State Rail Authority of NSW v Heath Outdoor

termsterms (express)terms (parol evidence rule)promissory estoppel

25 Apr

Written By Julie Clarke

State Rail Authority of NSW v Heath Outdoor Pty Ltd
(1986) 7 NSWLR 170 (New South Wales Court of Appeal)

Case details

Court
New South Wales Court of Appeal

Judges
Kirby P
Glass JA
McHugh JA

Issues
Parol Evidence Rule

Citations

(1986) 7 NSWLR 170

Appeal from
Supreme Court of NSW

Judge
Justice Holland

Overview

Facts

Heath Outdoors (HO) entered into several contracts with SRA. These contracts gave HO the right to place advertising material on land owned by SRA. Clause 6 of one agreements gave SRA the right to cancel the contract by giving one month’s notice.

During the negotiations, a representative of HO pointed out that cl 6 was not in accordance with the discussions that had taken place between the parties; it was alleged HO had been told it did not need to worry about clause 6 because it would only be invoked when the lessee did not pay or advertised objectionable content on hoardings and poster panels owned by SRA. HO constructed its own panels and rented ground space from SRA.

The representative of SRA stated that it would be very difficult to amend the contract and that there was no need to do so because cl 6 would only be invoked if rent was not paid or somebody wanted to advertise objectionable content. The representative of HO stated that he was happy to proceed so long as he had SRA’s assurance that cl 6 would only be invoked in these circumstances.

In January 1983 HO contracted with a cigarette manufacturer to display cigarette advertising. In March 1983 the NSW government decided to phase out cigarette advertising on government property. SRA (a government authority) terminated its agreement with HO in 1983. HO claimed it was not permitted to rely on cl 6 either because the contract had been varied or because of promissory estoppel.

Finding

The majority found that no promissory estoppel operated (McHugh JA dissented). Justice McHugh also rejected a claim that the contract was partly oral and partly in writing.

Facts

[Facts largely taken from judgment of McHugh JA]

In October 1981, the parties had a conversation in which HO (via Mr Low) stated that cl 6 [below] was not in accordance with pre-contract discussion in which SRA (via Mr Giles) had given assurances that there is no need for HO to be concerned about the exercise of clause 6 because they have a five year contract and clause 6 was only ever invoked for non-payment or if someone wants to advertise objectionable advertising. The SRA representative had also made clear that it would be difficult to have the clause altered.

On 12 October 1981, following the conversation referred to above, the parties entered into an advertising contract.

On 7 December 1982 another conversation occurred between Mr Low and Mr Giles about a fresh contract. It was alleged that it was similar in nature to the first.

In December 1982 the SRA (the defendant) wrote to Heath Outdoor (HO - the plaintiff) enclosing a copy of an advertising contract. This provided for HO to exhibit advertisements at 138 locations and was to commence 1 March 1983 and end 29 February 1988 unless terminated sooner.

Clause 3 provided:

All advertisements shall be in a form approved by and all advertising matter on such advertisements shall be subject to the approval of the Authority or its duly authorised officer prior to the exhibition thereof.

Clause 6 provided:

“The Authority may terminate this contract at any time upon giving to the advertiser one (1) calendar month's notice in writing of its intention so to do, but such action shall not give rise to any claim for compensation whatsoever on the part of the advertiser.”

This was signed by HO and returned to SRA.

In January 1983 HO entered into an agreement with Rothmans under which it rented advertising space to Rothmans on the spaces it had agreed with SRA in the 1982 agreement. This was also a five year agreement and contained s ‘special condition that [HO] could only terminate the agreement with Rothmans if, at the date of the agreement, it had received “notice from any Local or other authority of its intention or proposed intention to compel” [HO] to remove the advertising panels. Rothmans used the poster panels to advertise cigarettes. On 9 March 1983 the Ministers for Transport and Health jointly announced the phasing out of cigarette advertising on government transport vehicles and property. They said that “no new cigarette advertising would be accepted, and existing contracts would not be renewed on expiry”.’ [Justice McHugh, p 185]

On 2 May 1983 SRA notified HO of the Ministers’ statement, noting that the Rothmans cigarette posters were being displayed on a number of the advertising panels and that this was in breach of government policy and had to ‘be removed forthwith’.

On 3 May 1983 HO’s managing director met with a representative of SRA who told him HO would need to remove the cigarette advertising. HO advised SRA they couldn’t comply because of the agreement with Rothmans; SRA responded that HO had no right to enter into that agreement. However, SRA said they would allow the 1982 contract to run to expiry on three conditions relating to date and content of signs. On that day SRA wrote to HO setting out the substance of the discussion and requesting written response.

On 6 May 1983 HO wrote to SRA confirming acceptance of advertising limits set out in the 3 May letter and on 7 June 1983 SRA wrote to HO stating it was pleased to have agreement to enable advertising to continue, but also stated that in accordance with Government policy tobacco advertising should be phased out by 30 April 1984. This gave rise to further discussion and on 1 November 1983 SRA gave written notice that the contracts with HO were terminated.

Findings in brief

The trial judge found that there had been a contractual variation and that an estoppel arose which prevented SRA relying on clause 6.

The Court of Appeal (by majority) disagreed.

All members agree there was no relevant contract variation.

All members of the court accepted that promissory estoppel could extend to pre-contractual negotiations. This could arise where unconscionable for the promisor to insist on strict rights if given assurances they would only be exercised in a particular way.

Justices Kirby and Glass concluded it was not unconscionable for SRA to enforce clause 6 despite pre-contractual statements; Justice McHugh dissented, finding that the pre-contractual negotiations made it unconscionable for SRA to rely on this clause to terminate the contracts.

Justice McHugh also considered the claim that the contract was partly oral and partly written and rejected the claim, but made important comments about the operation of the parol evidence rule:

[191] A preliminary question which arises is whether the so called parol evidence rule prevents reliance on the oral assurances of [SRA]. Under that rule parol evidence is not admissible to contradict or vary the terms of a written agreement. But it is a rule whose scope and rationale is often misunderstood. It has no operation until it is first determined that the terms of the agreement are wholly contained in writing. The tendering of oral evidence to prove a contractual term, therefore, cannot be excluded until it is determined that any terms in writing record the whole of the parties' agreement: … [emphasis added]

When a person alleges that an agreement was partly oral and partly written, it is not always easy to determine whether the writing is the exclusive repository of the bargain. … in my opinion the correct rule is that the existence of writing which appears to represent a written contract between the parties is no more than an evidentiary foundation for a conclusion that their agreement is wholly in writing: … [emphasis added]

Trial judge (Justice Holland)

Found that the 1982 contract was varied in May 1983 by the letter setting out the conditions relating to continued use of the signs and this precluded exercise of rights in clause 6 (giving right to cancel at any time).

In relation to the evidence about pre-contractual discussions, Justice Holland found:

[182] “My interpretation of the evidence as to both occasions is that Mr Giles made it plain to Mr Low that he had no authority to add to or alter the written terms of the letter of the standard form, as to cl 6 or otherwise, and that if Mr Low wanted to make the contract he would have to accept them as they stood. … what Mr Giles said about the defendant's practice in the use of its powers under the clause [183] was in the context only directed to the degree of risk to which the plaintiff would be exposed by accepting the clause, not to qualifying its legal effect or the defendant's right to exercise the powers. As to Mr Low, I would interpret the evidence as showing clearly that Mr Low understood and accepted Mr Giles' lack of authority and that what Mr Giles was telling him of the use made of the clause was only information on which Mr Low might assess the risk of contracting on terms of cl 6 before deciding whether or not to accept it. I infer that Mr Low decided to take the risk knowing that, if he signed without any alteration to the contract, cl 6 could be used to its full legal extent by the defendant. …

Court of Appeal

[my emphasis throughout]

President Kirby

[On the estoppel claim]

[172] Assuming that Mr Giles had authority to give the assurance upon which Heath Outdoor relies, and accepting that such assurances were, in each case, capable of giving rise to an estoppel, it is my opinion, on the facts of this case, that they did not have the effect which Heath Outdoor claims. I do not consider that the SRA was estopped from terminating the contracts by the exercise of its right under condition 6 in both contracts.

…

[173] … for present purposes I shall assume that McHugh JA's conclusion is correct and that Mr Giles did have the authority to give G relevant assurances upon which Heath Outdoor relied to its detriment. I will also assume that, though given before the contract was made, although inconsistent with the terms of the contract and although not a variation of those terms nor a collateral contract, such assurances are capable of giving rise to an equitable estoppel. I can safely make that assumption without finally deciding the point, although the conclusion is a controversial one. I [174] can do so because of the opinion which I have formed about the proper A interpretation of Mr Giles' “assurances” and the lack of effect which they have to prevent the SRA from exercising its right to terminate the 1981 contract pursuant to the entitlement it reserved by condition 6.

[The 1981 contract (estoppel claim)]

[175] A number of considerations in the evidence lead me to the conclusion that it is not unconscionable for the SRA to insist upon its strict right to terminate the agreement, as provided by condition 6.

First, it is clear from earlier evidence of Mr Low that he was aware that Mr Giles held a relatively subordinate position in the SRA. … when he approached the consideration of the written agreement proffered to him on 12 October 1981, Mr Low was not in doubt as to the limitations of Mr Giles' authority. … Content must therefore be given to any “assurances” given by Mr Giles to Mr Low, with knowledge that Mr Low was aware of the limitations on Mr Giles' authority to give assurances and the weight that might in such circumstances be given to such assurances.

Secondly, the written contract itself must be given appropriate force and effect. It contains the reference, in condition 6, to the entitlement of the SRA to terminate the contract at any time upon giving a month's notice. … the very acknowledgment of the difficulty which Mr Giles is said to have admitted, in having the condition changed (or deleted) represents, in the events which occurred, an acknowledgment that Mr Low elected, notwithstanding, to accept the terms [176] of condition 6, rather than reopen the negotiations …

Thirdly, upon Mr Low's own evidence, Mr Giles repeatedly professed an inability to change condition 6. … Despite these protestations, concerning the inflexible bargaining stance of the SRA, Mr Low accepted the agreement for Heath Outdoor. In doing so, in my opinion, he accepted condition 6 which Mr Giles could not amend.

Fourthly, the representations concerning the circumstances of the invocation of condition 6 may properly be interpreted as the provision of information by a subordinate official of the SRA concerning the operation of the clause. ... It is quite possible that what Mr Giles told Mr Low was an accurate summary of Mr Giles' experience to that date. If in every case of negotiation of a written contract, observations of subordinate employees of a contracting party may be called in aid to ground relief on the basis of estoppel against enforcement of the written contract, unacceptable uncertainty may be introduced into our contract law. In the present case, in circumstances of repeated demonstration and assertion of an inability to vary the written contract, the commercial risk assumed in proceeding with a contract which contained a condition such as condition 6, was one accepted by the party who signed the written contract notwithstanding that it contained the offending condition.

Fifthly, even if the terms of Mr Giles' “assurance”, as recorded by Mr Low are examined, they refer to two circumstances in which condition 6 might be invoked, of which Mr Low was on notice. … the second, namely the advertisement of matter having an “objectionable advertising content”, was precisely the circumstance which later became relevant with the adoption of a Ministerial policy to phase out cigarette advertising. Accordingly, when Mr Low signed the F agreement, he was aware that the clause was sometimes invoked. … [177] … He preferred to accept that risk rather than go through the tedious process of renegotiation …

Sixthly, Mr Low was dealing with a large public authority, having a statutory constitution and a hierarchical structure …, it is quite unrealistic to attract to the “assurances” of Mr Giles such a status as to render later reliance upon them the ground for the suggestion that it would be unconscionable to permit the SRA to rely upon the term. …

Seventhly, … there is an additional consideration of general application. It is relevant to the conclusion that our law permits matters said orally, preliminary to the signature of a written contract, to give rise to an estoppel. I have assumed, without deciding it, that this may be the case. But it is also relevant to the operation which should be given, upon that assumption, to pre-contract conversations as a basis for erecting an estoppel to prevent a party from relying upon the writing. Too great a willingness by the courts to discern, in pre-contract negotiations, a basis for estoppel will have the effect of introducing a serious element of uncertainty into our law of contract. It may also encourage expensive litigation in which the terms of the writing are put to one side and the courts busily engaged (as we have been) in a minute examination of the wilderness of pre-contract conversations. This may be a reason, at least in the case of written contracts which are accepted by the parties and are not varied or elaborated, to hold the parties to the applicable terms of such contracts and to limit carefully the development of the law of estoppel, lest it seriously undermine the adherence to bargains which are such an important feature of modern economic life. But even if estoppel is pushed so far, a too tender sense of the unconscionable may mislead the courts into substituting the court's notions of equity as between contracting parties for the bargain which the parties have themselves negotiated and accepted. …

These considerations, general and particular, drive me to the conclusion that it is not unconscionable for the SRA to insist upon its rights under [178] condition 6. The facts that Heath Outdoor, after signing the contract which A contained condition 6, proceeded to expend funds erecting signs and also entered a contract with Rothmans of Pall Mall (Aust) Ltd which render Heath Outdoor liable in damages, are a commercial misfortune for Heath Outdoor. But in my view this is a misfortune with Heath Outdoor accepted when Mr Low accepted and signed the agreement containing the offensive condition 6. A conclusion to the contrary effectively writes condition 6 out of the contract on the ground that it cannot be enforced without an offence to B conscience. There is a basic inconsistency between the conclusion that the contract was not varied or elaborated by the conversations with Mr Giles and the holding that it would be unconscionable to enforce the contract following Mr Giles “assurances”. It is desirable that the law of contract should be as certain, consistent and as simple as the courts can make it. Especially is this true of commercial contracts such as the present.

… in respect of the 1981 contract, that contract was lawfully terminated by the SRA.

[The 1982 contract]

[178] … I agree with McHugh JA that Holland J erred in holding that the 1982 contract was varied and that the effect of the variation was to preclude the exercise of the power under condition 6 of the contract. … I also agree that the defence of promissory estoppel fails. …

[179] … By calling upon the conversation between Mr Low and Mr Giles of 7 December 1982, against the background of the conversation which had taken place between them on 12 October 1981, McHugh JA has concluded that Mr Giles represented on behalf of SRA to Heath Outdoor that condition 6 would not be used to terminate the 1982 contract. Because Heath Outdoor thereafter spent a substantial sum in erecting the signs and concluded a five year contract with Rothmans of Pall Mall (Aust) Ltd, McHugh JA concludes that it would be unconscionable for the SRA to insist upon its strict rights under condition 6 to terminate the agreement. My conclusion is to the contrary.

… Mr Low was perfectly aware of the strictly limited D authority of Mr Giles and of the need to go to superiors to secure variation of the written terms. Mr Giles had emphatically brought his limited authority to Mr Low's attention. Condition 6 remained in the 1982, as in the 1981 contract. This was so despite further time within which, had he chosen, Mr Low might have attempted to negotiate its removal with an officer of the SRA authorised to remove it. Mr Low was already on notice that the clause was sometimes invoked.

[The third estoppel]

[It was alleged there was a further assurance that clause 6 would not apply to advertising hoardings constructed by the advertiser itself]

[180] … The suggestion of this estoppel was not made at the trial. Nor indeed was it made in the appeal until the second day of hearing. … the trial judge B having made no findings such as would support estoppel No 3, I would not do C so, even if it would be procedurally fair at this stage so to proceed. I consider such an estoppel to be quite inconsistent with the evidence. Mr Low decided to take a commercial risk. This Court, out of reliance upon a too tender judicial conscience, should not needlessly force its way into commercial decisions and impose upon parties, who have agreed otherwise, obligations derived from the court's perceptions of conscience. Were it to do so in a case such as the present the engine of our economy would become the conscience D of lawyers expressed in courts rather than the informed economic judgments of business people, made in the market place. The beneficial developments of the law of promissory estoppel should, upon this view, be conserved to parties and situations quite different from the present.

Justice Glass

[180] … I agree for the reasons given by him that the plaintiff is not entitled to any relief in respect of either contract by reason of the alleged variation, the alleged collateral contract or the alleged oral promise in a contract which was partly oral and partly in writing or by reason [181] of an estoppel based upon the events of May 1983 (estoppel No 1). He concludes, however, that the plaintiff was entitled to relief against the exercise by the defendant of the power to determine the contracts conferred on it by condition 6 of each contract by reason of a promissory estoppel. In the case of both the 1981 and 1982 contracts the defendant was estopped by assurances given in pre-contract discussions. The alleged assurance given in 1981 and impliedly renewed in 1982 was that the defendant's standard advertising contract including condition 6 did not apply to hoardings constructed by the advertiser (estoppel No 3).

I am prepared to assume without deciding that a promissory estoppel can be founded upon assurances given prior to the execution of a written agreement … However I am unable to agree that the findings of the trial judge provide an adequate evidentiary foundation for the application of the principle between the parties before the Court.

…

In the submissions put to the Court by Mr Gummow for the plaintiff the part of the 1981 conversation relied upon to raise an estoppel was the assurance that the clause would not be invoked except for non-payment of rent or the exhibition of objectionable advertising material (estoppel No 2). I agree with the President that no promissory estoppel can be based upon these words. The power to terminate the second contract was invoked for the very reason that the exhibition of cigarette advertisements was declared by government policy announced on 9 March 1983 to be objectionable on health grounds. The exercise of the power to terminate on that ground involved no departure from any representation that strict contractual rights [184] would not be enforced. … So far from the representation being departed from it was being strictly observed. …

…

It would seem to me quite incongruous and for that reason not credible that a State Rail Authority officer while insisting that a particular agreement be signed without alteration would be simultaneously representing that the terms of the agreement were inappropriate to the circumstances of the contracting party and that the latter although required to sign them would not be “affected” by them. I would also rely as did the trial judge upon the failure to note any qualification of condition 6 on the documents and the failure to protest when it was invoked as probative of the fact that no representation of the kind alleged had ever been made. I would infer that Mr Low well understood that Mr Giles, who had no authority to delete condition 6 from the agreement, was equally bereft of authority to bind the State Rail Authority by a representation that it would not be enforced. It would in my view be an unwarranted extension of the doctrine of promissory estoppel to base it upon an alleged representation that a right would not be strictly enforced which is not authorised by the party in whom the right is vested and where the representee is aware that the representor cannot bind that party by his representation. …

Justice McHugh

[Page 187] ‘[Justice Holland'] was in error in holding that the 1982 contract was varied and that the effect of the variation was to preclude the exercise of the power under condition 6 of the contract. The critical question is whether there was a variation which had the effect of abrogating condition 6. For I cannot accept the view, which his Honour expressed, that despite the variation condition 6 remained on foot to give effect to the rights of the defendant under the general law or in the event of a breach of contract justifying rescission. That conclusion would not only take away the defendant's right to terminate the contract on written notice, but would also detract from its general law rights to terminate the contract forthwith for fundamental breach or repudiation. For condition 6 requires that the defendant should give one calendar month's notice in writing of its intention to terminate the contract. The critical question, therefore, is whether the effect of the meeting of 3 May and the correspondence between the parties was that condition 6 was repealed.’

‘Since the terms of the condition do not appear to have been mentioned at the meeting and are not referred to in the letter of 3 May, it seems highly unlikely that the parties intended to repeal it. Clearly enough there was a discussion between the parties as to whether the contract and cigarette [188] advertising should continue. It is also plain enough that an agreement was reached that cigarette advertising should continue and that the parties contemplated that it would continue until the expiration of the Rothman's contract. But I do not see anything in the terms of the discussion, in the correspondence between the parties, or in their agreements or assumptions which leads to a conclusion that the defendant intended to give up its rights under condition 6 in consideration for any promise on the part of the plaintiff.’

…

‘Even accepting [HO’s] evidence that [SRA] said that the contract would be allowed to “run to expiry”, I do not think that it is reasonable to read that statement as meaning that the defendant was giving up its rights either under the general law or under the contract. Accordingly, in my opinion the contract between the parties was not varied in May 1983.

Estoppel

[On the question of whether SRA was estopped from invoking condition 6 to terminate the contract]

[Page 189] ‘Modern authority establishes that the doctrine of estoppel is not confined to representations concerning existing facts. … A statement that a right under an existing contractual relationship will not be enforced may constitute an estoppel if certain conditions are fulfilled: … But one of these conditions is that any representation must be clear and unequivocal: …. If a statement is capable of another meaning, no estoppel can arise: …

In the present case neither Mr Bennell nor Mr Giles made any representation that the contract would be terminated only by effluxion of time. The statement in the letter of 3 May 1983 that cigarette advertising would “be allowed to continue on 114 sites” is not an unequivocal representation that the defendant was abandoning its rights under condition 6. Nor was Mr Bennell's statement that the contract would be allowed to “run to expiry”. The defence of promissory estoppel based on the meeting and correspondence in May 1983 fails.’

Clause 6 and the parol evidence rule

[Justice McHugh noted HO contended clause 6 did not give unfettered decision not to terminate either because it would conflict with ‘fundamental promise that the contracts were for five years] or that before the signing of the contracts ‘assurances were made which were promissor in nature’ and these formed part of the contract that was partly in writing and partly oral. Estoppel was also argued.

On the partly oral/partly written claim

[190] [Justice McHugh noted that HO argued that when SRA presented a letter and form of contract in October 1981, they (HO) pointed out that cl 6 was not in accordance with an oral agreement and that SRA replied that the document was a standard authority document and could not be changed, but] that there was no need for [HO] to be concerned because he had “five years on the contract and it is very difficult for me to have that clause or any other clause altered” [and said that] “the only time that that clause is ever invoked is for non-payment of rent or if somebody wants to advertise objectionable advertising content”. [HO] said “as long as I have D your assurance that that is the case we can proceed”. [SRA] replied “you need not be concerned as to the terms of that agreement apply only to hoardings and poster panels that belong to us and where you would be placing your advertising. These don't affect you because you are building the plant and all we are doing is renting you the ground space”. … [HO] said that the reason he did not ask [SRA] to cross out condition 6 was because “it became very evident to me that he was going to have difficulty having the clauses changed if he had to take them away”. …

[The contract was signed immediately after these statements].

[191] The plaintiff [HO] submitted that it is always open to a party to show that a written document is not the binding record of their contract: …. It is then said that the statements by [SRA] about condition 6 were part of the contractual terms between the parties.

A preliminary question which arises is whether the so called parol evidence rule prevents reliance on the oral assurances of [SRA]. Under that rule parol evidence is not admissible to contradict or vary the terms of a written agreement. But it is a rule whose scope and rationale is often misunderstood. It has no operation until it is first determined that the terms of the agreement are wholly contained in writing. The tendering of oral evidence to prove a contractual term, therefore, cannot be excluded until it is determined that any terms in writing record the whole of the parties' agreement: … [emphasis added]

“… the mere production of a contractual document, however complete it may look, cannot as a matter of law exclude evidence of oral terms if the other party asserts that such terms were agreed. If that assertion is proved, evidence of the oral terms cannot be excluded because the court will, by definition, have found that the contractual terms are partly to be found in what was agreed orally as well as the document in question. No parol evidence rule could apply. On the other hand, if that assertion is not proved, there can be no place for a parol evidence rule because the court will have found that all the terms of the contract were set out in the document in question and, by implication, will thereby have excluded evidence of terms being found elsewhere.”

(The Law Commission, Law of Contract, The Parol Evidence Rule (January 1986) Cmnd9700, par 2.12 at 11.)

… I am of opinion that on the evidence the submission that the contract was partly oral should be rejected. Mr Giles [for SRA] made it plain that he had no authority to change any condition of the contract. Mr Low [for HO] accepted this. He said that it became apparent to him that Mr Giles was going to have difficulty getting the clauses changed if he had to take them away. Mr Giles also informed Mr Low that the document was a standard authority document which could not be changed. Whatever effect E the discussion between Mr Low and Mr Giles had, it did not add to the terms of the contract.

…

Equitable estoppel (1981 and 1982 contracts) (dissenting on application)

[193] I see no reason why the doctrine should be confined to the case of an existing contractual relationships. The rationale of this branch of equitable estoppel is that it is unconscionable for a person to resile from a promise that he will not exercise a right if to do so will place the promisee, who has acted on the promise, at a material disadvantage. It may be just as unconscionable to exercise a right acquired after a promise that any such right would not be exercised if or when acquired. Indeed the case for applying the doctrine of promissory estoppel seems particularly strong when the promisee is induced to confer the right on the promisor by the promise that the right will only be acted on in special circumstances or at D a particular time or place or in a particular way. I do not think that the court should be deterred from extending the doctrine of promissory estoppel to a case such as the present because to do so is to outflank the doctrine of consideration or the principles relating to collateral contracts. … I think that the decisive consideration is that it is unconscionable for a promisor to insist on his strict rights if he has induced the promisee to give them to him by an assurance that they will only be used in a particular way or in particular circumstances and the exercise of those rights is contrary to the assurance. …

[194] … in my opinion the assurances given by Mr Giles on 12 October 1981 before the execution of the first contract are capable of giving rise to an equitable estoppel.

The next question is whether Mr Giles had authority to give the assurances which he did and whether the result of his assurances is that the defendant was estopped from giving the notice of termination on 1 November 1983. It is a matter of some difficulty. … However, it seems clear enough from the conduct of the negotiations and the signatures on the correspondence that Mr Giles had no authority to make or terminate a contract. But this does not mean that he had no authority to make representations concerning the administration of the contract. …

… I think that an outdoor advertising manager who is in charge of the general administration of an advertising contract would have ostensible authority to inform an advertiser as to the circumstances in which the defendant might use condition 6 of the contract.

No incongruity exists between a finding that a person has authority to make representations concerning the manner in which a general contractual provision will be enforced and a finding that he has no authority to make, vary or terminate the contract.

The critical question, however, is the effect of the assurances which Mr Giles gave. One assurance was that condition 6 was only used in respect of panels which belonged to the defendant. This was in effect an assurance that, although condition 6 was in the contract, it would not be used against the defendant. As a result of the assurances the plaintiff executed the 1981 contract and expended a substantial sum of money …

[195] In this case … it would be an affront B to conscience to allow the defendant to insist on its strict rights when it has led the plaintiff to act to its detriment. Equity's intervention is called for because the defendant is unconscionably insisting on the strict letter of the contract. Courts of equity should not be deterred from giving effect to the beneficial protection of the doctrine of promissory estoppel by fear of upsetting commercial contracts. Certainty as to the effect of contracts is desirable. But the prevention of injustice arising from unconscionable conduct is more important. Moreover, the courts of equity should not be deterred from holding that the enforcement of strict rights is unconscionable because the assurances given before the execution of a written contract were made orally. In determining whether a contract should be set aside for fraud or mistake the court frequently has to make findings derived from oral evidence. The existence of a collateral contract, the rescission of a contract, and the issue whether or not a contract is wholly in writing frequently depend on the reception and evaluation of oral evidence.

In the very unusual circumstance of this case, the effect of the assurance was to estop the defendant from terminating the 1981 contract by the exercise of its rights under condition 6.

… The assurance was given and in my view acted upon. If Mr Giles had not given the assurance, I do not think that Mr Low would have lamely accepted the inevitable and signed the contract. At the least, I think that he would have taken steps to seek to clarify the position with those in higher authority. That is enough in the circumstances of the case to invoke the protection of equity.

[196] Having regard to the terms of the conversation which took place between Mr Giles and Mr Low on 12 October 1981, I think that the proper conclusion to draw from their conversation on 7 December 1982 was that Mr Giles was representing to the plaintiff that the condition 6 would not be used to terminate the 1982 contract because the structures and accompanying signs had been installed by the plaintiff and not by the defendant. The plaintiff spent $138,000 in erecting those signs as well as entering into a five year contract with Rothmans in the belief that it had a five year contract with the defendant. In these circumstances it would be unconscionable for the defendant to insist on its strict rights under condition 6 and terminate the contract after the representations of Mr Giles had led the plaintiff to expend a large sum of money and expose itself to an action for damages for breach of its contract with Rothmans. …

[197] … for the reasons which I gave in respect of the 1981 contract, the doctrine of equitable estoppel applies. …

Court of Appeal (NSW)kirbyglassmchu

Julie Clarke