance on the representation by the other party. It appears in view of the language of unconscionability to be the underlying rationale in the modern cases based on promissory estoppel. However, it has not been generalized into the doctrine of unconscionability under English law. Similarly, it has not even been used as a common link for drawing together promissory estoppel and proprietary estoppels (Handley 2006).
In Central London Property Trust v High Trees House [1947], a block of flats was leased by High Trees from CLP at the ground rent of £2,500. When the lease was taken out in 1937, it was a new block of flats. The defendant was facing problems in getting tenants for all the floods and High Trees was left with no profit due to the ground rent. By 1940, a number of flats were still unoccupied and as the ball was going on, it appeared that there would be no change to the situation for some time in the future. Under these circumstances, CLP, agreed that during the war years the rent may be reduced to £1,250. This agreement between the parties was reduced to writing. High Trees started to pay the reduced rent from 1941. However, when the war was over, all the flats were occupied and the claimant wanted to return to the original rent. In this case, the decision of the High Court was that the parties can return to the originally agreed rent only for the future. The court stated that the arrears accrued during the war years cannot be claimed by CLP. This case assumes significance due to the reason that in this case, the doctrine of promissory estoppel was established by Denning J. In view of the application of promissory estoppel, CLP was not allowed to go back on its promise to accept the lower rent even if such a promise was not supported by any consideration. Denning J stated that in his opinion, it was the right time to recognize the validity of such a promise. Therefore the logical consequence would be to accept that the promise to accept smaller sum and discharge the debt of the larger amount, is binding if acted upon, even if there is no consideration present in such a case.
It is also required to briefly discuss the case of Walton Stores (Interstate) Ltd v Maher and Another (1988) 76 ALR 513. In this case, commercial property was owned by Mr. and Mrs. Maher. On the other hand, the lease of the existing premises of Walton Stores (Interstate) in Nowra was going to expire in generally 1984. By mid-1983, Mehar’s and Waltons have entered into the negotiations for the lease of property by the store. In order to fulfill the requirements of Walton’s, Mehars became ready to demolish the old building standing on the property and construct a new building according to these presentations provided by Waltons. In this regard, Mehar’s were advised by Waltons that the new building should be completed by 15 January, 1984. Subsequently, the parties reached an agreement to extend the time for completing the work. The terms of the lease and the rent was agreed upon by the parties on 21 October, 1983, the solicitors of Waltons sent a draft agreement for lease to the solicitor of Maher. The solicitor of Maher informed the solicitor of Waltons that Maher’s wanted the agreement to be concluded within the next one or two days otherwise they will not be in a position to complete the new building on time. Maher’s solicitor was orally advised by the solicitor of Waltons that according to the verbal instructions given to him by Waltons and therefore you will seek formal instructions. On that night, the solicitor of Walton sent the updated the agreement in which the amendments were incorporated along with a letter in which it was confirmed that according to him, formal instructions would be forthcoming. He also promised to inform the solicitor of Maher’s if any amendment was not agreed to. The amended deed executed by the Maher’s was sent to Walton’s solicitor. On the other hand, it was decided by Waltons that in view of the new retailing policy that was being formulated they did not wish to commit themselves to leasing the property and therefore they instructed their solicitors to go slow. Under these circumstances, Mahers started the construction of the new building that was being done according to the plans and specifications given by Waltons. However by January 19, the solicitor of Walton’s advised the solicitor of Maher that they did not intend to proceed with the lease.
An action was brought in the Supreme Court of New South Wales by Mahers, who were seeking a declaration that a binding agreement had been created between the parties and the specific performance of the agreement or in its place, damages. The case was decided in the favor of Mahers by the judge had the first instance. The decision was given on the grounds that Waltons were prevented from denying that concluded contract has been created between the parties in view of the common law estoppel. The court ordered Waltons to pay damages. Against this decision, an appeal was preferred by Waltons in the NSW Court of Appeal.
This appeal was dismissed and Waltons made an appeal to the High Court. The legal issue was if Waltons was esstopped from denying the presence of a binding agreement that it was going to lease the property. The appeal was dismissed by the High Court. Although separate decisions were given by the Justices, with the exception of Mason CJ and Wilson J. they were all of the opinion that the presence of a binding agreement to lease the property could not be denied by Waltons even if the parties have not entered into the formal contract.
On the basis of the above-mentioned discussion, in the present case also, Garland cannot deny that there was any given between the parties to extend the lease for the next five years after the lease for the first five years had expired. Therefore, in this case, even if the promise to extend the lease by next five years was not supported by any consideration provided by Bertini, still the promise is enforceable. However, Garland can claim that Bertini cannot claim $200,000 that it was going to earn as ordinary profit and also the $100,000 that it was going to make in exceptional profits in view of some lucrative deals.
References
Bryan, M. 2012. ‘Almost 25 years on: some reflections on Waltons v Maher’ 6 Journal of Equity 131
Cooke, E. 2000. The Modern Law of Estoppel, Oxford University Press
Handley, KR. 2006. ‘Three High Court decisions on estoppel 1988-1990’ 80 Australian Law Journal 724
Handley, KR, 2010. ‘Further thoughts on proprietary estoppel’ 84 Australian Law Journal 239
Meagher R, Hayden, Leeming M 2002 Meagher Gummow and Lehane’s Equity Doctrines and Remedies Fourth Ed. at 17
Nolan, D., 2000. ‘Following in their footsteps: Equitable Estoppel in Australia and the United States’ 11 Kings College Law Journal 202
Robertson, A. 1996. ‘Satisfying the Minimum Equity: Equitable Estoppel Remedies after Verwayen’ 20 Melbourne University Law Review 805
Spence, M. 1999. Protecting Reliance: The Emergent Doctrine of Equitable Estoppel Hart Publishing
Bank Negara Indonesia v Hoalim (1973) 3 PCC 27
Central London Property Trust Limited v High Trees House Limited [1947] KB 130
Commonwealth v Verwayen (1990) 170 CLR 394
Legione v Hateley (1983) 152 CLR 406
Saleh v Romanous [2010] NSWSC 274
Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466
Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387
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