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Compass Marinas Australia Pty Ltd v State of Queensland QCA 293
SUPREME COURT OF QUEENSLAND
Compass Marinas Australia Pty Ltd & Anor v State of Queensland  QCA 293
COMPASS MARINAS AUSTRALIA PTY LTD
ACN 127 274 882
PETER VICTOR FRANCIS HARBURG
STATE OF QUEENSLAND
Appeal No 594 of 2021
SC No 7884 of 2017
SC No 13008 of 2017
Court of Appeal
General Civil Appeal
Supreme Court at Brisbane –  QSC 375 (Dalton J)
23 December 2021
14 and 15 October 2021
Sofronoff P and Morrison and Bond JJA
ESTOPPEL – ESTOPPEL BY CONDUCT – ACT, OMISSION OR ASSUMPTION – REPRESENTATION GENERALLY – where the State claims in debt for unpaid rent and on a guarantee – where the appellants claim that the State is estopped from recovering rent in the amount claimed because of a false representation made by the State which induced them to enter into the deed of variation – where the primary judge held that the appellants’ common law estoppel claim failed because the representation was not sufficiently clear, the State was not estopped from asserting any element of its cause of action and the representation did not give rise to an expectation or assumption as to the legal relations between the parties – whether the evidence demonstrated detrimental reliance on the representation such that the State was estopped from contradicting the truth of that representation – whether estoppel should operate as a complete defence to the State’s claim
ESTOPPEL – ESTOPPEL BY CONDUCT – EQUITABLE ESTOPPEL GENERALLY – where the appellants argue that the evidence establishes a case that satisfies the elements of equitable estoppel – where the appellants could have had no assumption or expectation that the amount of rent was anything other than that which was stated in the leases – where the appellants argue on appeal that in equity, the State must be required to make good the representation in a way which has the pecuniary consequences for which they contend – whether there is jurisdiction in equity to award pecuniary compensation to a plaintiff for the falsity of an innocent misrepresentation relied on by the plaintiff to its detriment – whether this appeal provides the occasion to determine such questions of equitable doctrine not advanced at trial
LIMITATION OF ACTIONS – LIMITATION OF PARTICULAR ACTIONS – OTHER CASES AND MATTERS – where the primary judge found that Compass’ damages claim was statute-barred – where the same conclusion was reached in respect of Mr Harburg without separate consideration of his claim for loss or damage – where the appellants seek to appeal the primary judge’s decision on the grounds that the primary judge erred in not assessing Mr Harburg’s claim and in concluding that his counterclaim for damages and other relief under the Trade Practices Act 1974 (Cth) was statute-barred – where the State’s limitations defence applied to the counterclaim by both appellants – where Mr Harburg was the guarantor under the leases – where the State did not make a demand for payment of rental arrears until 23 October 2017 – whether Mr Harburg became liable on the guarantees only after such a demand was made by the State
Limitation of Actions Act 1974 (Qld), s 10
Trade Practices Act 1974 (Cth), s 82, s 87
Burrowes v Lock (1805) 10 Ves Jun 470;  EngR 89, considered
Cook’s Construction Pty Ltd v SFS 007.298.633 Pty Ltd (formerly trading as Stork Food Systems Australasia Pty Ltd) (2009) 254 ALR 661;  QCA 75, cited
Coulton v Holcombe (1986) 162 CLR 1;  HCA 33, cited
Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1;  HCA 26, cited
Delaforce v Simpson-Cook (2010) 78 NSWLR 483;  NSWCA 84, considered
Derry v Peek (1889) 14 App Cas 337;  UKHL 1, considered
Filmana Pty Ltd v Tynan  QCA 256, cited
George 218 Pty Ltd v Bank of Queensland Limited (No 2) (2016) 313 FLR 287;  WASCA 182, cited
Low v Bouverie  3 Ch 82;  UKLawRpCh 106, considered
McGlone v Kalgold Pty Ltd  QCA 215, cited
Mutual Life & Citizens’ Assurance Co Ltd v Evatt (1968) 122 CLR 556;  HCA 74, considered
Suttor v Gundowda Pty Ltd (1950) 81 CLR 418;  HCA 35, cited
Swick Nominees Pty Ltd v Leroi International Inc (No 2) (2015) 48 WAR 376;  WASCA 35, considered
Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387;  HCA 7, cited
Winter Star Pty Ltd v Dixon (1994) 55 IR 187, considered
G J Gibson QC, with D C Clarry, for the appellants
S Cooper QC, with C A Schneider, for the respondent
Carter Newell for the appellants
Corrs Chambers Westgarth for the respondent
- SOFRONOFF P: I agree with the reasons and orders proposed by Bond JA.
- MORRISON JA: I have read the reasons of Bond JA and agree with those reasons and the orders his Honour proposes.
- BOND JA:
- The primary judge conducted a trial of two proceedings in which she was required to adjudicate upon claims arising as between, on the one hand, the respondent (the State), and, on the other hand, the first appellant (Compass) and the second appellant (Mr Harburg).
- Compass was a developer and operator of marina facilities and Mr Harburg was its sole director, company secretary and shareholder. Compass and Mr Harburg entered into a suite of contractual arrangements with Port of Brisbane Corporation (POBC) which were ultimately, by legislation, transferred to the State. Pursuant to those arrangements, Compass leased certain property from the State with a view to undertaking a marina development at Scarborough Boat Harbour in South East Queensland, and Mr Harburg guaranteed Compass’ obligations.
- The State sued Compass and Mr Harburg for rent under the applicable leases and guarantees and Compass and Mr Harburg sought to avoid liability because they contended that they had been misled into entering into the relevant contractual arrangements and leases. They also counterclaimed for damages for deceit and for misleading and deceptive conduct. Their claims failed and the State obtained judgment against both Compass and Mr Harburg for $9,486,204.64.
- By this appeal Compass and Mr Harburg seek to reverse that outcome, or at least to ameliorate it significantly. For reasons which follow, the appeal should be dismissed.
The course of relevant events
- In July 2007, POBC requested proposals from interested parties to develop part of Scarborough Boat Harbour. Compass lodged a proposal in response and by December 2007 had become the preferred proponent.
- In May 2008, POBC and Compass entered into an agreement for lease. Mr Harburg was also a party to the agreement. Under the agreement, Compass was obliged to apply for the requisite governmental approvals to carry out the first stage of construction works at the harbour site, and, if the approvals were obtained, to carry out those works to practical completion. Compass was obliged to enter into two written leases with POBC, to commence once practical completion of the first stage was achieved. Mr Harburg guaranteed Compass’ obligations under the agreement for lease. If the governmental approvals were not obtained by a defined “Approval Date”, the agreement would be cancelled.
- Draft forms of the leases the subject of the obligation formed schedules to the agreement for lease. For present purposes it may be observed:
- (a)There was proposed a “wet lease” for the purposes of constructing and operating a fully serviced marina, and a “dry lease” of adjacent land for the purpose of constructing and operating infrastructure in support of the marina (including an office, a market area and restaurants).
- (b)Both forms of lease would oblige Compass to pay POBC a contractually defined “Annual Rent” in advance. “Annual Rent” comprised the aggregate of “Base Rent” and a “Crown Mooring Levy” and a “Dredging Contribution”. The agreement for lease and both forms of lease defined the “Base Rent” amounts of $27/m2 for the dry lease and $10/m2 for the wet lease. They were the same figures as had appeared in POBC’s initial request for proposals. It is unnecessary to explain how “Crown Mooring Levy” and a “Dredging Contribution” were defined.
- (c)Both forms of lease also contained guarantee terms which provided that Mr Harburg accepted joint and several liability with Compass for all moneys to be paid by Compass and, further, that as between he and POBC, he was a primary debtor jointly and severally liable with Compass.
- A year after entering into the agreement for lease, Compass unsuccessfully sought to be relieved of its obligations to develop certain restaurants on the land the subject of the dry lease and to substitute an obligation to develop a dry stacking facility. A few months later on 19 August 2009 (by which time the Approval Date was 20 August 2009), Compass advised POBC that the commercial rental market in the area was depressed, that it was not commercially viable to construct the buildings in which the restaurants were to be located, and sought relief from its obligations to construct those buildings and rental relief in respect of the relevant land.
- Although POBC responded immediately by proposing an agreement to extend the Approval Date to allow Compass’ request to be considered, on 24 August 2009 Compass’ lawyers advised that Compass had not received all of the requisite governmental approvals and the agreement for lease was, accordingly, cancelled. The same letter also advanced a without prejudice proposal advising of Compass’ continued interest in the project and enquiring whether POBC would be interested in negotiating with Compass on the basis of an altered proposal in which Compass would build shore-based facilities, including one office building, dry stack facilities and open spaces.
- There followed some correspondence and meetings between POBC and Compass, in which, amongst other things, POBC identified aspects of the proposal in which it was prepared to consider change and aspects on which it was not prepared to undertake further negotiation. Critically, by letter dated 15 September 2009 (the September letter) the relevant POBC officer wrote to Compass advising (emphasis added):
“I refer to our meeting of 11th and confirm the points raised by you at that meeting.
Whilst the rental to be charged under the lease is listed in the Scarborough Boat Harbour Request for Proposal in clause 2-3.1 is not negotiable, I can assure you that it is a commercial rental and that our policy is to have all lessees in South East Queensland Boat Harbours charged a similar rental to each other, so that you will be able to lease out berths at the same rentals as others in the Boat Harbour.
Because of our “Commercial in Confidence” policy we cannot give you a list of rentals being charged to other lessees.
We agree that the usage of the balance area of the dry lease will be agreed later and whilst we have advised that we will not agree to Dry Stacking we would be agreeable to many other usages including Tourism, Tourist Accommodation and Entertainment.
I trust this addresses your concerns and that we can proceed to finalise the agreement”.
- On 18 November 2009 POBC, Compass and Mr Harburg entered into an agreement styled “Deed of Variation” which effectively reinstated the agreement for lease, with some changes to decrease the amount of work Compass was obliged to carry out as part of the dry land development, but with no changes to the provisions about rents, or to the guarantees expressed in the agreement for lease and in the draft proposed wet lease and dry lease. Nevertheless, the primary judge found that the representation made in the September letter had been a real or substantial inducement to Compass to enter into the deed of variation. In reliance on that representation, Mr Harburg believed that the rental amounts were the same or similar to those charged to other lessees in South East Queensland. It was on the basis of that belief that he had caused Compass to re-enter negotiations with POBC and to sign the deed of variation reinstating the agreement for lease.
- By transfer notices under the Infrastructure Investment (Asset Restructuring and Disposal) Act 2009 (Qld), which became effective on 1 June 2010, all of POBC’s assets and obligations were transferred to the respondent (the State) under the stewardship of the Department of Transport and Main Roads.
- Relevant governmental approvals having been obtained, Compass carried out the first stage of its works to practical completion. On the basis of the belief which had been induced by the representation made in the September letter, on 16 November 2010, Mr Harburg caused Compass to enter into the wet lease and the dry lease, and chose to sign his personal guarantees as expressed therein. As has been mentioned at  above, he thereby accepted joint and several liability with Compass for all moneys to be paid by Compass and, further, accepted that he was a primary debtor jointly and severally liable with Compass.
- Each lease provided for a 24-year term and that the “Date of Commencement” was 13 August 2010. The obligation to pay the Annual Rent commenced on the Date of Commencement. Under each lease, the Annual Rent was payable six-monthly in advance without the need for any formal or other demand, the first payment to be made on the Date of Commencement for the period expiring 31 December 2010 and instalments thereafter to be made on 1 January and 1 July of each lease year.
- By 23 March 2011 Compass knew that the rents it was bound to pay under the wet lease and the dry lease were not substantially the same as, or similar to, the rents paid by other marina operators, and that it had agreed to pay more than other operators. At least by 28 March 2011, Compass knew the order of the difference between the rent it had agreed to pay and what others were paying. Indeed, by 28 March 2011, Compass regarded the difference between what Compass had agreed to pay by way of rent and the rent charged to other harbour tenants as having a very significant negative impact on the profitability of Compass’ marina business.
- Compass did not pay the first year’s Annual Rent as required by the leases. In fact, it paid no rent at all until 9 September 2011 when it paid $659,348. It made no further rent payments thereafter. Compass did not complete the development, discharging only some of its capital development obligations, and it made trading losses. Ultimately at a mediation in March 2020, the parties agreed to terminate the leases from that time forward.
- On 2 August 2017, Compass commenced proceeding 7884 of 2017 against the State. Mr Harburg was not a party. As ultimately pleaded in that proceeding, Compass claimed damages for deceit or in the alternative for misleading and deceptive conduct under the Trade Practices Act 1974 (Cth). Both claims asserted that the September letter had falsely represented that the rents Compass was to pay under the wet lease and the dry lease were commercial rentals in the sense of being substantially the same as or similar to the rentals charged by POBC in other South East Queensland boat harbours, and that Compass had acted in reliance on that false representation in entering into and performing the subsequent contractual arrangements. Amongst other defences, the State pleaded that each of Compass’ claims was statute-barred because each accrued more than six years before the proceeding commenced (i.e. each claim accrued before 2 August 2011).
- The State did not counterclaim in proceeding 7884 of 2017. Rather, on 8 December 2017, the State commenced proceeding 13008 of 2017 against Compass and Mr Harburg, claiming unpaid rent from 1 January 2012 onwards. As against Compass, the State’s claim was framed as a claim for a debt due and owing under the leases, or as damages for breach of contract. As against Mr Harburg, the claim was framed as a debt due and owing under the guarantee clauses which had been incorporated within the leases and signed by him, or as damages for breach of the obligation to pay set out in those clauses. Compass and Mr Harburg defended on the basis that the State was estopped from claiming rental in any amount which exceeded that which would have been payable if rent was calculated in accordance with the representations conveyed by the September letter. Compass pleaded it was entitled to a set-off in the sum which it claimed for damages by way of counterclaim, and Mr Harburg pleaded that he was entitled to claim the benefit of any set-off available to Compass. The counterclaim relied on the same facts pleaded in proceeding 7884 of 2017. Amongst other defences to the defendants’ counterclaim, the State pleaded that the defendants’ counterclaim was statute-barred because any claim at common law and any claim under the Trade Practices Act accrued more than six years before the proceeding commenced (i.e., each claim accrued before 8 December 2011).
- Both proceedings were tried together. It became clear at trial (and it was confirmed by Senior Counsel on appeal) that the Trade Practices Act counterclaim was advanced as a “no-transaction case”, in that (as Mr Harburg had sworn) if Mr Harburg had known of the falsity of the representation made in the September letter, Compass would not have signed the deed of variation which reinstated the agreement to lease, or, implicitly, the wet lease and the dry lease.
- At trial, the State entirely succeeded. In proceeding 7884 of 2017 there was judgment for the State against Compass on Compass’ claim. And in proceeding 13008 of 2017 there was judgment for the State against both Compass and Mr Harburg for $9,486,204.64. The primary judge accepted the State’s allegations concerning the liability of Compass and Mr Harburg for Annual Rent and interest and rejected the estoppel defence. The defence of set-off and the counterclaims also failed. Although the primary judge accepted that the representation made by the September letter was false, the deceit claim failed because her Honour found that it was made innocently and without intention to deceive and also because it was statute-barred. Compass’ Trade Practices Act claim failed because it was statute-barred, Compass’ cause of action having accrued when it suffered loss, and the primary judge having found:
“As Compass pleads, its loss dates from its November 2009 entry into the Deed of Variation which obliged it to enter into the dry lease and the wet sub-lease; its entry into both the dry lease and the wet sub-lease on 16 November 2010, as well as its spending significant amounts of money undertaking Tenant’s Works pursuant to the Agreement to Lease before 16 November 2010. There was nothing contingent or executory about its obligations to develop the marina under the Agreement to Lease, nor its obligations to pay rent under the dry lease and wet sub-lease. In this respect its case is factually quite different from that considered by the High Court in [Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 524]. The limitations defence succeeds.”
- The appellants filed and sought leave to amend a notice of appeal. The State filed a notice of contention and, in response to the application to amend the notice of appeal, sought leave to amend its notice of contention and also sought leave to adduce further evidence on appeal. At the hearing of the appeal, leave to amend the notice of appeal and the notice of contention was given, and the decision on the application for leave to adduce further evidence reserved. The following paragraphs describe the issues on appeal, consequent upon those decisions.
- On appeal, the appellants did not challenge their prima facie liability on the State’s claim for Annual Rent and interest. Nor did they seek to challenge the failure of the deceit claim or the conclusion that Compass’ Trade Practices Act claim was statute-barred. They did challenge the primary judge’s rejection of the estoppel defence, contending that her Honour erred in rejecting the case they advanced in relation to estoppel by representation at common law, and equitable estoppel. For the first time on appeal, they contended that estoppel should operate as a complete defence to the State’s claim, however it may be that that proposition was only argued for common law estoppel because it seemed that the estoppel as a complete defence argument was not pressed in relation to equitable estoppel. In their oral reply argument on appeal, the appellants clarified that their argument concerning equitable estoppel as a partial defence relied on Burrowes v Lock (1805) 10 Ves Jun 470 to justify the conclusion that the State should be required in equity to make the representation good. As will appear, upon analysis and despite the appellants’ disclaimer that they advanced no claim for “equitable damages”, that is to contend that the State should be liable to compensate Compass and Mr Harburg in equity for the falsity of the representation. But that would be to advance on appeal a claim for equitable relief that had not previously been advanced.
- Further, the appellants contended that the primary judge erred by not separately considering Mr Harburg’s Trade Practices Act claim. They contended that the primary judge should have found that Mr Harburg’s claim was not statute-barred and should have assessed the loss and damage which he separately suffered. The State contended that Mr Harburg’s claim for damages was implicitly abandoned at trial, or, at best, was only ever pleaded and pressed as a claim which depended on the success of Compass’ claim. If the latter, his claim failed because Compass’ claim had failed. The State said that if a separate and independent counterclaim for damages by Mr Harburg had to be considered, then that claim too must be regarded as statute-barred, because, like Compass, Mr Harburg suffered loss as soon as he became bound to the obligations in the agreement for lease (18 November 2009) and the guarantee obligations in the leases themselves (16 November 2010). The State’s application for leave to adduce further evidence on appeal addressed alternative dates on which Mr Harburg’s cause of action might have accrued (and still be statute-barred), if, contrary to its submission, the cause of action did not accrue as at the date Compass and he signed the leases.
The way in which the estoppel defence and the Trade Practices Act claims were advanced below
- A party ordinarily should not be permitted to raise new points on appeal if, had the points been raised at trial, they might possibly have been met by additional evidence at the trial or the opponent might have conducted its case differently: Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 438; Coulton v Holcombe (1986) 162 CLR 1 at 7-9; Cook’s Construction Pty Ltd v SFS 007.298.633 Pty Ltd (formerly trading as Stork Food Systems Australasia Pty Ltd) (2009) 254 ALR 661 per Fraser JA at 698-699 . Because there are significant parts of the case now advanced on appeal which it is contended were not run below, or were abandoned, and because the State has objected to new cases being advanced on appeal, it is necessary to identify how the estoppel defence and the Trade Practices Act claims for damages were advanced below.
- Mr Harburg was only a party to proceeding 13008 of 2017 in which, as I have explained, the State advanced its claim for Annual Rent and interest. In that proceeding Compass and Mr Harburg pleaded estoppel and set-off as defences and counterclaimed for damages for deceit and under the Trade Practices Act. The analysis below proceeds by reference to proceeding 13008 of 2017 because the relevant aspects of Compass’ deceit and Trade Practices Act claims were not advanced in any materially different way in proceeding 7884 of 2017. Moreover, as the State did not counterclaim for rent in proceeding 7884 of 2017, no occasion for pleading estoppel as a defence arose in that proceeding.
- In response to the State’s allegations that Compass had not paid Annual Rent in the period from 1 January 2012 onwards and as to the proper calculation of Compass’ total liability for Annual Rent as at 4 June 2020, Compass and Mr Harburg pleaded that by reason of the matters pleaded in the counterclaim, Compass was not required to pay to the State the “Annual Rent” under either the wet lease or the dry lease and otherwise denied the alleged liability because of the matters pleaded in the counterclaim: defence at [6(c)] and .
- In response to the allegations:
- (a)that Compass was liable to the State for the amount claimed as a debt due and owing under the leases, or as damages for breach of contract; and
- (b)that Mr Harburg was liable to the State for the amount claimed as a debt due and owing pursuant to cl 27.1 of the wet lease and cl 25.1 of the dry lease, and further or in the alternative pursuant to cl 27.3 of the wet lease and cl 25.3 of the dry lease, or as damages for breach of the obligation to pay that amount,
Compass and Mr Harburg denied the alleged liability because of the matters pleaded in the counterclaim: defence at .
- Compass and Mr Harburg pleaded the entry into the agreement for lease; its cancellation; the representation made by the September letter and its falsity at the time it was made; their reliance on the representation; and that the representation was made by POBC either knowing it was false or with reckless indifference to its truth: defence at . The reliance plea asserted that Compass and Mr Harburg “assumed and expected” that the rentals to be charged under the wet lease and the dry lease were commercial rentals in the sense of:
- (a)being substantially the same as other similar rentals charged by POBC;
- (b)being similar to other rentals charged by POBC in South East Queensland;
- (c)being similar to other rentals charged by POBC in the Scarborough Boat Harbour; and
- (d)having the above-mentioned qualities so as to enable Compass fair opportunity to compete with other marinas in South East Queensland and the Scarborough Boat Harbour in particular,
and that, on the basis of those assumptions and expectations, they entered into the deed of variation, Compass executed the wet lease and the dry lease, and Mr Harburg entered into the guarantees as recorded in the wet lease and the dry lease.
- By the defence at , Compass and Mr Harburg pleaded they would suffer detriment if their assumptions and expectations were not fulfilled, namely by:
- (a)being bound to the wet lease and the dry lease at the rentals specified therein; and
- (b)having to pay the rentals for the wet lease and dry lease in circumstances where the rentals for the wet lease substantially exceeded commercial rentals as represented by the statement in the September letter.
- By the defence at , Compass and Mr Harburg pleaded the State was estopped as against either or both of Compass and Mr Harburg from:
- (a)claiming under the wet lease and the dry lease (including the guarantees therein) in the quantum claimed in the proceeding;
- (b)demanding or otherwise claiming for payment of rental under the wet lease and the dry lease in any amount exceeding that which would be payable if calculated in accordance with the representations conveyed to Compass and Mr Harburg in the September letter; and
- (c)otherwise departing from the representations conveyed to Compass and Mr Harburg.
- By the defence at , Compass and Mr Harburg pleaded a defence of set-off. Compass pleaded an entitlement to and claimed a set-off against the State’s claims in the sum as advanced in the counterclaim: defence at [12(a)]. Mr Harburg, as guarantor of Compass’ obligations under the wet lease and the dry lease pleaded an entitlement to and claimed the benefit of any set-off granted to Compass: defence at [12(b)].
- The counterclaim stated that it was made by Compass and Mr Harburg against the State.
- By the counterclaim at ,  and , Compass and Mr Harburg pleaded the material facts establishing a claim by Compass for damages in consequence of misleading and deceptive conduct. The plea of causation and loss having been sustained by reason of misleading and deceptive conduct was expressed at , in the terms identified below (the strike through and underlining identifying amendments made shortly before the commencement of the trial). (The way in which the equivalent paragraph was asserted by Compass in proceeding 7884 of 2017 was not materially different.)
“15. By reason of the matters pleaded in paragraph 9 of the defence and in the preceding paragraph hereof, the plaintiff first defendant has sustained loss and damage in that:
- (a)from November 2009, it became committed to enter, and it did enter into, each of the dry lease and the wet lease;
- (b)on or about 9 September 2011 it paid rent under those leases totalling $659,348;
(b)(ba) to the extent that the first defendant or the second defendant is found liable to pay POBC an amount claimed by the plaintiff (currently $9,177,026.34), they will have incurred a liability for rent in that amount under those leases;
- (c)expended the capital sum of $4,592,661 on the development of the marina; and
- (d)it has operated a marina on the land subject of the leases at a total loss of $1,015,995 for the period 1 July 2011 to 18 March 2020
(d)(e) but giving credit for $2,300,000 paid by the plaintiff pursuant to a deed of settlement dated 9 March 2020 between the plaintiff and the defendants.”
- The claims for relief advanced in the counterclaim were expressed in the terms identified below (again the strike through and underlining identifying amendments made one month before the commencement of the trial). (The way in which the claims for relief were advanced in proceeding 7884 of 2017 was not materially different, except, of course, they were advanced only by Compass, and not on behalf of both Compass and Mr Harburg.)
“And the defendants claim:
- [A claim for rescission of the deed of variation, the agreement for lease, the wet lease and the dry lease was struck through]
- Alternatively, a declaration (pursuant to the common law or pursuant to section 87 of the TPA) that the above contracts are void on and from November 2009, or a declaration that the plaintiff is relieved of any further obligations under the above contracts.
18. Damages in favour of the first defendant in the sum of $7,586,091 $3,968,004 (i.e. the total of the claims in paragraph 15 above, including the credit but excluding the liability for rent) or in such further or other sum as determined by the Court.
18A Further damages in the sum of $9,177,026 or such amount, if any, to which the defendants are held liable to the plaintiff in this proceeding, or alternatively, the declaration at paragraph 17 above.
18.19. Set-off of any such damages against the plaintiff’s claim.”
- The following conclusions relevant to the analysis of issues arising on this appeal may be drawn about how the estoppel defence and the Trade Practices Act claims for damages were advanced below.
- First, estoppel was pleaded as a partial but not complete defence to the State’s claim. And it is notable that it was only ever pleaded as a defence. It was not pleaded as the foundation for any claim for relief in equity, whether pecuniary or otherwise. In particular no claim for equitable compensation was pleaded at all. No claim for declaration of a constructive trust was advanced. Although the quantum of the partial defence was not pleaded, it was evident that it was not to be calculated in the same way as the defence by way of set-off, because the latter was calculated as reliance damages and the former was proposed to be calculated essentially as if there had been a contractual promise that the rentals under the leases would be substantially the same as the rent charged by POBC to other lessees in South East Queensland boat harbours.
- Second, it is notable that Mr Harburg’s plea of set-off only claimed the benefit of Compass’ entitlement to set-off its counterclaim against any liability he might have for rent. He did not seek to set-off any independent claim for damages which he might have had. If Mr Harburg had intended to convey to the State that he advanced any separate and independent counterclaim to recover damages against the State, the State would reasonably have expected that the set-off plea would have asserted that entitlement.
- Third, consistently with the second observation, the only plea of causation and loss having been sustained by reason of the deceit and the misleading and deceptive conduct was that pleaded in the counterclaim at , quoted at  above. That was a plea of loss and damage suffered by Compass. The pleader had corrected the obviously mistaken reference to “the plaintiff” and specifically inserted only “the first defendant” (i.e. Compass) as the person who had suffered loss. That said, the insertion as part of  of the new subparagraph [ba] was incongruous to the extent that it referred to Mr Harburg, because there was no plea that Mr Harburg sustained loss by reason of the material facts pleaded at .
- Fourth, more problematic are the claims for relief advanced at  and [18A]. The claim for relief at  was plainly consequent upon the material facts pleaded at . When read with  and , it must be taken to have advanced a common law claim for damages for deceit and a statutory claim for damages for misleading and deceptive conduct. Consistently with the reference in the chapeau of  to “the first defendant”, the claim for relief was only advanced in relation to the first defendant. But, one might ask, what then was the point of the excision from Compass’ damages claim (achieved by the underlined material in parentheses in ) of Compass’ claim that its liability for rent could be regarded as damages suffered by it? Given that that amendment occurred at the same time as the insertion of the new claim for relief advanced at [18A], it could only be concluded that for some reason the pleader wanted separately to deal with the liability for rent as a head of damage. The new claim for relief in [18A] could only reasonably be interpreted as also connected with the plea of causation and loss advanced in  and as conveying – clumsily and despite the reference only to the first defendant in the chapeau of  – that Mr Harburg too asserted a claim for damages sustained by deceit or by reason of misleading and deceptive conduct, albeit one which depended on establishing that the State was liable to Compass for the same damages. Certainly, one could not reasonably discern from that poorly expressed pleading that Mr Harburg had an independent claim for damages for misleading and deceptive conduct which Mr Harburg sought to advance if Compass’ claim for the same damages failed.
- Fifth, the claim for relief advanced at , quoted at  above, would, at least as initially pleaded, reasonably be interpreted as asserting on Mr Harburg’s behalf the claim for the entitlement to set-off against the claims advanced against him the damages which Compass had suffered; the “such damages” being obviously a reference to the damages claimed at . This would give Mr Harburg the benefit of any set-off granted to Compass, which would be consistent with his plea of the defence of set-off at [12(b)]. Once  was amended and [18A] was inserted, the “such damages” would be taken to be a reference to the damages claimed in both  and [18A], and this would still give Mr Harburg the benefit of any set-off granted to Compass. Although the estoppel case was not advanced as a complete defence, the set-off of the common law damages case and the Trade Practices Act case was, because one element of that case was the whole amount of the liability for rent as claimed at [18A].
- I turn now to address how the pleaded case was advanced at trial. It will be apparent that the first time there was any significant focus on the nature of the estoppel defence was in supplementary submission after the close of evidence at the trial.
- Argument before the primary judge was developed:
- (a)in written opening submissions on behalf of, on the one hand, Compass and Mr Harburg, and on the other, the State, both of which were delivered on 6 October 2020, the first day of the trial;
- (b)in written closing submissions, on behalf of, on the one hand, Compass and Mr Harburg, and on the other, the State, both of which were delivered on 12 October 2020, evidence having closed on 9 October 2020;
- (c)in oral closing addresses on 12 October 2020; and
- (d)in two sets of supplementary written submissions, on behalf of, on the one hand, Compass and Mr Harburg (dated 23 October 2020 and 3 December 2020, and on the other, the State (dated 30 October 2020 and 14 December 2020).
- The written opening by Compass and Mr Harburg focussed entirely on Compass’ claims for damages for deceit and misleading and deceptive conduct. The discussion of damages centred on the mechanism by which it could be said that Compass suffered damages. There was no reference whatsoever to a claim for damages by Mr Harburg whether in deceit or under the Trade Practices Act. The opening identified the orders sought at trial, namely a damages award in favour of Compass (but, notably, not Mr Harburg); declarations that the instruments signed in reliance on the representation were void; and that Compass and Mr Harburg were relieved of any further obligations under those instruments. Estoppel was not mentioned. No claim for equitable relief, pecuniary or otherwise was mentioned.
- Unlike Compass and Mr Harburg, the State’s written opening did not overlook the fact that both Compass and Mr Harburg had advanced a damages claim, but, consistently with the way in which those claims had been pleaded, did not address Mr Harburg’s claim separately, apparently regarding it as rising or falling with Compass’ claim. So far as damages were concerned, the State contended that the counterclaim advanced by Compass and Mr Harburg was statute-barred, but by focussing only on explaining why that was so in relation to Compass. The estoppel defence was mentioned only in the last two paragraphs, and only then to challenge the ability of Compass and Mr Harburg to prove the representation and reliance.
- Written closing submissions on behalf of Compass and Mr Harburg dated 12 October 2020 sought the same orders as those identified in the written opening, albeit at slightly different amounts. No award of damages was sought in favour of Mr Harburg. The elements of Compass’ damages claims were identified as the total of the capital expenditures Compass incurred in developing the Marina (all of which were sustained and ascertained on or before 21 December 2010); the rental payment it made on 9 September 2011, the operating losses which it contended were only ascertained upon the end of first year of trading at the Marina on 30 June 2012. No claim for equitable relief, pecuniary or otherwise was mentioned. There was no discussion of the estoppel defence.
- Written closing submissions on behalf of the State also dated 12 October 2020 sought to respond to Compass’ damages claim as expressed in proceeding 7884 of 2017, saying its analysis applied mutatis mutandis to the counterclaim advanced by Compass and Mr Harburg in proceeding 13008 of 2017. Again, there was no attempt to respond to any separate damages claim advanced by Mr Harburg. Estoppel was briefly mentioned to emphasise the need that the representation be proved and that, in terms of reliance and causation, that the representation in question caused the decision to enter the contract. The State addressed the evidence which had been adduced which was relevant to quantum if the Court was satisfied that the State was estopped in the manner alleged. Amongst other things, the State submitted that the estoppel could only apply to the wet lease and not the dry lease.
- In oral argument on 12 October 2020, there was almost no examination of the impact of the doctrine of estoppel. Counsel for the State identified for the primary judge where she could find the submissions advanced by the State just mentioned, and Senior Counsel for Compass and Mr Harburg confirmed that their contention was that if there was an estoppel, it would not mean that they did not pay any rent, it would mean that they paid the rent which they said was consistent with the representation and that they would check the State’s calculations.
- The next development was that on 20 October 2020, Compass sought leave to file a supplementary submission addressing the State’s calculations and the basis for “Compass’ alternative calculations”. The primary judge gave leave and that led to the first round of written supplementary submissions. As to this:
- (a)Compass’ supplementary submissions dated 23 October 2020 sought to rebut the proposition that the estoppel defence should be limited to the wet lease, and then developed their own calculations addressing the quantum which they sought to have applied in relation to their estoppel defence.
- (b)The State’s supplementary submissions dated 30 October 2020 responded by developing the argument that the defence related to the wet lease only; and by addressing the quantum which should be applied if Compass and Mr Harburg succeeded in their estoppel defence.
- The final round of written supplementary submissions occurred consequent upon the primary judge having requested Compass:
“… to provide submissions in support of its claim for estoppel. At the very minimum this ought to include informing the Court (and the State of Queensland) what type of estoppel it relies upon having regard to the taxonomy in the decided cases and the names of any authority which it submits would support a claim for estoppel on the facts it pleads,”
and having proposed a timetable for the delivery of submissions by Compass and then by the State.
- That request resulted in Compass’ further supplementary written submissions dated 3 December 2020 and the State’s further supplementary written submissions dated 14 December 2020. For present purposes, the following aspects of submissions were notable.
- First, Compass submitted that its pleaded case was sufficient to found estoppel by representation (in law) and equitable estoppel. No submission was made that estoppel could operate as a complete defence to the State’s claim or could provide a foundation for a claim for equitable relief, pecuniary or otherwise.
- Second, Compass acknowledged that for estoppel by representation at law, the representation had to be one of existing fact, not a promise or representation of an intention to do something in the future, and, in this regard, characterised the representations as to facts as the representations made in the September letter. Compass also suggested – possibly in relation to equitable estoppel only, but that was not clear – that the representation could be characterised “as a negative stipulation as to rent under the ‘resumed’ deal”.
- Third, for the purposes of equitable estoppel, Compass did seek to characterise the representation as a negative stipulation as to rent. Specifically, Compass submitted that (emphasis added):
“… a promissory estoppel operates as an equitable restraint on the exercise or enforcement of contractual and other rights and is negative in substance. The defensive nature of the equity is accommodated by considering the relevant assumption as a negative stipulation to the effect that the rent charged would not be more than that charged to Compass’ competitors.”
- Fourth, the State objected that any attempt by Compass to characterise the representation as anything other than a representation as to a present fact was a departure from the manner in which Compass had pleaded its case and run the trial and should not be permitted. The State’s complaint was as to Compass’ attempt to characterise the representation as one dealing with future matters, or as in any way promissory in nature.
- Fifth, the State contended that even if Compass was permitted to characterise the representation in that way, such a representation was not made out on the evidence. Amongst other submissions advanced by cross-reference back to previous submissions were:
- (a)a submission that the representation in the September letter could not be construed as a representation that rents actually charged under the leases would be anything other than those stated in the leases; and
- (b)a submission that neither Compass (nor Mr Harburg) in fact made, and relied upon, an assumption of the kind alleged in relation to rentals under either or both leases.
- Against that understanding of how the case was run below, it is necessary to turn to the issues which arise on this appeal.
The estoppel defence
The grounds on which the primary judge rejected the estoppel defence
- The primary judge interpreted the September letter as saying that it was the present policy of POBC to have all lessees in South East Queensland boat harbours charged a similar rental to each other. Insofar as the letter referred to rents, it was to be taken as referring to rents in respect of the wet lease and the dry lease, i.e. the $27/m2 and $10/m2 rates. Her Honour found that a reasonable representee would have understood the statement at paragraph 2 of the letter as meaning that the rent of $10/m2 on the wet lease and $27/m2 on the dry lease was a commercial rent in the sense that it was substantially the same as the rent charged by POBC to other lessees in South East Queensland boat harbours.
- The primary judge found that the letter had made no promise to Compass. She found that there was no representation as to the future, and that Compass had not advanced a case that the representation should be so regarded. She found that the representation was to be treated as a representation of a present fact. She also found that it was not a representation which could have induced in Compass any assumption or expectation that the amounts for rent it would have to pay was anything other than the amounts for rent stated in the leases, the letter having made clear that those amounts were not negotiable.
- No challenge was advanced on appeal to these findings. Specifically, there was no challenge to the primary judge’s findings as to the nature of the representation made by the September letter. No challenge was made on appeal as to the findings that Compass had not advanced a case that the representation had been made as to the future, or that the representation was to be treated as a representation of fact. The appellants did not challenge the finding that the representation was not promissory in nature. Indeed, and explicitly despite the appellants’ apparently submitting to the contrary in their written submissions in reply before this Court, Senior Counsel for the appellants confirmed that the only aspect of futurity which the appellants attributed to the letter was that the representation as to the facts which existed as at the time the representation was made (15 September 2009), was still operative as at the time Compass and Mr Harburg entered into the leases (16 November 2010). Senior Counsel for the appellants also accepted that they did not challenge the finding that Compass could have had no assumption or expectation that the amounts for rent it would have to pay was anything other than the amounts for rent stated in the leases.
- As I have already mentioned, the primary judge found:
- (a)The representation made in the September letter had been a real or substantial inducement to Compass to enter into the deed of variation.
- (b)In reliance on that representation, Mr Harburg believed that the rental amounts in the leases were the same or similar to those charged to other lessees in South East Queensland.
- (c)On the basis of that belief he caused Compass to re-enter negotiations with POBC and to sign the deed of variation reinstating the agreement for lease and, later, he caused Compass to enter into the wet lease and the dry lease, and chose to sign his personal guarantees as expressed therein.
- The primary judge noted that there is no general acceptance in Australia of a “single, unified doctrine of estoppel”, citing Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1, at  per Keane J and at  and  per French CJ, Kiefel and Bell JJ. Her Honour then proceeded to consider the potential applicability to the case before her of various types of estoppel.
- Her Honour rejected proprietary estoppel, concluding that there was nothing pleaded or proved in this case which could amount to proprietary estoppel. Her Honour then rejected the applicability of promissory estoppel because of her conclusion that the representation was a representation as to an existing fact and was not promissory in nature. Neither of these conclusions were challenged on appeal. Indeed, Senior Counsel for the appellants confirmed on appeal that the appellants did not rely on promissory estoppel. Her Honour did not otherwise consider any form of equitable estoppel because she expressed her view that if there was any form of estoppel on which Compass could rely, it was a common law estoppel, namely estoppel by representation.
- Her Honour concluded that there were three reasons why the common law estoppel claim made by Compass must fail:
- (a)the representation was not sufficiently clear to found an estoppel;
- (b)the State was not estopped from asserting any element of its cause of action; and
- (c)there was no assumption or expectation by Compass that its legal rights would be any different from those which the State sought to enforce.
- As to the first reason:
- (a)The primary judge held that the state of affairs which existed by way of the representation was not precise enough to allow a court to decide what the parties’ legal rights should be: Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466 at 472 per Priestley JA. In other words, the representation was so equivocal or ambiguous that it could not be given effect to or modify the operation of a term of the contract: Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd per Keane J at 43-44  to .
- (b)Her Honour found that there could have been no expectation or assumption of the amount of rent payable other than that which was stated in the contract. Her Honour distinguished the present case from a case like Caringbah Investments Pty Ltd v Caringbah Business & Sports Club Ltd (in liq)  NSWCA 165, in which, she observed:
“… a lease was drawn up. The lessee protested that it could not pay the rent named in the lease. The lessor promised that, if the lessee took the lease, it would only have to pay a lesser amount. The lease was executed in reliance upon that promissory statement. Bathurst CJ, writing the judgment in the Court of Appeal, found that the trial judge was right to conclude that the lessor was estopped from asserting that ‘the rent payable was that set out in the lease rather than as stated in the representations’”.
- As to the second reason:
- (a)The primary judge highlighted the limited nature of estoppel by representation by reference to Brennan J’s characterisation of the doctrine in Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 415 as “merely a rule of evidence and not a cause of action”. Her Honour cited various writings which each upheld the view that estoppel operated by establishing an assumed state of affairs according to the facts as represented, and as such, the maker of a statement could not deny the truth of that statement, noting in particular that:
“Of course, the making of an untrue statement of fact may have other consequences in law beyond the law of estoppel, including the creation of a cause of action. Such a statement if made negligently may give an action in tort for the breach of a duty of care, or such an untrue statement may enable a contract to be rescinded for misrepresentation … None of this has anything to do with estoppel.”
- (b)Based upon those principles, her Honour found that an estoppel was of no assistance to the appellants’ claim as “[t]he State simply needs to assert the terms of its lease and sub-lease with Compass, and rely upon the guarantee which Mr Harburg gave.”
- As to the third reason:
- (a)The primary judge ultimately decided that the representation was not one that gave rise to an expectation or assumption as to the legal relations between Compass and POBC as:
- the relevant leases created and governed their legal relations;
- there could be no assumption that the rent would be any different than that specified in the leases and was that which Compass expected to pay both before and after the September letter; and
- the assumption or expectation sought to be relied upon by Compass was not one which related to what the State was bound to do.
- (b)In reaching that conclusion, her Honour recognised that the statements of law relied upon were from cases of promissory estoppel, but nevertheless found them applicable in the circumstances (i.e., where Compass seeks to contend that the State is estopped from asserting its contractual rights). Specifically, her Honour placed emphasis on Brennan J’s conclusion in Walton Stores (Interstate) Ltd v Maher at 422 that “[i]t follows that an assumption or expectation by one party which does not relate to what the other party is bound to do or not to do gives no foundation for an equitable estoppel”.
The relevant grounds of appeal
- There were five relevant grounds of appeal:
- (a)Ground 7: The primary judge erred in finding, in paragraph  of the reasons, that the Representation (as defined in paragraph  of the reasons), or the expectation or assumption to which it gave rise, was insufficiently clear to found an estoppel.
- (b)Ground 8: The primary judge erred in finding, in paragraph  of the reasons, that an estoppel by representation as alleged by the appellants could not assist them in resisting the claim by the respondent for rent payable under the lease and sublease.
- (c)Ground 10: The primary judge erred in finding, in paragraph  of the reasons, that the Representation (as defined in paragraph  of the reasons) was not one which gave rise to an expectation or assumption as to the legal relations between the appellants and POBC.
- (d)Ground 11: The primary judge erred in finding, in paragraph  of the reasons, that the appellants could not rely on both an estoppel by representation (in law) and an equitable estoppel in defence of the claims.
- (e)Ground 13: The primary judge erred in failing to address or make any or any adequate finding with respect to the allegation of equitable estoppel made by the appellants in defence of the claims.
- Grounds 7, 8 and 10 essentially challenge each of the three reasons the primary judge gave for rejecting the common law estoppel by representation case. Grounds 11 and 13 challenge the primary judge’s rejection of any equitable estoppel case. Analysis of the case on appeal may proceed by reference to the two types of estoppel now relied upon.
The appellants’ challenge to the rejection of the common law estoppel by representation case
- The appellants’ common law estoppel case on appeal was that:
- (a)the State made a false representation that the rent in both leases was “substantially the same as the rent charged by POBC to other lessees in South East Queensland boat harbours”;
- (b)the evidence demonstrated detrimental reliance on that representation; and
- (c)in consequence, the State was estopped from contradicting the truth of that representation by enforcing the rental provisions in the leases at rates that were substantially more than those charged to other marina operators in South East Queensland.
- The appellants submitted that if this Court determined two key points in the appellants’ favour, namely:
- (a)the representation was sufficiently clear to found an estoppel; and
- (b)the State’s assertion of the rent in the leases contradicted the representation,
then the elements of common law estoppel by representation were established and the Court ought to set aside the judgment which had been entered in proceeding 13008 of 2017 and instead order that the State’s claim be dismissed.
- It is not necessary to consider the appellants’ critique of the way in which the primary judge dealt with certainty. The problem for the appellants is that even if one accepts that her Honour was wrong in regarding the evidence as insufficiently clear to found an estoppel, enforcing the rental provisions at the rates stated in the leases would not contradict the truth of the represented fact. The State could assert the material facts establishing its cause of action for the recovery of rent; Compass could assert that the rents stated in the leases were substantially more than those charged to other marina operators in South East Queensland; and the State could be estopped from denying the truth of that assertion, but that would not avail Compass or Mr Harburg because the truth of the assertion would neither defeat the State’s claim nor establish a defence to the State’s claim. The fact which the State would be estopped from denying was not a fact which was relevant to the liability of Compass and Mr Harburg to pay the rent at the rates stated in the leases.
- The appellants’ argument roamed unnecessarily far and wide over Australian estoppel cases but must be taken to have foundered because the second of the appellants’ so-called “key points” could not be determined in its favour.
- The appellants’ challenge to the rejection of their common law estoppel by representation case fails.
- For completeness, I record that I would not have permitted the appellants to argue that estoppel could operate as a complete defence, even if, contrary to my view, the State’s case had contradicted the representation relied on by the appellants. In this case, estoppel was never pleaded as a complete defence, and if it had been, the State might have conducted its case differently, at least by advancing a case as to occupation rent in respect of the debt claim given that no limitation point was raised against the State’s debt claim at trial.
The appellants’ challenge to the rejection of the equitable estoppel case
- The appellants sought to argue that the evidence established a case which fell within Brennan J’s famous identification of the elements of equitable estoppel in Walton Stores (Interstate) Ltd v Maher at 428-429. They argued:
- (a)they had adopted an assumption as to the terms of a legal relationship with POBC, namely that the rent in the leases was a “commercial rental” in the sense of being substantially the same as that which other lessees were charged;
- (b)POBC induced them to adopt that assumption;
- (c)they acted in reliance on that assumption;
- (d)POBC knew or intended that they would so act; and
- (e)they would suffer detriment if the assumption was not fulfilled.
- However, in his discussion of the first element, Brennan J had earlier observed at 420 (emphasis added):
“In all cases where an equity created by estoppel is raised, the party raising the equity has acted or abstained from acting on an assumption or expectation as to the legal relationship between himself and the party who induced him to adopt the assumption or expectation. The assumption or expectation does not relate to mere facts, whether existing or future.”
- In this case, there was an unchallenged finding of fact that Compass could have had no assumption or expectation that the amount of rent it would have to pay was anything other than the amounts for rent stated in the leases. There was no promissory conduct and no pleaded basis for finding that an equity existed which should constrain the manner of exercise by the State of its legal right to recover the rent stated in the leases. The representation made in the September letter could not, consistently with the unchallenged findings, be construed as amounting to a “negative stipulation as to rent”, as had been contended by the appellants below. Indeed, on appeal, and as I have mentioned, the appellants specifically disclaimed reliance on promissory estoppel. The unchallenged findings justify the conclusion that in this case the assumption or expectation did relate to a “mere fact” and did not relate to the way in which the State could exercise its legal rights. There was no room for equitable estoppel to operate as a defence in the way which the appellants had argued below.
- The appellants’ case on appeal sought to avoid these difficulties by characterising the estoppel as an estoppel by representation in equity and then by submitting that, in equity, the State must be required to “make good the representation” in a way which had the pecuniary consequences for which they contend. They relied on observations in Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies (5th ed., 2015), paras 17-135 to 17-160, to suggest that there is jurisdiction in equity to award pecuniary compensation to a plaintiff for the falsity of an innocent misrepresentation relied on by the plaintiff to its detriment. They submitted that “[a]t no point in the modern history of equity has a court in either Australia or England overruled the line of authority cited by the appellants.” The line of authority on which such reliance was placed was that commencing with Burrowes v Lock which, it was said, identified the equitable jurisdiction whereby a defendant could be compelled to make good its representations, even if innocently (in the sense of not fraudulently) made. Reference was also made to Brownlie v Campbell (1880) 5 App Cas 925 at 935-36 (Lord Selborne LC) and 953 (Lord Blackburn); Derry v Peek (1889) 14 App Cas 337 at 360 (Lord Herschell); Low v Bouverie  3 Ch 82 at 100 (Lindley LJ); MLC Assurance Co Ltd v Evatt (1968) 122 CLR 556 at 584 (Kitto J); Winter Star Pty Ltd v Dixon (1994) 55 IR 187 at 194 (Glynn and Cullen JJ, Redman CC); Delaforce v Simpson-Cook (2010) 78 NSWLR 483 at 485 (Allsop P); Swick Nominees Pty Ltd v Leroi International Inc (No 2) (2015) 48 WAR 376 at 443-4  (Murphy JA and Edelman J).
- There are a number of problems with the appellants’ contention.
- First, Burrowes v Lock may not have been overruled, but the extent to which it may be regarded to have survived Derry v Peek was explained over 130 years ago in Low v Bouverie, and in a way which does not assist the appellants. As to this:
- (a)In the course of argument, Lindley LJ explained that the report of Burrowes v Lock at (1805) 10 Ves 470 was not quite intelligible: see Low v Bouverie at 95. Accordingly, he obtained a copy of the pleadings and a footnote to the report of Low v Bouverie sets out in detail a report of the facts, pleadings and decree made in Burrowes v Lock: see Low v Bouverie at 94 to 97.
- (b)The detail there set out reveals that Burrowes v Lock concerned the assignment for consideration by one of several residuary legatees of his share of the residue of a testator’s estate. The assignee brought suit against both the assignor and the trustee of the assignor’s share of the residue, seeking to recover the full share assigned. (The suit could be brought against the trustee because the assignee had given notice of the assignment to the trustee.)
- (c)The trustee had, in answer to the suit, admitted that he had notice of the assignment, but asserted that the assignor’s share of the residue was encumbered and, accordingly, he could not pay over the full share to the assignee.
- (d)However the assignee pleaded that prior to the time of taking the assignment, he had made inquiry of the trustee to find out whether the assignor was absolutely entitled to the share which was the subject of the proposed assignment and the trustee had informed the assignee that the assignor’s share was unencumbered. The trustee admitted that the inquiry had been made of him and said that he had honestly answered as alleged but asserted that he had forgotten about the fact of the encumbrance.
- (e)The decree made was that the trustee pay the full share to the assignee, subject to a deduction to reflect the value of the encumbrance, but that the assignor and the trustee must jointly pay to the assignee the amount so deducted.
- (f)Lindley LJ observed at 100:
“… until [Derry v Peek] was decided, it was generally supposed to be settled in Equity that liability was incurred by a person who carelessly, although honestly, made a false representation to another about to deal in a matter of business upon the faith of such representation: Burrowes v. Lock …. This general proposition is, however, quite inconsistent with Derry v. Peek.”
- (g)His Lordship went on to state at 101 that estoppel was not a cause of action but a rule of evidence which precluded a person from denying the truth of some statement previously made by himself. He then explained Burrowes v Lock in these terms:
“The decree was, in effect, that the trustee should pay the full amount of the share to the plaintiff without deducting the incumbrance. The trustee, even if he acted honestly … was clearly estopped from denying that the share was unincumbered. … Regarded as a decision on the ground of estoppel, Burrowes v. Lock appears to me not only to have been quite right, but to remain wholly untouched by Derry v. Peek.”
- (h)For his part, Bowen LJ agreed with Lindley LJ. He regarded Derry v Peek as leaving untouched cases of estoppel. He too regarded estoppel only as a rule of evidence in the same way as did Lindley LJ. He analysed Burrowes v Lock as a case of estoppel and regarded that as having become apparent as soon as one examined the complete record of the case. He observed at 106:
“It was a case where there was a right to relief on the hypothesis that the defendant was precluded from denying the truth of a particular fact.”
- (i)Kay LJ specifically addressed the question “whether Courts of Equity have been in the habit of exercising a more extensive jurisdiction than Courts of Law in cases of innocent misrepresentation” and, after analysing the cases, concluded at 111-112:
“The result of the authorities seems to be as follows:–
- There has been from ancient time a jurisdiction in Courts of Equity in certain cases to enforce a personal demand against one who made an untrue representation upon which he knew that the person to whom it was made intended to act, if such person did act upon the faith of it and suffered loss by so acting.
- This was readily done where the representation was fraudulently made, in which case an action of deceit would lie at law.
- Relief will also be given at Law and in Equity, even though the representation was innocently made without fraud, in all cases where the suit will be effective if the defendant is estopped from denying the truth of his representation.
- Where there is no estoppel, an innocent misrepresentation will not support an action at law for damages occasioned thereby.
- Estoppel is effective where an action must succeed or fail if the defendant or plaintiff is prevented from disputing a particular fact alleged: for example, if an assign of A. sues A.’s trustee to recover the fund assigned, and the trustee is prevented from denying its existence in his hands; or at law, if the assign of a debt should sue the alleged debtor and he was prevented from denying that the debt was due. Or, in the converse case, an estoppel may be a defence; as if a joint stock company were to sue a shareholder for calls and they were estopped from denying that the shares were paid up, their action would fail.”
- (j)If Burrowes v Lock is viewed as an estoppel case, then estoppel by representation in equity operates in the same way as estoppel by representation at law. And because the question of whether the rents were similar is not an element of the State’s cause of action or an element of a defence, estoppel would not assist the appellants.
- (k)The result is that Low v Bouverie is authority against the continuation of the equitable jurisdiction upon which the appellants rely.
- Second, the authorities relied upon by the appellants which post-date Low v Bouverie do not authoritatively recognise a continued equitable compensatory jurisdiction in respect of innocent misrepresentation of facts. I observe:
- (a)Mutual Life & Citizens’ Assurance Co Ltd v Evatt (1968) 122 CLR 556 was, of course, a case in which the High Court recognised that in certain circumstances a person conveying information or advice to another might be subject to liability in tort for having done so negligently. The High Court was not examining the equitable jurisdiction presently posited. The High Court discussed Low v Bouverie in the course of considering whether it would prove an insurmountable obstacle to recognising a duty of care in tort and found that it would not. It must be acknowledged, however, that in the course of so doing Barwick CJ and Kitto J did suggest that Lindley LJ in Low v Bouverie had taken more from Derry v Peek than should be taken. Further, in obiter remarks Kitto J referred with approval to this statement by Lord Shaw in Nocton v. Lord Ashburton  AC 932 at 971-972:
“There is a passage, my Lords, in an argument used by Sir Roundell Palmer in Peek v. Gurney [(1871) LR 13 Eq 79 at 97] which may well afford guidance as to the antecedent state of the law of equity. ‘Equity will interfere only in the following cases: first, wherever a contract is to be rescinded; secondly, where fraud, in the proper sense of the word, is to be redressed; thirdly, where a representation has been made which binds the conscience of the party and estops and obliges him to make it good. In the last case the representation in equity is equivalent to a contract and very nearly coincides with a warranty at law; and in order that a person may avail himself of relief founded on it he must shew that there was such a proximate relation between himself and the person making the representation as to bring them virtually into the position of parties contracting with each other.’”
- (b)In Winter Star Pty Ltd v Dixon (1994) 55 IR 187, the Full Bench of the then Industrial Relations Commission found that the appellant was estopped from enforcing an agreement that it had previously repudiated because of a false representation made to the respondent. The Full Bench did not have regard to Low v Bouverie nor was an alleged right to equitable compensation advanced. And, in any event, the citation of Burrowes v Lock quoted the Master of the Rolls affirming Equity’s jurisdiction to require knowingly false representations to be made good.
- (c)In Delaforce v Simpson-Cook (2010) 78 NSWLR 483, the New South Wales Court of Appeal was considering the principles governing the grant of relief in an estoppel by encouragement claim. Central to that analysis was the principle of “minimum equity” as discussed by the High Court in Giumelli v Giumelli (1999) 196 CLR 101. Consistent with the High Court’s position in Giumelli v Giumelli, Handley AJA (with whom Allsop P and Giles JA agreed) held that the “minimum equity” principle did not apply to the subject facts and was “probably not the law in this country”. The Court’s decision in Delaforce v Simpson-Cook is not authority for the existence of a continued equitable compensatory jurisdiction in respect of innocent misrepresentation of facts. The passage cited by the appellants simply records Allsop P (as he then was) observing that Burrowes v Lock was an example of the proposition that “[e]quity has always had a place in keeping parties to representations or promises”.
- (d)Swick Nominees Pty Ltd v Leroi International Inc (No 2) (2015) 48 WAR 376 concerned a manufacturer’s liability for pure economic loss in the context of negligent misstatements and breach of contract. Burrowes v Lock was cited in reference to a discussion regarding the development of duty of care in cases of pure economic loss. There was no recognition of a continued equitable compensatory jurisdiction in respect of innocent misrepresentation of facts. Murphy JA and Edelman J noted merely:
“An understanding of the enforceability of undertaken duties became confused during the 19th century. The greatest difficulty was in the context of actionable misrepresentations. The focus was not upon whether a person had undertaken that a statement had been made with care or undertaken only that the statement had been made honestly. Instead, the question was generally posed in absolute terms: a person would be liable only for having made a statement fraudulently. The focus was on the meaning of “fraud” rather than the content of the undertaking. Until Derry v Peek, the meaning of “fraud” was the subject of much dispute, particularly between the courts of common law (which tended to view the meaning strictly) and courts of equity (which, during various periods, accepted liability for “constructive fraud” and “innocent mistake”).”
- Third, the appellants’ inability to identify a modern authority which, as a matter of ratio decidendi, has recognised the continued existence of a compensatory jurisdiction in equity in respect of innocent misrepresentation of facts is hardly surprising. One might think that any impetus for the resurrection of such a pecuniary remedy has been negated by the expansion of the action for damages for negligent misstatement, by the recognition of promissory estoppel, and by the statutory remedies for misleading and deceptive conduct. As to this:
- (a)The learned authors of Meagher, Gummow and Lehane’s Equity: Doctrine and Remedies do identify Burrowes v Lock as authority for the existence of an equitable jurisdiction to award pecuniary compensation to a plaintiff for the prejudice suffered by a plaintiff consequent upon detrimental reliance on an innocent representation of fact made by a defendant. The learned authors raise the possibility that the compensatory jurisdiction might still remain, despite Derry v Peek and Low v Bouverie, although they acknowledge that the argument “takes equity rather far”.
- (b)On the other hand, Professor Finn has observed, that with Low v Bouverie it became the orthodox view that one effect of Derry v Peek was to dispossess equity of its compensatory jurisdiction in respect of innocent misrepresentations.
- (c)Whatever criticisms can be made of the development of that orthodoxy 130 years ago, modern resurrection of such a jurisdiction would have far reaching ramifications, including as to whether some established principles of tort and contract could be regarded to have any continuing relevance or proper justification: see, for example, the discussion in Francis Dawson, ‘Making Representations Good’ (1982) 1(3) Canterbury Law Review 329 at 330-331. It may well be too late in the history of the law to take this course.
- Ultimately, however, this appeal does not provide an occasion to determine these questions of equitable doctrine because the case which the appellants now advance was not the case they advanced below. I observe:
- (a)In the appellants’ written submissions in reply – and consistently with the fact that their counterclaim did not advance a claim for equitable compensation – the appellants say that they make no claim for “equitable damages” in this case. But, despite that disclaimer, that is exactly what this Court would be permitting them to do, if it permitted them to advance the argument now put. It would be permitting the appellants to assert a claim for equitable compensation to make good the representation; to quantify the amount of that claim; and to use that quantified claim as a basis for impeaching the conscience of the State in asserting its legal right to recover the rent stated in the leases.
- (b)Although the appellants’ argument did not condescend to specifics, one might speculate (without expressing any view as to the argument’s correctness) that the development of their argument might necessarily have involved: (1) reliance on an equitable set-off of the quantified equitable claim against the State’s legal rights; or (2) the contention that the State’s legal chose in action to recover rent having been acquired by reason of a misrepresentation as to a collateral fact, the legal title of the owner of the chose should be subjected by order of the Court to limitations necessary to meet the requirements of good conscience (involving relief by way of proprietary estoppel and constructive trust).
- (c)As will have become obvious, the appellants’ pleadings did not assert claims for equitable relief, pecuniary or otherwise. Nor did their argument below. A claim for equitable relief for the consequences of the innocent misrepresentation made in the September letter was simply not litigated below. And, as a result, neither was the question of how the appellants’ delay in commencing proceedings would affect equitable claims. Had a claim for relief by way of equitable compensation based on the jurisdiction now relied upon been advanced in the counterclaim, the State might have conducted its case differently, not the least by pleading laches, or that equity might apply by analogy the limitation statutes which were in fact relied on in relation to the claims which were advanced in the counterclaim. The limitations defence pleaded in the State’s answer to the counterclaim is expressed to apply only to the appellant’s common law and statutory claims, presumably because the State understood – correctly in my view – that the counterclaim did not advance claims for equitable relief.
- (d)The appellants cannot be permitted on this appeal to argue for relief founded on the application of the Burrowes v Lock compensatory jurisdiction (assuming, without deciding, that it still survives), not having advanced such a claim below.
- The appellants’ challenge to the rejection of the equitable estoppel case fails.
- The appellants’ challenge to the failure below of their estoppel defence must fail.
Mr Harburg’s Trade Practices Act claim
The appellants’ argument
- There were two relevant grounds of appeal:
- (a)Ground 3: The primary judge erred in concluding, impliedly in  of the reasons for judgment, that Mr Harburg’s counterclaim for damages and other relief under ss 82 and 87 of the Trade Practices Act was statute-barred.
- (b)Ground 6: The primary judge erred in not assessing the loss or damage suffered by Mr Harburg by reason of the breach of the Trade Practices Act.
- I have explained above how Compass’ damages claim was pleaded (at  to  above), presented to the primary judge (at  to  above), and why the primary judge found that it was statute-barred (see at  above). The appellants do not seek to appeal that conclusion.
- The paragraph of the primary judge’s reasons referred to in ground 3 was the paragraph which simply expressed her Honour’s ultimate conclusion, namely:
“For the above reasons I conclude that Compass and Mr Harburg have no defence to the State's claim on the lease, the sub-lease and the guarantee and give judgment in favour of the State, together with interest. I will hear the parties as to costs.”
- It is true that, as asserted in ground 6, the primary judge did not assess the loss or damage suffered by Mr Harburg by reason of the breach of the Trade Practices Act. Indeed, her Honour did not separately address Mr Harburg’s claim for loss or damage at all. But that is hardly surprising because there was no attempt to present a case for her Honour’s consideration which required that to occur.
- It was implicit in the way in which the case was pleaded and argued that Compass and Mr Harburg recognised that if Compass’ claim for damages under the Trade Practices Act failed, then so must that of Mr Harburg. The primary judge made no error by responding to the case as it was presented to her.
- But, in any event, on the findings made by the primary judge, it is plain that Mr Harburg’s case must also be regarded as statute-barred. As expressed, the State’s limitations defence applied to the counterclaim by both Compass and Mr Harburg. Mr Harburg suffered loss via the same mechanism as Compass had, namely on 18 November 2009 by subjecting himself to the obligations expressed in the deed of variation they executed and, on 16 November 2010, by subjecting himself to the obligations expressed in the wet lease and the dry lease which they entered into on that day. The logic which applied to defeat Compass’ claim would also apply to defeat Mr Harburg’s claim, even though the damages which could be claimed by him were not entirely the same.
- In argument before this Court, Mr Harburg sought to escape that logic by contending that time did not begin to run against him as guarantor until the contingent liability under the guarantees which he had given crystalised by the State making a demand on him for payment of rental arrears. The State did not make such a demand until 23 October 2017.
- That submission depended on the proposition that Mr Harburg did not become liable on the guarantees until a demand was made of him. The question whether a guarantee should be construed so that receipt of a demand is a condition precedent to the guarantor’s liability is a question which turns on the proper construction of the instrument concerned: see McGlone v Kalgold Pty Ltd  QCA 215 at  per Dalton J (with whom de Jersey CJ and McMurdo J agreed), citing with approval Benson-Brown v Smith  VSC 208; Filmana Pty Ltd v Tynan  QCA 256 at  to  per Muir JA (with whom McMurdo P and Holmes JA agreed); and George 218 Pty Ltd v Bank of Queensland Limited (No 2) (2016) 313 FLR 287 at 319  per Martin CJ and Newnes and Murphy JJA.
- It suffices to observe that guarantees were expressed in cl 27 of the wet lease and cl 25 of the dry lease. Because the clauses were not materially different in terms, it suffices to have regard only to cl 25 of the dry lease, which relevantly provided (“Guarantor”, “Tenant” and “Landlord” being references to Mr Harburg, Compass and the State respectively):
“25. GUARANTEE AND INDEMNITY
The Guarantor is liable jointly and severally with the Tenant for payment of all moneys to be paid by the Tenant and performance of all the Tenant’s Obligations under this Lease.
The Guarantor indemnifies the Landlord from and against all Claims which it may incur arising from any breach of any of the Tenant’s Obligations. The Guarantor remains liable to the Landlord under this indemnity even if:-
25.2.1 the Landlord has exercised any of its Rights under this Lease including its rights of re-entry; or
25.2.2 the Tenant (being a corporation) has been wound up or dissolved or (being a natural person) has been declared bankrupt; or
25.2.3 the guarantee given by the Guarantor may for any reason be unenforceable either in whole or in part.
25.3 Default by Tenant
If the Tenant breaches its Obligations the Guarantor must:-
25.3.1 immediately on demand by the Landlord pay all moneys and make good all losses and expenses incurred by the Landlord; and
25.3.2 pay to the Landlord Interest from the time moneys fall due to the date of payment.
25.4 Liability Not Affected
The liability of the Guarantor is not affected by:-
25.5 Primary Debtor
Even as though between the Guarantor and the Tenant, the Guarantor may be a surety only, as between the Guarantor and the Landlord the Guarantor is a primary debtor and contractor jointly and severally with the Tenant.”
- There is nothing in the clause which expressly or impliedly makes the giving of a demand a condition precedent to the liability imposed on Mr Harburg by the clause. Clause 25.1 operated to make Mr Harburg jointly and severally liable with Compass for payment of all moneys to be paid by Compass, from the time he became bound by the guarantee. That contractual intention was reinforced by the primary debtor obligation expressed in cl 25.5. Mr Harburg’s liability for Annual Rent and interest was immediate and not contingent upon a demand being made. That conclusion is not gainsaid by the reference to a demand in clause 25.3.1. It is also appropriate to recapitulate the proposition that under the leases rent was payable without the need for any demand: see  above.
- It follows that Mr Harburg suffered loss immediately upon becoming bound by the guarantees expressed in the leases, namely on 16 November 2010, which was more than six years before the date on which Compass commenced proceeding 7884 of 2017; the date on which the State commenced proceeding 13008 of 2017; and the date on which Mr Harburg filed his counterclaim in that proceeding. The State’s pleaded reliance on the six-year limitations period expressed in the Trade Practices Act would have been a complete defence to Mr Harburg’s claim for damages under the Trade Practices Act or other relief under that Act, even if it had been appropriate to consider the claim as a separate cause of action independently of that advanced by Compass.
- Because the State could make good its limitations defence by reference to the evidence adduced at trial, it is not necessary to consider the State’s application for leave to rely on further evidence, or what the implications of that further evidence might have been. The State’s application to adduce further evidence on appeal may be dismissed.
- Grounds 3 and 6 fail.
The orders which should be made
- The appropriate orders are:
- (a)The appeal is dismissed, with costs.
- (b)The respondent’s application for leave to adduce further evidence on appeal is dismissed.
The wet lease was actually a sub-lease, but nothing turns on that fact and it is convenient simply to refer to it as a lease.
Reasons of primary judge at .
Although the primary judge was highly critical of the evidence of Mr Harburg, her Honour found that Mr Harburg’s evidence about reliance on the representation was corroborated and that she was prepared to rely on it: reasons at , and in this regard see the evidence of Mr Harburg referred to in the first five lines of the primary judge’s reasons at .
Wet lease: Reference data schedule item 2 and Dry lease: Reference data schedule item 2.
Wet lease cl 3.1.1 read with reference data schedule item 5. Dry lease cl 3.1.1 read with reference data schedule item 5.
Reasons of primary judge at .
Reasons of primary judge at .
See the State’s defence at . The time limit for the common law deceit claim was six years: see s 10 of the Limitation of Actions Act 1974 (Qld) and the time limit for relief under ss 82 or 87 of the Trade Practices Act was also six years: see ss 82(2) and 87(1CA) of the Trade Practices Act.
See the State’s defence at .
Reasons of primary judge at , footnotes omitted.
Transcript on appeal 2-42 lines 29 to 47.
Transcript 5-23 line 45 to 5-24 line 46 ARB pp. 2746-2747.
Transcript 5-38 lines 23 to 46 ARB p. 2761.
The request was made by email sent by her Honour’s associate dated 23 November 2020 and proposed a timetable for the requested submissions and any responsive submissions by the State.
Reasons of primary judge at .
Reasons of primary judge at .
Reasons of primary judge at  to .
Reasons of primary judge at .
Reasons of primary judge at  and .
Reasons of primary judge at .
Reasons of primary judge at  and .
Transcript on appeal 1-3 lines 20 to 24.
Transcript on appeal 1-5 at lines 17 to 22.
Transcript on appeal 1-6 at lines 1 to 3.
Appellants’ outline of argument at [47(e)].
Transcript on appeal 1-5 line 32 to 1-6 line 20.
Transcript on appeal 1-12 lines 8 to 25 and 1-20 lines 1 to 25.
Transcript on appeal 1-28 lines 11 to 31.
Reasons of primary judge at .
Wilken & Ghaley, The Law of Waiver, Variation and Estoppel, 3rd ed , Oxford University Press 2012 at p. 137; Michael Barnes QC, The Law of Estoppel, Hart Publishing at 3.1 to 3.3; Feltham, Hochberg and Leech, Spencer Bower, The Law Relating to Estoppel by Representation, LexisNexis 2004 at p. 4.
Michael Barnes QC, The Law of Estoppel, Hart Publishing at 3.3.
Reasons of primary judge at .
See reasons of primary judge at , citing Central London Property Trust Ltd v High Trees House Ltd  KB 130 and Combe v Combe  2 KB 215, 220.
Grounds 9 and 12 were deleted by amendment of the notice of appeal.
The appellants had contended that the primary judge’s reliance on the analysis of Keane J in Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd was misplaced because his Honour’s view did not command majority support in that case and did not represent the law.
Transcript on appeal 1-77 lines 22 to 47 and 1-78 lines 1-8.
See (1968) 122 CLR 556 per Barwick CJ at 575-576, and per Kitto J at 587-588. The High Court’s decision was reversed in Mutual Life & Citizens’ Assurance Co Ltd v Evatt (1970) 122 CLR 628, but Lords Hodson, Guest and Diplock expressed similar views to those expressed by Barwick CJ and Kitto J in relation to the way in which Low v Bouverie treated Derry v Peek.
Delaforce v Simpson-Cook at 493  and 497.
(2015) 48 WAR 376 at 443-444  (footnotes omitted). Burrowes v Lock was footnoted as an example of a case where a court of equity had, prior to Derry v Peek, accepted liability for “constructive fraud” and “innocent mistake”.
P D Finn, ‘Equitable Estoppel’ in P D Finn (ed), Essays in Equity (1985) at p 65.
Appellants’ submissions in reply at .
cf Giumelli v Giumelli (1999) 196 CLR 101 at 111-114  to  per Gleeson CJ, McHugh, Gummow and Callinan JJ; Sidhu v Van Dyke (2014) 251 CLR 505 at 511  per French CJ, Kiefel, Bell and Keane JJ and Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1 at 46  per Keane J.
Grounds 1, 2, 4, and 5 were deleted by amendment to the notice of appeal.
- Published Case Name:
Compass Marinas Australia Pty Ltd & Anor v State of Queensland
- Shortened Case Name:
Compass Marinas Australia Pty Ltd v State of Queensland
 QCA 293
Sofronoff P, Morrison JA, Bond JA
23 Dec 2021
- Selected for Reporting: