ON THIS DAY IN 1988, the High Court of Australia delivered Waltons Stores (Interstate) Ltd v Maher  HCA 7; (1988) 164 CLR 387 (19 February 1988).
Maher owned a commercial property at Nowra. Waltons was a national department store. Waltons and Maher entered into negotiations regarding the lease of Maher’s property conditional upon Maher demolishing the existing building and constructing a new one in accordance with Waltons’ requriements.
Waltons provided Maher with a draft lease contract. Maher suggested amendments and indicated they needed to complete the agreement in the next day or so in order to arrange building supplies before Christmas. Maher indicated that he did not want to demolish the building until he knew there was no problem with the lease. The solicitor for Waltons said to Maher that Waltons had informed him that the amendments were acceptable but would obtain formal instructions and inform him by the next day if they did not agree with any of the amendments. The solicitor for Waltons then sent Maher’s solicitor a redrafted lease with the suggested amendments and did not object to the amendments the next day, or at all. Maher then sent Waltons an executed lease by way of exchange and then proceeded with the demolition. A week later, Waltons had concerns about the transaction and, not having exchanged their counterpart of the lease, instructed their solicitor to go slow. Waltons then became aware that the building had been demolished and when the new building was 40% completed advised Maher that they did not wish to proceed with the transaction.
Maher sued Waltons in the Supreme Court of NSW, obtaining an order for specific performance or damages in lieu. An appeal to the NSW Court of Appeal was dismissed, as was an appeal to the High Court of Australia.
Per Mason CJ, Wilson, Brennan and Deane JJJ, Waltons was bound to enter into a lease agreement and estopped from denying an implied promise to complete the contract as it would be unconscionable for Waltons to take a course of inaction that exposed Maher to detriment by acting on a false assumption.
The High Court brought together proprietary and promissory estoppel under the broader principle of equitable estoppel. When a person makes a non-contractual or voluntary promise and knowingly induces the other party to act to his or her detriment in reliance on that promise, that person is precluded from resiling from the promise without avoiding the detriment. The person who makes the promise is liable to either honour the promise or avoid detriment to the other party.
Per Brennan J at 428-9:
“In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff’s action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise. For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will nevertheless be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant’s property, a diminution of his rights or an increase in his obligations and he, knowing that the plaintiff’s reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs.”
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