GOLLIN & COMPANY LIMITEDv. (Plaintiff) Appellant ...

IN THE SUPREME COURT OF QUEENSLAND No. 40 of 1979

FULL COURT

GOLLIN & COMPANY LIMITED (Plaintiff) Appellant

v.

CONSOLIDATED FERTILIZER SALES PTY. LTD.

(Defendant) Respondent

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D.M. CAMPBELL J.

W.B. CAMPBELL J.

ANDREWS J.

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Reasons for Judgment delivered by D.M. Campbell J. 29th February 1980 upholding appeal.

Reasons for Judgment delivered by W.B. Campbell J. with Andrews J. concurring dismissing appeal.

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“APPEAL DISMISSED WITH COSTS”

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BETWEEN:

COLLIN & COMPANY LIMITED (Plaintiff) Appellant

- and -



JUDGMENT - D.M. CAMPBELL J.

In this action an assignee of a lease claimed that the purchaser of the reversion was bound by variations of the lease made by their predecessors in title, and pleaded both estoppel and waiver in answer to a counterclaim. The land was under the Real Property Acts, 1961-1978.

By registered lease No. E 435695 dated November 9, 1972, the original lessee leased from the registered proprietor an area of 1.52 hectares at South Fine Road, Strathpine, shortly described as part of Lot 2 on registered plan 115488 together with the improvements including the plant of a sawmill erected on the land. The lease was for a term of 10 years at a calendar monthly rental of $1,835 for the first year and thereafter at a calendar monthly rental of $2,750 with two several options for extension each of 5 years.

In cl. 1 of the lease the lessee covenanted (inter alia) - not to make any alterations to the demised premises without the consent of the lessor; to maintain the premises and plant in good and tenantable repair; to carry out normal maintenance on the plant; to permit the lessor entry at all reasonable times; to keep the drains, spouting and water pipes clean; and to insure the building and plant for full replacement value. The clause had a proviso placing the primary obligation on the lessor to effect any structural repairs or alterations required by law to enable the lessee to continue to operate the demised premises as a sawmill for the milling of the timber referred to in the lease.

In cl. 2(c) the lessor covenanted as follows:

“To permit the Lessee and its servants and agents to make reasonable use of the Lessor's telephone on the premises of the Lessor adjoining the demised premises free of charge for the purposes of the Lessee's business.”

This was followed by a covenant by the lessor permitting the lessee under certain conditions to remove any fixtures and fittings installed by the lessee during the tenancy with the consent of the lessor.

A covenant was also contained in the lease - it is cl. 5 - relating to the supply by the lessor of a minimum of 2,000,000 super feet of hoop pine per annum and the purchase of that minimum quantity by the lessee.

The above-mentioned covenants were all deleted from the lease by a deed of variation signed by the original lessor and lessee on November 27, 1974, reducing the rent payable from $2,750 per calendar month to $452 per calendar month. The deed was made following an agreement between the parties under which the lessee agreed to purchase from the lessor the plant as well as the right to remove from the land all fixed improvements at any time up to six months from the expiration of the term for the sum of $80,000. The sum was made payable on or before November 1, 1974 -

“in exchange for these presents duly executed by the lessor and in exchange for the lessor relinquishing all its right title and interest to and in respect of the plant and fixed improvements.”

A new clause was substituted by the deed for cl. 2(c) of the registered lease reading:

“(c) To permit the lessee and its servants, agents, invitees and licensees to have access to and make reasonable use of the toilets and sanitary facilities situated in the premises of the Lessor adjoining the demised premises free of charge.”

The respective estates or interests of the parties to the present action in the land arose in the following ways. On July 11, 1975, the lessee assigned its interest in the demised premises to the appellant which is its parent company. The transfer of the lease No. E 435695 was duly registered. On June 6, 1977, the lessor sold to the respondent the land described as Lot 2 on plan 153544

containing 4.522 hectare for $500,000. The sale was expressed to be-

“Subject to a lease in favour of Timber Industries (Pine) Pty. Ltd. (the original lessee) for a term of 10 years from 1st December, 1972.”

Section 43 of the R.P. Act of 1861 provides that no instrument shall be effectual to pass any estate or interest in any lands until such instrument is registered.

When any land is intended to be leased for any term of years exceeding three years, the proprietor is required, by s. 52, to execute a lease in form E of the Schedule.

However, s. 11 of the R.P. Act of 1877 provides that the estate of a registered proprietor shall not be paramount over any tenancy for a term not exceeding three years. The object of the section is to protect short-term tenancies (Domb -v- Owler (1924) N.Z.L.R. 532, 536). A short-term lease is not defeated by a transfer of the reversion; it is of passing interest to notice that s. 42(d) was introduced as an exception in the R.P. Act of N.S.W. to overcome a contrary decision in Funro -v- Sharp (noted in (1941) 44 S.R. (N.S.W.) 203).

Finally, s. 51 of the Act of Mill enacts that equities may be enforced against proprietors in the some manner as they may be enforced against proprietors of Land not under the provisions of the Act provided that no unregistered estate or interest is to prevail against the title of any subsequent purchaser for valuable consideration duly registered.

In the course of his judgment the primary judge remarked that the deed of variation made on November 28, 1974, was not registered, and this was in fact so. But there is no express provision in the Real Property Acts for the registration of such a deed and the practice of the Titles Office, as I understand, is to have the parties surrender the lease and execute another lease. It possibly

points to a defect in the system of registration in cases where the variation is not substantial. Non-registration was the hurdle the appellant had to get over and in the attempt reliance was pieced on the conduct of the parties after the sale of the land. Mr. Fitzgerald for the appellant accepted that actual or constructive notice of the variation would not alone avail his client in the absence of fraud on the part of the respondent - and fraud was not alleged.

The memorandum of transfer of Lot 2 to the respondent was registered on July 11, 1977. Rent was not demanded at the higher rate until 12 months later. In a letter to the appellant on July 13, 1978, the solicitors for the respondent wrote stating that rental payments had not been made in accordance with the terms of the lease, and demanding that arrears of rent amounting to $27,495 be paid within 30 days and requiring that future rental payments of $2,750 be made each month. On February, 2, 1979, the respondent served a notice on the appellant under s. 124(1) of the Property Law Act 1974 as a preliminary step to exercising a right of re-entry or forfeiture. The notice required the appellant to remedy a breach of the lease by paying current arrears of rent of $43,662.

In substance the appellant's case is that upon the transfer of the land to the respondent both the appellant and the respondent adopted and acted upon the lease as varied by the deed of variation. Its amended claim was for -

“1. a declaration that the calendar monthly rental payable by the plaintiff to the defendant in respect of the land the subject of the lease .... is the sum of $452.00;

2. an injunction to restrain the defendant from purporting to re-enter or forfeit the said lease;

3. an order that the defendant join with the respondent in executing a lease in registrable form between the

defendant as lessor and the plaintiff as lessee in terms of the lease as varied by the deed to be prepared, stamped and registered at the plaintiff's expense.”

In substance the respondent's case is that once the respondent became registered as proprietor of the land the appellant's rights under the deed of variation ceased as against the proprietor. Reference was made to s. 117(1) of the Law of Property Act to underline that the rent reserved by the lease went with the reversionary estate.

The respondent counter-claimed for (a) declaration that the calendar monthly rental was $2,750; (b) recovery of possession of the land subject to registered lease No. E 435695; (c) $59,740 in respect of unpaid rent to date; (d) interest; and (e) an order that a caveat (placed on the land by the appellant) be removed.

The trial judge held that the rights and obligations of the parties were governed by the registered lease. He ordered that the plaintiff be relieved against forfeiture on payment of the rent underpaid since July 1977, taking the view that-

“this whole situation was contributed to in a large measure by the failure of the defendant for a long period to assert its rights even when, as it would appear, it had had the clearest advice as to what those rights were.”

He awarded interest at 4 per centum per annum on the sum of $59,748 from July 31, 1978 to September 7, 1979.

It is of first importance to decide what type of tenancy the appellant held under from the time of the sale. Following the signing of the deed of variation the appellant continued in possession under an agreement for a lease, and the appellant could have called on the proprietor to execute a new lease in registrable form: Parker -v- Taswell (1858) 2 DeG & J 559; 44 E.R. 1106; Walsh -v- Lonsdale (1882) 21 Ch. 9; Levis -v- McConachie

(1915) 15 S.K. (N.S.W.) 510 at p. 515; Wellington City Corporation -v- Public Trustee (1921) N.Z.L.R. 1086, 1099-1102; The National Trustees Executors and Agency Co. Ltd. -v- Boyd (1926) 39 C.L.R. 73, 81-82; York House Pty. Ltd. -v- Federal Commissioner of Taxation (1930) 43 C.L.R. 427, 435-436; Ahern -v- L.A. Wilkinson (Northern) Ltd. (1929) St. R. Qd. 65, 84-85; and generally on unregistered leases exceeding three years, see the article by Professor N.M.L. Harrison in 25 Law Institute Journal 157. The law in New South Wales is stated succinctly in Lang on Leases and Tenancies in N.S.W. (at p. 75):

“Where a lease is not in proper form it may in equity constitute an agreement for lease entitling the holder to an order for the specific performance of the agreement to compel the lessor or lessee to execute a lease in proper form effective at law. Until that order, the Court may adjust the rights of the parties, as if a valid lease has existed, on the basis of the doctrine in. Walsh -v- Lonsdale but at law the tenancy is “only a tenancy at will, or some other tenancy implied from the payment of rent, until the lease has been executed in proper form, end where required registered (Carberry -v- Gardiner (1936) 36 S.R. (N.S.W.) 559 at p. 569; Australian Provincial Assurance Co. Ltd. -v- Rogers (1943) 43 S.R. (N.S.W.) 202.”

It was held by this Court in Hughes -v- Graham (1902) Q.W.N. 79 that where a person has been let into possession under an agreement for a lease for a term, and has paid part of an annual rent, a yearly tenancy will be implied. See also Dockrill -v- Cavanagh (1945) 45 S.R. (N.S.W.) 45 and Turner -v- York Motors Pty. Ltd. (1951) 85 C.L.R. 59. However, in New South Wales s. 127 of the Conveyancing Act 1919 reduces the term of a tenancy from year to year implied at common law, to a tenancy determinable at the will of either party by one month's notice in writing expiring at any time. Barwick C.J. expressed the view in Coumbis -v- Metropolitan Trade Finance Co. Pty. Limited (1974) 131 C.L.R. 396 at p. 398 that such a tenancy is not a tenancy at will as at common law, but is a periodic tenancy from month to month capable of supporting a sub-

lease for a term of three years. As I see the position here, the appellant remained in possession of the land after the sale as a yearly tenant subject to all the covenants of the lease as varied by the deed which ore not inconsistent with such a tenancy: Marshall -v- Coupon Furniture Co. Ltd. (1916) St. R. Qd. 8; Edwards -v- Horriran (1923) St. R. Qd. 8; Herrmann -v- Mackenzie (1965) Qd. R. 235; but cf. Joserhson -v- Mason (1912) 12 S.R. (N.S.W.) 249 where it was held, on the evidence, that the lessee remained on under an unregistered lease as a tenant at will, and see Felser -v- Walker (1953) 53 S.R. (N.S.W.) 493, 495 and Elrington -v- Judd (1964-5) N.S.W.R. 493, 495. In Moore -v- Diamond (1929) 43 C.L.R. 105 it was recognised that, where a person retained possession of land on the termination of a lease for a term, the leaning was in favour of construing the tenancy as a yearly tenancy. It is not material, to my mind, that the respondent did not sight the deed of variation before the sale. The material fact is that the respondent was aware of its existence - indeed their solicitors obtained definite instructions to settle without having received a copy of the deed. I regard that fact coupled with the payment and acceptance of rent over a lengthy period as establishing a periodic tenancy. I am unable to agree therefore that the relationship between the parties was governed by the registered lease and in particular that the rent reverted to $2,750 per calendar month on the respondent becoming registered as proprietor.

This was not, of course, the position taken up by the appellant either in this Court or in the Court below but, neverthelers, the exact relationship in which the parties stand, as between landlord and tenant, falls to be determined on the counterclaim. It was declared on the counterclaim that the parties are not bound by the deed of variation bearing date November 25, 1975, and it was adjudged that the respondent recover from the appellant the sum of $59,748 being the amount of arrears of rental under the lease dated November 9, 1972, and incidental orders were made including an order for the payment of interest amounting to $2,638.73.

In para. 3(e) of the amended reply and answer the appellant gave particulars of the conduct of the respondent which it relied on to raise an estoppel precluding the respondent denying that it “took” the land subject to the lease varied as provided by the deed. And in para. 3(f) the appellant gave particulars of the detriment it had suffered to support an alternative claim that the appellant had waived its entitlement to rental of more than $452 per calendar month. However, as Mr. Jackson pointed out, no evidence was led in respect of some matters and the principal matters relied on were the invoicing for rent and the payment of rent at the reduced rate, the use of the toilet and sanitary facilities free of charge and the omission to use the telephone, and the carrying out of structural work in raising blow pipes and replacing the log deck. I have had the advantage of reading in draft the judgment of my brother W.B. Campbell and, while disagreeing with the conclusion he came to, I agree in general with what he has written on this, aspect of the case. I would refer however to what Hoare J. said in Permanent Finance Corporation Ltd. -v- Flavell (1963) Qd. R. 84 at p. 99:

“It seems to me that one should not try to make undue play on the term ‘tenancy by estoppel’ ... A much more direct approach is to ask whether the parties ... have agreed that there be a tenancy between them on certain terms. If the relationship of the parties and the state of actual ownership of the land be such that a “tenancy in the full sense of the term in not created, then unless there is some over-riding reason to the contrary, the law will, inter partes, recognize the tenancy on the terms agreed upon by the parties. For convenience such a tenancy has been called a tenancy by estoppel, to distinguish it from the actual tenancy which would operate if an actual interest could pass.”

There is one other matter I feel I should mention. It concerns cl. 5 of the lease relating to the supply of a minimum quantity of hoop pine annually. If the lease were restored to full life and vigour, the clause would impose an unusual obliration on the respondent which is concerned with the sales of agricultural chemicals. The clause was

not referred to and there my be an explanation of this, but it has struck me that if the clause is being ignored it may point more strongly than some of the matters pleaded to the parties having adopted and acted upon the lease as varied by the deed of variation.

The result is that I think that the learned trial judge was wrong in holding that the parties must look back to the registered lease. In my opinion, the appellant was not in arrears with the rent and there is no question of granting relief against forfeiture. The yearly tenancy has not been determined. To resolve any uncertainty I would declare that the calendar monthly rental payable by the appellant in respect of the land the subject of registered lease No. E 435695 is the sum of $452. The appeal consequently should be upheld.


BETWEEN:

GOLLIN & COMPANY LIMITED (Plaintiff) Appellant

-and-



JUDGMENT - W.B. CAMPBELL J.

The basic facts of this case are set out as follows in the opening paragraphs of the reasons for judgment of the learned trial Judge:

“ On 9th November, 1972 Australian Match Manufacturing Co. Pty. Ltd. (AMM) granted to Timber Industries (Pine) Pty. Ltd. (TIP) a registered lease of 1.521 hectares of land at Strathpine for a term of ten years and at a rental which, from 1st December, 1972 was $2,750 per calendar month. On 28th November, 1974 AMM and TIP executed a Deed of Variation the substantial effect of which was to give to TIP the right to remove the improvements on the expiration of the lease, a right for

which TIP paid $80,000 as a consequence of which the parties agreed to reduce the rent to $452 per calendar month. TIP was a wholly owned subsidiary of the plaintiff. By a Memorandum of Transfer of 11th July, 1975 which was registered on 23rd April, 1976 TIP transferred to the plaintiff its interest in the registered lease. The Deed of Variation was never registered.

Late in 1976 the defendant commenced, negotiations with AMM for the purchase of the latter's property at Strathpine, which was a total area of 4.5215 hectares and which included the area the subject of the registered lease to which I have already referred. A Contract of Sale for $500,000 was executed on 6th June, 1977 and the sale was completed on 6th July of that year. A Memorandum of Transfer of the freehold was lodged for registration on 6th July and duly registered on 11th July, 1977.”

The registered lease (cll. 8 and 9) also gave to the lessee two options for renewal each for a period of five years. By cl. 2(c) of the lease the lessor covenanted with the lessee to permit the lessee and its servants and agents to make reasonable use of the lessor's telephone on the premises of the lessor adjoining the demised premises free of charge for the purposes of the lessee's business; and cl. 2(d) gave to the lessee the right at any time prior to the termination of the tenancy to take down and remove any fixtures and fittings which may have been installed by the lessee with the consent of the lessor on the demised premises. By the unregistered deed of variation cl. 2(c) of the lease was deleted in its entirety and in its place the following clause was inserted: “to permit the lessee and its servants agents invitees and licensees to have access to and make reasonable use of the toilets and sanitary facilities situated in the premises of the lessor adjoining the demised premises free of charge.” The deed also deleted cl. 2(d) of the lease in its entirety. It also provided for the deletion from the lease of the lessee's covenants not to make structural alterations without the lessor's consent, to repair and maintain the premises and plant, to carry out proper and normal maintenance on the plant and to keep the drains clean. The deletion of these covenants was

consequential upon the deed providing that the lessee was the sole beneficial owner of the fixtures and plant.

From July 1977, when the respondent became the registered proprietor of the land, until July 1978 the appellant continued to pay a rental of $452 per calendar month, the respondent accepting such rental and invoicing the appellant monthly for such amount. However, by a letter dated 13 July, 1978 the respondent's solicitors demanded that the appellant pay the respondent $27,495.74 being arrears of rent for that period, and also demanded that all future rental payments be made in the sum of $2,750 per calendar month. On 5 January, 1979 the appellant commenced this action in which it claimed a declaration that the calendar monthly rental payable by it to the respondent is the sum of $452, an injunction to restrain the respondent from purporting to re-enter or forfeit the lease and an order that the respondent join with the appellant in executing a lease in registrable form in terms of the lease as varied by the unregistered deed. The respondent counter-claimed for a declaration that the calendar monthly rental pursuant to the registered lease is $2,750, an order for recovery of possession of the lands leased to the appellant, $59,748 for monies owing in respect of unpaid rentals under the lease, interest on those monies at 12 per centum per annum and an order for removal of a caveat over the land lodged by the appellant.

The trial Judge made a declaration that the parties are not bound by the terms of the deed of variation, and ordered that the respondent recover from the appellant the sum of $59,748 by way of arrears of rental under the lease, the caveat be removed, and the appellant be relieved from forfeiture on the condition that within twenty-one days of the date of the judgment it pays the sum of $59,748.

Although His Honour's findings of fact were not challenged by the appellant some of his conclusions or the inferences drawn from the facts were attacked. It is desirable to set out shortly some of the material findings.

His Honour found that during the negotiations which led to the execution of the contract of sale the respondent “was made aware of the existence of the lease and of the existence of a transaction between the vendor and the then occupant of the sawmill which involved a transfer of a substantial capital sum and a reduction in the rental”. His Honour pointed out that it was not really disputed in the proceedings before him (and it is not disputed by the appellant on this appeal) that, upon registration of the memorandum of transfer of the freehold on 11 July, 1977, the respondent took the land subject to the registered lease but not subject to the contractual variation contained in the deed, fraud not being alleged. His Honour referred to ss. 44 and 109 of the Real Property Act of 1861, s. 51 the Real Property Act of 1877 and to authorities in support of this proposition, namely, Friedmann v. Barrett (1962) Qd.R. 498; Mills v. Stokman (1967) 116 C.L.R. 61; Breskvar v. Wall (1971) 126 C.L.R. 376.

As pointed out by Mr. Fitzgerald for the appellant, the issues in this case are concerned with the doctrines of waiver and estoppel. Consequently, I will not refer specifically to the grounds of appeal. The issues may broadly be said to be two in number, namely, the wider issue whether the respondent is estopped from denying that the deed of variation is operative as between the appellant and the respondent and the narrower issue whether the respondent is estopped from claiming from the appellant the arrears of rental for the twelve months' period from July 1977 to July 1978. Counsel for the appellant based his argument in support of the wider issue squarely on the doctrine of “estoppel by acquiescence” or, as he sometimes called it “equitable estoppel” or “proprietary estoppel,” and that relating to the narrower issue on the doctrine of promissory estoppel.

In his reasons for judgment His Honour, said:

“The essential question in this action is whether events subsequent to the registration of the Memorandum of

Transfer to the defendant can in some fashion, be prayed in aid by the plaintiff in modification of the defendant's rights as the registered lessor to the plaintiff.”

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“The question is whether there is an equity in the plaintiff such as to deprive the defendant of its legal rights under the registered lease where that instrument is inconsistent with the deed of variation and to require it to submit to the operation of that deed by entering into a fresh lease and incorporating the provisions of the deed.”

Counsel conceded that in so stating the main issue for decision, the trial Judge was correct. His Honour came to the view that the respondent was not estopped from denying that the deed of variation operated as between the parties and that no relief founded on such an estoppel, such as an order for the execution of a fresh lease, should be given. When considering the narrower question of the rent paid by the plaintiff from 6 July 1977 until 13 July 1978, His Honour held that the continued invoicing of the appellant with the rent at the rate specified in the deed during that period should be regarded “as a promise to charge that rent and no more”. However, His Honour was of the view that, for the defence of promissory estoppel to succeed, some alteration in the promisee's position must be shown, and he was not persuaded that the appellant had altered its position in any relevant sense.

I will refer to but a few of the authorities where the doctrine of equitable estoppel has been considered. The classic statement of the principle of estoppel by acquiescence is that of Fry J. in Willmott v. Barber (1880) 15 Ch. D. 96, at pp. 105-106:

“ It has been said that the acquiescence which will deprive a man of his legal rights must amount to fraud, and in my view that is an abbreviated statement of a very true proposition. A man is not to be deprived of his

legal rights unless he has acted in such a way as would make it fraudulent for him to set up those rights. What, then, are the elements or requisites necessary to constitute fraud of that description? In the first place the plaintiff must have made a mistake as to his legal rights. Secondly, the plaintiff must have expended some money or must have done some act (not necessarily upon the defendant's land) on the faith of his mistaken belief. Thirdly, the defendant, the possessor of the legal right, must know of the existence of his own right which is inconsistent with the right claimed by the plaintiff. If he does not know of it he is in the same position as the plaintiff, and the doctrine of acquiescence is founded upon conduct with a knowledge of your legal rights. Fourthly, the defendant, the possessor of the legal right, must know of the plaintiff's mistaken belief of his rights. If he does not, there is nothing which calls upon him to assert his own rights. Lastly, the defendant, the possessor of the legal right, must have encouraged the plaintiff in his expenditure of money or in the other acts which he has done, either directly or by abstaining from asserting his legal right. Where all these elements exist, there is fraud of such a nature as will entitle the Court to restrain the possessor of the legal right from exercising it, but, in my judgment, nothing short of this will do.”

In Crabb v. Aran District Council (1976) 1 Ch. 179 (C.A.), Lord Denning H.R. discussed many of the cases and pointed out that the basis of proprietary estoppel is the interposition of equity. In that case it was clear that, as a result of the conduct of the defendants, the plaintiff had acted to his detriment, and this was held by the court to raise an equity in his favour against them. His Lordship said, at p. 188:

“Short of an actual promise, if he, by his words or conduct, so behaves as to lead another to believe that he will not insist on his strict legal rights—knowing or intending that the other will act on that belief—and he does so act, that again will raise an equity in favour of the other; and it is for a court of equity to say in what way the equity may be satisfied. The cases show that this equity does not depend on agreement but on words or conduct. In Ramsden v. Dyson (1866) L.R. 1 H.L. 129, 170 Lord Kingsdown spoke of a verbal agreement ‘or what

amounts to the same thing, an expectation, created or encouraged.’ In Birmingham and District Land Co. v. London and North Western Railway Co. (1558) 40 Ch.D. 268, 277, Cotton L.J. said that ‘... what passed did not make a new agreement? but ... what took place.... raised an equity against him.’ And it was the Privy Council in Plimmer v. Wellington Corporation (1884) 9 App. Cas. 699, 713-714 who said that ‘... the court must look at the circumstances in each case to decide in what way the equity can be satisfied’ giving instances.”

Scarman L.J. also referred to Lord Kingsdale's speech in Ramsden v. Dyson saying that that case may properly be considered as the modern starting point of the law of equitable estoppel and that it was analysed and spelt out in the judgment of Fry J. in Willmott v. Barber. His Lordship said at p. 195:

“The court therefore cannot find an equity established unless it is prepared to go as far to say that it would be unconsciounable and unjust to allow the defendants to set up their undoubted rights against the claim being made by the plaintiff.”

The passage from the judgment of Fry J. was referred to by Buckley J. in Shaw v. Applegate (1977) 1 W.L.R. 970. His Lordship said, at p. 978:

“So I do not, as at present advised, think it is clear that it is essential to find all the five tests set out by Fry J. literally applicable and satisfied in any particular case. The real test, “I think, must be whether upon the facts of the particular case the situation has become such that it would be dishonest; or unconscionable for the plaintiff, or the person having the right sought to be enforced, to continue to seek to enforce it.”

Goff L.J., when discussing Willmott v. Barber, also said at p. 980: “... I agree that the test is whether, in the circumstances, it has become unconscionable for the plaintiff to rely upon his legal right.”

The question of what is “acquiescence” when applied to conduct was discussed by Thesiger L.J. in delivering the

judgment of the Court of Appeal in De Bussche v. Alt (1878) 8 Ch. D. 286, at p. 514 as follows:

“If a person having a right, and seeing another person about to commit, or in the course of committing an act infringing upon that right, stands by in such a manner as really to induce the person committing the act, and who might otherwise have abstained from it, to believe that he assents to its being commited afterwards he cannot be heard to complain of the act. This, as Lord Cottenham said in the case already cited, is the proper sense of the term “acquiescence”, and in that sense may be defined as quiescence under such circumstances as that assent may be reasonably inferred, and is no more then an instance of the law of estoppel by words or conduct.”

From what conduct of the respondent towards the appellant can it be said that it is estopped from denying that the deed of variation was in force between the parties or, as the trial Judge said, must it be taken “by implication to have promised the plaintiff to honour the terms of the deed of variation”? It must so borne in mind that there were no discussions or negotiations between representatives of the respondent and of the appellant prior to the respondent becoming the registered proprietor of the land. At that time the respondent had knowledge of the existence of a lease between its predecessor in title and the appellant, but not of the terms of the lease as the document at that time had not been seen by the respondent. The contract of sale (ex. 23) merely stated that it was “subject to a lease in favour of Timber Industries (Pine) Pty. Ltd. for a term of ten years from 1st December 1972.” The respondent was also aware that there had been a transaction between the previous lessor and the appellant which purported to reduce substantially the amount of the rental - but it did not know of the terms of the transaction - and received information that “under the terms of the lease the lessee is entitled to remove the improvements at the termination of the tenancy” (see the valuation obtained by the respondent, dated 5 April 1977 - ex. 4). His Honour made the following findings:

“I accept the evidence of the defendant's witnesses that its main concern was to acquire land, appropriately zoned, on which to carry on its own activities. It was quite content to settle the purchase without sighting either the registered lease which could easily have been searched or the deed of variation. It proposed to examine the documents and the legal implications of the leasehold situation at its leisure and take whatever action seemed in its best interest including, if that were open, a renegotiation of the lease in order to obtain a more economic rent. I do not accept the view that it acted with any intention of over-reaching the plaintiff and there was nothing discreditable in the attitude which it adopted.”

In my opinion those findings of his Honour were reasonably open to him on the evidence.

The conduct of the respondent, after it became the registered proprietor, which induced or encouraged the appellant to believe that the deed of variation continued to govern the relationship between the parties, was said to have occurred in one or all of the following ways: (i) the use of the toilet facilities in lieu of the telephone; (ii) the carrying out by the appellant of works in relation to the sawmill; and (iii) the invoicing for rent and the payment of rent at the lower rate.

In relation to (i) the trial Judge said:

“Again, the plaintiff relies upon the fact that the registered lease contains a covenant by the lessor to permit reasonable use of its telephone (cl. 2(c)). Clause 2(c) was deleted by the deed of variation and in substitution therefore the lessor covenanted to permit access to its toilet. The plaintiff “relies on the fact that it did not use the defendant's telephone and that it did use its toilet. The fact however is that the plaintiff had installed its own telephone before the defendant purchased from AMM and that the toilet on AMM's premises being the only one at the site, had always been used by all those at the AMM site including employees on the leasehold.”

In my opinion the evidence supports those findings of fact. There was no evidence to show that the appellant's non-use of the respondent's telephone resulted from any reliance on the provisions in that regard made by the deed of variation. The evidence also shows that the toilet block had always been used, by the appellant's employees and visitors both before and after the execution of the deed of variation and continued to be so used after the respondent had become the registered proprietor of the land. Consequently, it cannot be said that the appellant had, in this regard, acted or altered its position on the faith of any representation, by acquiescence or otherwise, that the deed of variation continued to remain in operation after the respondent had become the registered proprietor and the lessor of the appellant.

In relation to the appellant's carrying out of works on the sawmill, I refer to following passages of the learned trial Judge's reasons for judgment:

“Clause 1(c) of the lease contained a covenant not to make alterations or additions without the consent of the lessor. This clause was deleted by the deed of variation and the plaintiff points to alterations and additions which it made without consent after the defendant had purchased the freehold as an indication that the parties acted as if the deed of variation were operative. I am however far from satisfied that the defendant was aware that the work in question was being done and in any case cl. 1(d) of the registered lease contained a covenant to keep in good and tenantable repair and cl. 1(e) a covenant to carry out proper normal maintenance on plant. Both of these covenants were deleted by the deed of variation. If the work in question clearly went beyond repair and maintenance, its performance would be explicable only on the footing that the deed of variation had operated to delete the negative covenant in cl. 1(c). On the whole of the evidence, however, I am not satisfied that this is so. The conclusion to which I have come is that the expenditure in question was for the purpose of keeping the existing plant in operation and “that it cannot be regarded as effecting a significant alteration or addition to that plant”

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“For reasons I have already given, I cannot persuade myself that the plaintiff in truth laid out money in alterations and additions to the fixed improvements in reliance upon the representation of the defendant that the deed continued in operation or upon its implied promise to honour the obligations of the deed.”

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“Here the money was laid out by a tenant in possession who was on any view entitled, subject to the due exercise of the options for renewal contained in the registered lease, to remain in possession of the land and its improvements until 1st December, 1992. It was expenditure of which it may expect to have the benefit for the duration of that period. It is in high contrast with cases in which the expenditure would be wholly lost without the intervention of equity. I have earlier referred to the somewhat narrow question whether the work done by the plaintiff was done in the exercise of the tenant's obligations to repair and the like or whether it amounted to alterations and additions. For present purposes that distinction is in my judgment irrelevant. The monies were laid out for the long term benefit of the plaintiff itself.”

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“Even if the expenditure which the plaintiff has laid out is upon improvements which, because the deed does not operate, are not its property, they are still improvements which it will enjoy for many years and I cannot persuade myself that it would be unconscionable or unjust to allow the defendant to set up its undoubted rights at law from 13th July, 1978.”

In my opinion it was open to His Honour on the evidence to make these findings of fact in relation to the performance of the works. I am unable to find any evidence to the effect that any of the works carried out by the appellant on the sawmill were done in reliance on the provisions of the deed of variation and it appears, from the evidence, that the respondent was at no time consulted about these works. The value of the works carried out was

of a relatively minor amount. Mr. Phillipson who was the appellant's Queensland manager from August 1976 to August 1978, said that there was no communication to the respondent about the carrying out of these works. Moreover, His Honour found that the respondent did not know of the expenditure - a finding not challenged. Consequently, the finding that moneys were not expended by the appellant on the faith of its belief in the continued operation of the deed of variation must stand.

The invoicing and accepting payment of the rental at the rate specified in the deed should be looked at in the light of the respondent's limited knowledge of its legal rights at all material times. In his reasons for judgment His Honour said that he was unable to regard any aspect of the relationship between the appellant and its landlord (the respondent) as necessarily referable to the continued operation of the deed “save the amount of rent which was paid.” By the date of the first invoice (25 August 1977) in His Honour's words “the defendant's officers were well aware of the likelihood that the defendant was not in truth bound by the deed of variation.” The respondent first saw the lease and the deed in the latter part of July 1977, it obtained advice as to the effect of the deed from its solicitors in September 1977 which was to the effect that it should seek advice from senior counsel, and an opinion from counsel was obtained in April 1978. No steps were taken until July 1978 to inform the appellant that the rental was not covered by such deed (see the letter dated 13 July 1978 - ex. 17). A significant fact is that the existence or the terms of the deed of variation were not at any material time the subject of discussions between the parties.

Does this conduct amount to a “representation” by way of acquiescence on the part of the respondent that the deed of variation governed the legal relationship between the parties? I think not. In invoicing the appellant for rent at the lower rate (and in accepting it without demur) the respondent could not reasonably be said to have induced or

encouraged the appellant to believe that it (the respondent) was treating the deed as being in force between the parties. In Low v. Bouverie (1891) 3 Ch. 82, Bowen L.J. said, at p. 106:

“Now, an estoppel, that is to say, the language upon which the estoppel is founded, must be precise and unambiguous. That does not necessarily mean that the language must be such that it cannot possibly be open to different constructions, but that it must be such as will be reasonably understood in a particular sense by the person to whom “it is addressed.”

That passage from the judgment of Bowen L.J. was discussed by Lord Hailsham L.C., Lord Gross and Lord Salmon in Woodhouse Ltd. v. Nigerian Produce Ltd. (1972) A.C. 741. In that case those three law lords approved the proposition that the language upon which an estoppel id founded must be precise and unambiguous. I have mentioned the passage in the judgment of Bowen L.J., although it is concerned with estoppel by representation, because it seems to me that a representation by way of conduct upon which to found an estoppel must be equally clear and unambiguous. In Kammins Co. v. Zennith Investments (1971) A.C. 850, Lord Diplock said at p. 884:

“The essential elements of quasi-estoppel by acquiescence are stated in Willmott v. Barber, 15 Ch. D. 96, As respects the party relying on the acquiescence he must be mistaken as to his legal rights and must have done some act on the faith of his mistaken belief. .... One of the essential elements as respects the quasi-estoppel by acquiescence is that he must have encouraged the other party to act as he did; and this encouragement maybe active, as in the instant case by agreeing to the proposed postponed date, or passive by refraining from asserting his own inconsistent legal right. But in contrast to estoppel in the strict sense of the term the party estopped by acquiescence must, at the time of his active or passive encouragement, know of the existence of his legal right and of the others party's mistaken belief in his own inconsistent legal right. It is not enough that he should know of the facts which give rise to his

legal right. He must also know that he is entitled to the legal right to which those facts give rise.”

The evidence accepted by the trial Judge does not in my opinion, establish that the respondent, at any material time, had such knowledge of its legal rights under the lease documents as to warrant a finding or conclusion that its invoicing of rental, at the same rate as it knew the appellant had been paying to the previous landlord, amounted to the respondent's standing by and allowing the appellant to do an act which infringed the respondent's legal rights under those documents. I have already referred to His Honour's finding that the respondent proposed to examine the documents at its leisure and then to take appropriate action. I cannot accept that the respondent's conduct in relation to the rental by itself could work so wide an estoppel as is claimed. His Honour expressed the view, correctly in my opinion, that Tor the establishment of an equity in the appellant which would deprive the respondent of its legal rights under the lease the court must hold that it would be “unconscionable and unjust” to allow those legal rights to be set up against the appellant's claim. He also held that, because of the conduct of the respondent, the appellant did not do anything to its detriment or did not alter its position in such a way as to prevent it from resuming its earlier position. However, the appellant's counsel contended that His Honour was wrong in considering that it was necessary to hold that the appellant should have altered its position to its detriment before he could give effect to the appellant's equity.

In my opinion, a necessary element in the doctrine of estoppel, be it estoppel based on representation or on acquiescence or standing by, is that the person setting up the estoppel must have altered his position to the degree that it could be said to have invoked a change in his practical or business affairs or condition: see Spencer Bower and Turner: Estoppel by Representation 3rd ed., p. 104. In Grundt v. The Great Boulder Proprietary Gold Mines

Limited (1937) 59 C.L.R. 41 Dixon J. (as he then was) said, at p. 674:

“One condition appears always to be indispensable. That other must have so acted or abstained from acting, upon the footing of the state of affairs assumed that he would suffer a detriment if the opposite party were afterwards allowed to set up rights against him inconsistent with the assumption.”

I will go in more detail into what I think is meant by the concept of “alteration of position” when I come to the doctrine of promissory estoppel. But here I refer again to the point that the evidence shows that the respondent did not know until April 1978 that it was entitled to the legal rights which it now claims, when it obtained counsel's opinion. But even assuming that in April it knew of its legal rights - as distinct from holding the view that there was a likelihood that it was not bound by the deed - it does not seem to me that the respondent by invoicing for a lower rent after April until July 1978 did anything to encourage the appellant to alter its position in any way. The appellant, simply continued to pay rent at the lower rate as it had been doing prior to April 1978. If it be taken that the appellant made a mistake as to its legal righto vis-a-vis the respondent in that it considered that the deed of variation continued to apply to its situation as lessee, the appellant did not expend any money or alter its position to its detriment or prejudice on the faith of that mistaken belief, other than such alteration of position as may be said to hove occurred by the mere continuation of payment of rental at the same rate. In my opinion the more payment of the lower rental in this case has not boon shown to be an alteration of the appellant's position, and so I am unable to see that any conduct on the part of the respondent has rendered it inequitable for it to insist on its legal rights as the registered proprietor of the land.

Before leaving this aspect of the case I mention that the evidence does not support Mr. Fitzgerald's submission

that the respondent, in its negotiations with the vendor, obtained a lower purchase price for the land because of the disadvantage (then known to the respondent) arising from the fact that the rental payable under the lease had been reduced by a subsequent variation. The evidence is to the effect that the respondent made to the vendor only the one offer of $500,000 which the latter accepted.

I turn now to the narrower issue, that based on the doctrine of promissory estoppel. I have already referred to the view taken by the trial judge that the continued invoicing of the appellant should be regarded as a promise to charge the lessor rent and no more, and to his opinion that the appellant was obliged and failed, to show “in a relevant sense” an alteration of its position. A full discussion of this principle appears in Spencer Bower and Turner: Estoppel by Representation, 3rd ed., at p. 366-401, where the authors analyse many of the leading authorities. Mr. Fitzgerald submitted that, for the application of the doctrine, there is no need for the promisee to have acted on the promise to his detriment. He argued that, if there is any requirement of “alteration of position” by the promisee, it moans no more than that the promisee acted upon the promise. He referred to a number of recent decisions since that of Denning J. (as he then was) in Central London Property Trust Ltd. v. High Trees House Limited (1947) 1 K.B. 130.

Mr. Jackson, for the respondent, submitted that the defence (or shield) of promissory estoppel had not been established for four reasons: first, it was not shown that the invoicing for the lower rent was intended to affect the legal relations between the parties; second, it was not shown that the appellant acted on the invoicing in that belief; third, the appellant did not in any relevant sense alter its position; and fourth, it is not inequitable to require the appellant to resume its position.

In the particular circumstances of this case I have some doubts as to whether the respondent's conduct in

invoicing at the lower rental was an act of such a nature as to establish an intention on its part to affect the legal relations between it and the appellant. Further, in the peculiar facts of the case, I find it difficult to accept that the respondent could be said not to have kept good faith with the appellant. However, I do not propose to enter into a detailed discussion of all the elements of promissory estoppel because I consider that the learned trial Judge was correct in holding that some alteration in the promisee's position must be shown, and that it was not shown that the respondent altered its position as a result of the promise. His Honour referred to the speech of Lord Cairns L.C. in Hughes v. Metropolitan Railway Company (1877) 2 App. Cas. 439 at p. 448 (an authority which Denning J. relied upon, together with Birmingham and District Land Co. v. London and North Western Railway Co. (1888) 40 Ch. D. 268, in support of his statements of principle in the High Trees case), and said:

“The gist of the equity lies in the fact that one party has by his conduct led the other to alter his position: Tool Metal Manufacturing Co. Ltd. (1955) 1 W.L.R. 761 at p. 764 per Viscount Simonds.”

The requirement that there must be an alteration of position by way of some kind of action or conduct in reliance on a promise is supported by the decisions of the High Court: Barns v. Queensland National Bank Ltd. (1906) 3 C.L.R. 925; The Equitable Life Assurance of the United States v. Bogie (1906) 3 C.L.R. 878; Mulcahy v. Hoyne (1925) 36 C.L.R. 31; and by the decisions of the Court of Appeal in New Zealand - see Inland Revenue Commission v. Morris (1958) N.Z.L.R. 1126.

I will mention some of the authorities which Mr. Fitzgerald contended were in support of his arguments as to the meaning of “alteration of position”. In Ajayi v. R.T. Briscoe (Nig) Ltd. (1964) 1 W.L.R. 1326, Lord Hodson, in delivering the judgment of the Privy Council, referred to the equity arising as a result of the principle as being subject to a qualification that the promisee has altered

his position. There the plaintiffs, in a letter of July 22, 1957, told the defendant, who was having trouble with some motor lorries acquired under hire purchase agreements from the plaintiffs, that they were agreeable to the defendant withholding instalments due on them as long as they are withdrawn from active service. The defendant had laid up the lorries and contended that the plaintiffs could not enforce payment pending the return of the lorries to service, relying on the shield of promissory estoppel. It was contended on behalf of the defendant that he had acted on the promise by not putting forward certain counter-proposals after the promise had been made, that after the promise he laid up the lorries with the result that they were out of service and earned no revenue, and also that he organised his business on the basis that the lorries would be put in repair and he would not have to make the payments due on them until they were back in service and accordingly earning revenue. Lord Hodson said, at p. 1331:

“The defendant did not alter his position by not putting forward counter-proposals after receipt of the letter of July 22, 1957. There is no evidence to support the contention that he did so by organising his business in a different way having regard to the fact that the lorries were out of service, and it cannot be inferred from the evidence given that such re-organisation was necessary. It can be said that the lorries were laid up and there is evidence to support the view that they were laid up after the receipt of the letter of July 22, 1957. Nevertheless, in view of the evidence given by the plaintiffs' witness, not rejected by the trial judge (although contradicted by the defendant), it cannot be said “to have been proved that the lorries were not made available to the defendant after they had been repaired.”

Their Lordships hold, therefore, that the defendant had failed to establish any defence to the plaintiffs' claim. It is implicit in that decision that their Lordships were of the opinion that an alteration of position meant something more than merely acting on the promise.

Other authorities referred to by Mr. Fitzgerald were D. & C. Builders Ltd. v. Rees (1966) 2 Q.B. 617; W.J. Alan

& Co. Ltd. v. El Nasr Export and Import Co. (1977) 2 Q.B. 189; Brikom Investments Ltd. v. Carr (1979) 1 Q.B. 467. It is clear from these cases that Lord Denning has clearly stated that alteration of position to the detriment of the promisee is not an essential ingredient of promissory estoppel. When considering the proposition that the promisee must have been led to act differently from what he would otherwise have done, His Lordship said in Brikom Investments Ltd., at pp. 482-483:

“This argument gives, I think, too limited a scope to the principle. The principle extends to all cases where one party makes a promise or representation, intending that it should be binding, intending that the other should rely on it, and on which that other does in fact rely - by acting on it, by altering his position on the faith of it, by going ahead with the transaction then under discussion, or by any other way of reliance. ... Once it is shown that a representation was calculated to influence the judgment of a reasonable man, the presumption is that he was so influenced.”

I am unable to find in the authorities any other judicial support for Lord Denning's view as to what is meant by “alteration of position”.

The authors of Spencer Bower and Turner: Estoppel by Representation, (3rd ed.) appear to me to have reached the right conclusion in saying, at p. 394:

“It is here submitted that in promissory estoppel, detriment in Dixon J.'s sense, (Grundt v. The Great Boulder Pty. Gold Mines Ltd. (1938) 59 C.L.R. 641, at pp. 674-675) will be found essential; for to go further must go perilously close to the enforcement of a simple gratuitous promise.”

Finally, I refer to Bank Negara Indonesia v. Philip Hoalim (1973) 2 M.L.J. 3, where Lord Wilberforce, delivering the judgment of the Privy Council, cited with approval the classic statements of the doctrine of promissory estoppel as set out in Hughes v. Metropolitan Railway Co. (1877) 2 App. Cas 439, at p. 448 and Birmingham

and district Land Co. v. London and North Western Railway Co. (1888) 40 Ch.D. 268, at p. 286. In the reasons for judgment of the Board, at p. 5, the following passage occurs:

“Their Lordships do not overlook the point that the rights, which the appellants had against the respondent, and whose enforcement is in question, were not strictly pre-existing rights, but rights coming into existence upon the change in the respondent's situation induced by the appellants' assurances, but in their Lordships' opinion the same equitable principle applies. The fact that the respondent, as a result of the assurances given, entered upon a legal situation which was less favourable than that which he previously enjoyed, supports, rather than negatives, the equity of protecting him in the new position which he reached. It is of course quite clear that it was not possible to resume the position which he held prior to the assurances.”

I think it is clear from the above passage that their Lordships considered that the shield of promissory estoppel could only be successfully used by a promisee who had, on the faith of the promise, altered his position in such a way that such new position was different from that prior to his acting upon the promise. In the present case there is no evidence or suggestion that the appellant stayed on as lessee in reliance on a promise that he would be charged the same rental as he had paid prior to the promise being given. Nor is there any evidence that the appellant, in reliance upon this promise, altered its financial position in any way. There is no suggestion made that the appellant had expended the monies made up of the difference between the two rental amounts in such a way as would render it inequitable for it to be required to pay what, if the respondent insisted on its strict legal rights, it was strictly required to pay. The evidence does not disclose how the appellant changed its business or practical situation as a result of being induced so to do by any promise or conduct on the part of the respondent. Consequently, I cannot see that it would cause injustice to the appellant if the respondent is permitted to resile from

any promise it may be said to have made in relation to the rental.

In Brikom Investments Ltd. the assurance that the landlords would, at their own expense, repair the roof was given during the course of negotiations for the lease, and the original tenants, relying on that assurance, signed the leases. Roskill L.J. (with whose reasons Cumming-Bruce L.J. agreed) held that the assurance amounted to a clear oral collateral contract between the parties. His Lordship went on to say that, if he was wrong about that, he thought (p. 488) “there was a plain waiver by the landlords of their right to claim the cost of these repairs from these tenants.” He referred to the speech of Lord Cairns L.C. in Hughes v. Metropolitan Railway Co. and said, at p. 489:

“... where parties have made a contract which provides one thing and where, by a subsequent cause of dealing, the parties have worked that contract out in such a way that one party leads the other to believe that the strict rights under that contract will not be adhered to, the courts will not allow that party who misled the other to think the strict rights will not be adhered to, suddenly to seek to enforce those strict rights against him.”

Cumming-Bruce L.J. said, at p. 490:

“If I am wrong in holding that she can rely upon the contract collateral to her lease, she then acted to her detriment in reliance upon the landlords' promise that they would not enforce a covenant in the lease, and equity will not allow them to enforce their legal right.”

In the light of the view I have taken that the appellant did not alter its position in reliance upon any conduct or promise made on the part of the respondent it is unnecessary to deal separately with the application to the present facts of the doctrine of waiver.

For the reasons which I have given I would dismiss the appeal.

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