FISHER v McDONALD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL PRIESTLEY, SHELLER and STEIN JJA 30 September 1998, 5 November 1998 [1998] NSWCA 80 ESTOPPEL — misrepresentations - DAMAGES — objective value of time wasted — s41 Fair Trading Act 1987 This appeal dealt with representations made by the defendants during the course of negotiations between them and the plaintiffs about a proposed agreement for a licence by the defendants to the plaintiffs to develop and operate a hard rock quarry on the defendant's property. The trial Judge found that the defendant's had made representations which were deliberately false and misleading and awarded $59,331.57 for damages with interest for breaches of s42(1) of the Fair Trading Act. The plaintiffs appealed from this decision claiming that damages should have been $93,515.10 with interest and that the trial Judge should have held that the defendant's representations and the plaintiff's reliance upon them founded an estoppel which prevented the defendants denying that the plaintiffs were entitled to specific performance of an agreement between the plaintiffs and the defendants for the development and operation of the quarry. The estoppel claim was argued on two bases, first, on the basis that there was an unenforceable agreement (or proposed agreement) between the parties, the terms of which were known: Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387. In the alternative, the estoppel claim was on the basis that despite the absence of an unenforceable agreement with precise terms, the representations made by the defendants entitled the plaintiffs to estoppel: Plimmer v Mayor of Wellington (1884) LR 9 App Cas 699. The defendants cross-appealed claiming that there was no evidence to support the trial Judge's finding that neither of the defendants had the intention which their representations expressed. Held: 1. In this case, the parties had not made a binding agreement and the terms of any proposed agreement had not been agreed upon, therefore, estoppel on the first basis argued was not available. Waltons Stores v Maher, Plimmer v Mayor of Wellington and Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582 applied. 2. Even if estoppel on the second basis argued had been made out, the damages recoverable in lieu of specific performance were no greater than those recoverable for the misrepresentations found. Therefore, an award of damages m lieu of specific performance would be beyond the minimum relief necessary to do justice between the parties. Commonwealth v Verwayen (1990) 170 CLR 394 applied. 3. The trial Judge erred in failing to place an objective value on the time wasted by the plaintiffs in activities undertaken in reliance upon the defendants' representations. Van Gervan v Fenton (1992) 175 CLR 327 at 333-4 and 347-8 compared. 4. The defendant's representation that they would sign an agreement for the development of the quarry when it had been prepared was with respect to a future matter and the defendants had not given any evidence which satisfied the onus upon them under s41(2) of the Fair Trading Act. 5. In the absence of an explanation of the defendants' solicitors letter denying that "there was ever any intention to proceed with an agreement to quarry", it was open to the 2 UNREPORTED JUDGMENTS trial Judge to find that neither of the defendants had any intention at the time they made the representations to sign an agreement for the development of the quarry when it had been prepared. 6. The correct of assessment of damages meant that the trial Judge erred by applying Pt52A 133(2) of the Supreme Court Rules and thereby not making an order for costs. The plaintiffs had made an offer of $80,000 to settle the matter on 24 November 1995 to which the defendants did not reply. Therefore, indemnity costs were ordered from 24 November 1995. Calderbank v Calderbank (1975) 3 All ER 333, State Authorities Superannuation Board v Property Estates (Queensland) Pty Ltd (1991) 11 BCL 28 and AWA Ltd v Daniels (unreported) 8 October 1992, Rogers CJ Comm D applied. Authorities: Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582 AWA Ltd v Daniels (unreported) 8 October 1992, Rogers CJ Comm D Calderbank v Calderbank (1975) 3 All ER 333 Commonwealth v Verwayen (1990) 170 CLR 394 Mobil Oil Australia Ltd v Lyndel Nominees Pty Ltd (1998) 153 ALR 198 S & E Promotions Pty Ltd v Tobin Brothers Pty Ltd (1994) 122 ALR 637 State Authorities Superannuation Board v Property Estates (Queensland) Pty Ltd (1991) 11 BCL 28 Van Gervan v Fenton (1992) 175 CLR 327 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 Priestley JA I agree with Sheller JA. Sheller JA INTRODUCTION The plaintiffs in these proceedings, Colin Nicholas Fisher and Robin Stanislaus Keogh, have appealed from a decision of Bainton J given on 20 September 1996. The defendants, Michael. Vivian Coll McDonald and Brett Ian Gerard McDonald, have cross-appealed. The appeal concerns representations made by the defendants during the course of negotiations between them and the plaintiffs about a proposed agreement for a licence by the defendants to the plaintiffs to develop and operate a quarry on the defendants' property known as "Oakvale" via Williamsdale, New South Wales. Bainton J found that the defendants had made representations which were deliberately false and misleading and had misled the plaintiffs and awarded the plaintiffs damages in an amount (amended for reasons given on 14 March 1997) of $49,178 for breaches of s42(1) of the Fair Trading Act 1987. With interest the judgment for the plaintiffs was in the sum of $59,331.57. The plaintiffs claimed that the damages should have been $93,515.10 with interest. The defendants in their cross-appeal claimed that no damages should have been awarded against them and that they were entitled to judgment. But the main part of the plaintiffs' appeal was directed to their claim, which Bainton J rejected, that the defendants' representations and the plaintiffs' reliance upon them founded an estoppel which prevented the defendants denying that the plaintiffs were entitled to specific performance of an agreement between the plaintiffs and the defendants for the development and operation of the quarry. JUDGMENT AT FIRST INSTANCE Bainton J formed the view that each plaintiff was a careful, accurate and truthful witness and accepted their evidence but was unable to accept anything that either of the defendants said, apart from his name and address, unless it was either admitted by the plaintiffs, consistent with documentary material whose URJ FISHER v McDONALD (Sheller JA) 3 authenticity was not in doubt, or inherently probable, with one exception which does not matter for present purposes. In so far as there was any dispute between the parties as to what occurred, his Honour accepted the plaintiffs' version. The McDonald family had owned Oakvale since at least the 1850s. It contained a large area of particularly high quality basalt. In mid-1989 Leighton Contractors had approached the McDonalds with a view to developing a quarry. A draft environmental impact study (EIS) was prepared but the proposal was not implemented. Later, a person referred to as Geoff Schmidt approached the McDonalds with an expression of interest in developing the quarry prospect. A form of agreement was prepared by Morris Owen, a partner in the firm of Johnson & Sendal, the McDonalds' solicitors. I shall refer to this as the original draft agreement. After holding important positions with Caterpillar and ANI Komatsu, the first plaintiff, Mr Fisher, as an executive for his family company, Fisher Mathews Pty Ltd, from 1982 was engaged in providing consultancy services to the mining, quarry and earthmoving industries. The second plaintiff, Mr Keogh, was an earthmoving contractor. After the Leighton negotiations ended in March 1991, Mr Keogh wrote to Mr Owen about a proposal to establish a quarry on the McDonalds' property. This was followed by a proposal which Johnson & Sendal sent to the McDonalds. Johnson & Sendal provided Mr Keogh with a copy of the original draft agreement. In about August 1991, Mr Keogh met the McDonalds. Subject to a question about whether they were already committed, Mr Michael McDonald said that if they were not and Mr Keogh was willing to pay $1.40 per tonne royalty "then you can have the quarry". Subsequently, Mr Keogh received a copy of the draft EIS prepared for Leighton Contractors. In February 1992 at a meeting, Mr Keogh told the McDonalds that it was beyond his means to undertake the project by himself and that he wanted to involve Mr Fisher. On 14 October 1992 the plaintiffs, after obtaining some advice from the 'Yarrowlumla Town Planner, went to Oakdale and met the McDonalds. Mr Fisher estimated the likely cost of the development of the quarry to the point of commencement of production was in the vicinity of $7 million. He said that he and Mr Keogh had the experience to get the quarry operational and to control the finance aspects but it would be necessary to attract outside investors. The McDonalds produced an account to them from Horwath & Horwath for accountancy advice amounting to $5,000 which was overdue. One of the McDonalds said they had to get "this monkey off our backs" and a part of the deal was that Mr Keogh and Mr Fisher must pay the $5,000. They agreed to do so and made the payment. Mr Fisher raised the subject of his wish for a signed heads of agreement as they were about to spend a lot of money. One of the McDonalds said that Morris Owen had already prepared such an agreement in regard to previous dealings and he arranged for Mr Fisher to collect it that evening from the office of Johnson & Sendal, which he did. This was the original draft agreement. Bainton J set it out in full in his judgment. For present purposes it is unnecessary to say more than that the McDonalds were described as the licensors and a blanked out company as the licensee. There was space for the insertion of guarantors. The names in the draft had been blanked out. The operative part of the draft deed provided for the licensors to transfer and assign to the licensee "all their estate interest and right to prospect and quarry blue metal" on part of the land shown in an annexed plan. The licence was to continue until it was terminated pursuant to either cl11, cl12 4 UNREPORTED JUDGMENTS or cl16. The licensee agreed to pay the licensors $1.40 per tonne for every tonne of quarry blue metal product transported from the land by the licensee for its own use or purchased from the licensee by any other person or body for their use. C17 was a payment escalation provision in the following terms: "The payment of ONE DOLLAR FORTY CENTS ($1.40) per tonne remains fixed until the twelve (12) months from the date hereof (whether quarrying has taken place or not) and thereafter the payment will be increased by the proportion that the Consumer Price Index, all groups, Sydney published by the Australian Bureau of Statistics for the quarter ending......is greater than the said Consumer Price Index last published on or before.......... and thereafter the payment shall increase quarterly by the same proportion that the said Consumer Price Index last published before the end of each quarter is greater than the said Consumer Price Index last applicable under this Clause." Cl11 was as follows: "(a) Subject to the provisions of cl12 hereof and the provisions hereinafter set out the Licensee has the sole right to terminate this Deed by giving one (1) month's notice in writing delivered to the Licensors at their last known residence and in that event then the Licensee shall remove all of its chattels and fixtures from the said land and if required by the Licensors shall at the same time comply with any conditions set down in the development consent with respect to the operation and in particular as to the closure of the quarry. (b) This Deed shall be terminated forthwith upon the happening of the following events: (i) Failure of the Licensee to gain development consent for the quarrying operations within a period of twelve (12) months from the date hereof or in the event that an appeal has been lodged with the Land & Environment Court against any development consent conditions then to obtain a final judgment in such appeal within a period of eighteen (18) months from the date hereof. (ii) If the Licensee does not commence operations and produce blue metal products within a period of twelve (12) months from the date of development consent or the final result from the Land & Environment Court on any appeal. (iii) If the Licensee continues operations at the quarry site for a period in excess of six (6) months [sic]. (iv) If the Licensee becomes insolvent or goes into liquidation. (c) In the event that the License [sic] herein is terminated for any of the above reasons then the Licensee has the right to enter upon and remove its chattels and fixtures from the said land for a period of one (1) month following the termination of this Deed. In the event that the Licensee has not so removed his chattels or fixtures within the said period of one (1) month then those chattels and fixtures shall become and be sole and absolute property of the Licensors." Bainton J found that Mr Fisher and Mr Keogh, at this stage, thought, in the light of the discussions at Oakvale, that they had the McDonalds' agreement in principle at least to go ahead with the development. His Honour said: "The costs involved being beyond their ability to provide themselves, they had to interest investors. It would not be realistic to expect investors to put up money unless the owners of the real estate had committed themselves to the quarry development: and by that I mean legally committed themselves. On the other hand the landowner would ordinarily be reluctant to commit himself to a quarry project on his property where the licensee was a company with but a small paid up capital unless he were offered personal guarantees as to its ability to perform. Mr Fisher was obviously aware of these problems because on 27 October 1992 URJ FISHER v McDONALD (Sheller JA) 5 he sought advice from the senior partner of Bird Cameron in Perth (a firm of Chartered Accountants) seeking his view on how it should be done and his comments of Fisher's preliminary thoughts, namely that the license agreement (strictly a profit a prendre) would be granted to a company with but a small paid up capital, the shareholders being members of the Keogh and Fisher families, that that company would grant operating rights to an investment company in which again the same individuals would hold the ordinary shares but in which the investors would hold redeemable preference shares and that that investment company in its turn would own the issued capital of another company which would carry out the administration, the marketing and the actual quarry operations." Bainton J regarded the proposal as a sensible structure and said that thereafter discussion proceeded on the basis that Mr Keogh and Mr Fisher were seeking a grant of rights to a company which they would jointly control but which would not itself have a substantial paid up capital, that company licensing an operating company funded substantially by investors. While from the Fisher/Keogh point of view this was a sensible arrangement, his Honour did not think that either of the McDonalds was capable of understanding it and that that inability might well have explained some of their subsequent actions. On 9 December 1992 Johnson & Sendal wrote to Mr Keogh's son, Christopher, at the request of Mr Brett McDonald, sending a copy of "the draft agreement prepared in this matter". Bainton J said this was the same as the original draft agreement and that the exhibit did not annexe the copy document. In fact, as the plaintiffs pointed out in their written submissions, this draft agreement, exhibit 'P19', was different in a number of respects. It is unnecessary to dwell upon the differences. P19 was tailored to exclude what appeared as the address of the licensee in the first draft agreement. The amount per tonne to be paid by the licensee was left in blank. The increase in royalty remained tied to the CPI. The time referred to in cll1(c) was extended from one month to three months. C118, cl19 and cl20 were new. On 18 December 1992 Mr Christopher Keogh faxed to Mr Owen a copy of a draft heads of agreement he had prepared. In this draft the licensee was described as "Oakvale Quarrys" [sic]. Payment by the licensee was to be at the rate of $1.40 per tonne which was to remain fixed for twelve months. "Increases in the amount per tonnes [sic] will be a fixed percentage governed by the sale price of the quarry material". The draft ended with the statement: "Certain points in the heads of agreement may need to be discussed and expanded on before the actual contract is entered into." Bainton J said that this document did not depart "significantly from the Johnson & Sendal draft". The differences were for an increase in royalty payments geared to the selling price of the blue metal, rather than to the CPI, a change which Mr Keogh wanted; it also permitted an assignment of part or all of the interest granted, which Mr Keogh needed in order to be able to finance the development. On 18 December 1992 Johnson & Sendal faxed back advising that their clients were not happy with the document "rather presumptuously re-prepared with considerable changes". They insisted that the document be in the form or as close as possible to the form submitted on their behalf. Further: "They would prefer to enter into a binding and final agreement and not some document which seems to pre-suppose that a further agreement will be entered into. 6 UNREPORTED JUDGMENTS One matter of particular concern in the document submitted is that an Agreement cannot be made with a body such as Oakvale Quarries. The Agreement must be entered into with natural persons or a company but in the case of a company the obligations of the company would need to be guaranteed by the directors." At the conclusion of a Council meeting on 28 January 1993 which the McDonalds and Mr Keogh attended Bainton J found that Mr Brett McDonald said to Mr Keogh and Mr Fisher "Thank God for that. Now we'll get somewhere so get stuck into it and get the quarry opened." It is not clear from the evidence that Mr Fisher was present when this was said. By early February, Manion McCosker, the solicitors for Mr Keogh and Mr Fisher, were writing to Johnson & Sendal with inquiries as to title which were answered on 15 February 1993. Another meeting with the McDonalds took place at Oakvale on | June 1993. The McDonalds raised a number of matters of concern to them. According to Bainton J: "They included long term control of the quarry (which Fisher answered by saying in effect that his children would be well equipped to take over), the development of the access road and fencing of it, the installation of a boom gate where the quarry road joined the highway, insurances, a sound barrier around the McDonalds' mother's house (which was not far from the access road), stock fencing around the quarry area and how Keogh/Fisher would maintain control. At that stage Fisher said that there would probably be a holding company which would have the licence agreement and an agreement with a second company which would be the operating company and which would included investors and shareholders. The McDonalds also raised queries as to how they would check tonnages to ensure they got their royalties. The duration of the licence was also discussed, Fisher arguing for escalating the $1.40 per tonne royalty in accordance with any increase in the price of gravel rather than with CPI increases. He suggested that the McDonalds should discuss this with their solicitor." His Honour found that on this occasion the McDonalds represented that they intended to enter into an agreement for the development of the quarry and they would do so when it had been prepared. Inspections and meetings took place in July. On 8 October 1993 Mr Fisher, on the letterhead of Pacific Earthmoving Pty Ltd, wrote: "One of the reasons we have not pushed the agreement has been the fact that we did not wish to fool you around unless we were sure we could do what we all wished to accomplish, ie, get the quarry open quickly as soon as we receive the necessary approvals. Our main problem with the agreement was to come up with an acceptable escalation on the royalty that was fair to you but that did not jeopardise the viability of the quarry. Now that it has been done we think that it is a reasonable solution, however if you don't share that feeling, please tell us. Some of the solutions we came up with were so complicated we could hardly understand them ourselves." Enclosed was a copy of instructions which Mr Fisher and Mr Keogh had given to Peter Sendall, their solicitor at Manion McCosker. Included, amongst matters to be discussed with Mr Owen, was an alteration in the following terms: "A royalty of $1.40 per tonne will be paid on the average price of aggregate and road base being $15 or less per tonne. An escalation will apply on a percentage basis of any increase in price of aggregate or road base over $15. URJ FISHER v McDONALD (Sheller JA) 7 Should the price consistently fall below $15 per tonne to the point where the viability of the quarry was brought into question, then the Licensees would have the right to put a proposal to the McDonalds to reduce the royalty by an appropriate amount. (We are only seeking a right to put the proposal - there would be no obligation on the McDonalds to comply). Should dust become a source of sale, then an appropriate royalty would be negotiated." On 25 October 1993 Mr Fisher and Mr Keogh had a meeting that lasted about an hour with the McDonalds at Oakvale. Mr Fisher and Mr Keogh had a document dated 22 October 1993 which Mr Christopher Keogh had prepared. Its terms were as follows: "Messrs Brett and Michael McDonald "Oakvale' Monaro Highway Williamsdale NSW 2620 Dear Brett and Michael, Thank you for the time you took to discuss the opening of the Quarry on your property with Nick Fisher, Chris and myself. We confirm that we are keen to develop the quarry subject to obtaining the necessary approvals and confirming viable financial backing for the project. The conditions outlined to us are acceptable to us and we repeat them, as understood by us, below: 1. Fencing of the road from the Highway to the quarry site to be carried out as per the EIS. 2. Boom gate to be provided at the Highway end of the fence to restrict after hours access. 3. Gates to be installed on both sides of the access road to allow transfer of stock etc 4. A royalty of $1.40 per tonne to be paid. We would like to discuss annual increases with you further. We have no objection to increases as a matter of course however, over a twenty year period this could cause us some problems. The price of gravel may not necessarily increase over that period. Undoubtedly there are precedents in the payment of royalties to cover such situations and we would appreciate some guidance from Mr Owens in this matter so that an equitable solution is found. 5. The access road to be bituminised as determined by the EIS. 6. All necessary insurances, including public liability insurance, to be put in place. 7. Suitable sound barrier and shrubs to be erected on the side of access road passing Mrs McDonald's house. 8. Stockproof fence to be erected around Quarry, as per EIS. 9. Control of the site to remain in the hands of the Keogh/Fisher families. 10. This agreement to cover a period of twenty years with a ten year option. This agreement would be subject also to Yarrowlumla Council renewing the licence every five years. 11. A weighbridge to be installed to record quarry blue metal to be transported from the property. We look forward to receiving a draft agreement from your Solicitor and further discussions where necessary to assure you of our good intentions. Yours sincerely 8 UNREPORTED JUDGMENTS [signature] [signature] [signature] R S Keogh SS Keogh CM Keogh 44 Monkman St 3 Turnbull Pl 12 Axford Pl Chapman ACT Wanniassa ACT Kambah ACT [signature] CN Fisher 23 Lochville Street Wahroonga NSW These conditions accepted as a basis for a formal agreement between the parties for the operation of a Quarry proposed in the EIS for the Oak Vale property at Williamsdale. Brett McDonald Michael McDonald" Mr Keogh and two of his sons and Mr Fisher had signed the document. Mr Fisher handed it to the McDonalds and said words to the effect: "We are still concerned that we are spending money and we cannot finalise the formal agreement until we know the conditions of the development approval. This letter, which we have all signed, contains the additions we have discussed to your original requirements as set out by Morris Owen. We would appreciate it if you would sign it." Mr Fisher's evidence continued: "[Brett McDonald] glanced at the heads of agreement document and said words or words to the effect: "We appreciate that you are outlaying a large amount of money but we are not prepared to sign anything until the final agreement is prepared. There is no use continuing with a project that is going to last somewhere between twenty and fifty years if we cannot trust one another. There has to be mutual trust between the parties. We have given you our word that you can develop the quarry. We will not go back on our word. You will just have to accept that we will keep our word.' I then said words or words to the effect: "We should just discuss what is in the letter so that we are all clear on where we are heading."" Bainton J observed that thereafter agreement on a number of subsidiary matters was reached and that all the discussions assumed that the quarry would be developed by the Fisher/Keogh interests though they had not, at that stage, finalised by what entity they would acquire their interest in the quarry development. Subsequently, Mr Owen commented upon the Fisher/Keogh letter and concluded that an agreement should be prepared and signed similar to the previous agreement "signed by Leightons if this matter is to proceed, that the letter was too wide and they would like to see a more precise agreement signed before the matter proceeds." On 25 November 1993 Mr Owen wrote to Manion McCosker advising that their clients had no idea as to whether or not "your client" is intending to proceed with this matter. On 13 December 1993 Manion McCosker replied stating they were instructed that "our clients" were proceeding with the proposed quarry on the property. They were in the process of completing the EIS. On 14 December 1993 Johnson & Sendal in a letter to Manion McCosker again expressed concern about the identity of the people with whom their clients were dealing. Further correspondence followed which Bainton J set out in his judgment. URJ FISHER v McDONALD (Sheller JA) 9 On 10 February 1994 Mr Fisher wrote to Mr Owen: "The licence for the operation would be held by a company with limited capital (Company A) with the Keogh family holding 51% of the shares and the Fisher family holding 49% of the shares. It is our impression that the McDonalds would favour the 51/49 split as opposed to a 50/50 split because they do not know the Fisher family. The operation of the quarry would be carried out either on a Joint Venture arrangement or by Company B in which Company A would have the majority in controlling interest. The capital to operate the quarry would be raised through Company B, which would also be responsible to provide all the guarantees and insurances either specified in the Approval or which they thought necessary." The letter concluded: "T regret that I am not able to say to you that the money is in the bank just waiting for us to get the approval but it really is a complicated process and at the moment, there are a plethora of investment opportunities with which we have to compete. Despite that we believe we have it as well in hand as possible at this stage of development." On the same day Mr Owen requested a copy of the EIS. On 14 February Mr Keogh, by chance, met the McDonalds. Mr Michael McDonald asked if they had got the EIS yet and suggested "You had better get into it and get it to Council so you can get going." A further request followed for the EIS statement. On about 4 March 1994 Mr Keogh gave to Mr Michael McDonald a cheque for $500 to complete payment of the Horwath & Horwath account. He also reported that the draft EIS was almost completed and should be available in a week or so. On 9 April 1994 Johnson & Sendal wrote to Manion McCosker asking for a copy of the EIS as soon as it became available and forwarding a copy of the account they had rendered to their clients with a request that those costs be paid by "your client". On 4 May 1994 Manion McCosker sent a cheque for the substantial part of this account. On 5 May Mr Keogh delivered two copies of the draft EIS to Mr Owen's office. However, Manion McCosker were unable to obtain any response from the McDonalds to the draft EIS. On 15 July 1994 Johnson & Sendal wrote to Manion McCosker saying: "We refer to previous correspondence in this matter and advise that regretfully our clients have lost confidence in your client particularly in its ability to perform and/or honour any contracts. Accordingly, our clients have decided not to proceed with the matter any further. Please advise your client accordingly." On 3 August 1994 what Bainton J described as an "angry meeting" took place between Mr Fisher and Mr Keogh and the McDonalds at Oakvale. The matters discussed included the need to finalise the EIS, questions about where the money was coming from, the cost of building the access road, the amount of the royalty and the operation of the quarry by a $2 company. Finally, questions were raised about whether or not the McDonalds had to sign the EIS and the signing of the development application. Mr Fisher said that once the EIS was finalised it would be sent to Mr Owen with the development application for the defendants' signature. Mr Brett McDonald said: "We will go and talk to the Council to see if our father signed the application. If that was the case, we would then be prepared to sign the application." Subsequently, the McDonalds were told, when they went to the office of the Council, that they would have to sign the development application. 10 UNREPORTED JUDGMENTS In August and September Mr Fisher wrote to the McDonalds regarding progress. On 10 October 1994 the EIS was completed and signed on behalf of Connell Wagner, engineers. On 17 October 1994 Johnson & Sendal wrote to Manion McCosker as follows: "We refer to previous correspondence in this matter and advise that our clients have once again requested that we contact you and ask that you pass on to your clients that they have no interest in dealing further with your clients regarding the quarry. We understand that your clients have recently contacted our clients direct and they would prefer that this cease immediately." This led to a long letter from Manion McCosker dated 28 October 1994 making assertions which corresponded substantially with Bainton J's findings. They said that: "Your clients should appreciate that, induced by the representations and promises of your clients, our clients have incurred considerable expense in investigating and taking appropriate action to obtain all necessary approvals to enable the proposed quarry to proceed." Ultimately, they claimed, if the McDonalds were unwilling to proceed, recovery of substantial expense which they estimated to be in the order of $100,000 plus damages On 11 November 1994 Johnson & Sendal replied in the following terms: "We refer to your letter of 28 October 1994 and advise that our clients deny that there was ever any intention to proceed with an Agreement to Quarry. Our clients deny that they ever induced your clients to believe that a Quarry would proceed. At no time was there any concluded Agreement between the parties. It is quite clear from the correspondence that our clients had not agreed upon any facet of an alleged Agreement. The correspondence deals in particular with the identity of the licensee and the uncertainty of entering into any arrangement when they did not know who the licensee was. Accordingly as we see it there was no clear decision ever to enter into an agreement with any party in particular let alone any decision or agreement as to the terms of any Quarry Licence. Your claims are therefore denied." PROCEEDINGS The plaintiffs began these proceedings by summons issued on 21 March 1995. They sought a declaration that they were entitled to have the licence agreement, between the plaintiffs as licensees and the defendants as licensors, for the development and operation of the quarry specifically performed and carried into execution and an order to that effect. In their particulars they claimed that the defendants represented and agreed with them that they would grant to the plaintiffs "or their nominee" a licence to develop and operate a quarry on Oakdale. An amended summons was filed on 27 November 1995. Bainton J dealt first with a claim for breach of contract and said it must fail "simply because the evidence which he had accepted did not evidence the formation of a contract." The plaintiffs have not challenged this conclusion. His Honour also dismissed a claim of estoppel based on the plaintiffs' asserted assumption that an agreement in respect of the development of the quarry was in existence and that they relied upon this in making the payments which they did. His Honour said he had no doubt that each of the plaintiffs did assume there was an agreement of a general nature in respect of the development of the quarry but this did not amount to a legally binding agreement. He said: URJ FISHER v McDONALD (Sheller JA) 11 "No estoppel, even if what had happened could amount to an estoppel, could elevate the agreement which a party is estopped from denying into a legal [sic] enforceable contract, when the agreement which the estoppel prevents that party from denying is not as a matter of law a legally enforceable contract." To illustrate the point, his Honour referred to exhibit 'P19' and said that as he had already recorded: "the identity of the licensee had not been agreed upon, so that there was no legally enforceable contract. The proposed form of relief seeks to overcome that defect by offering a term which the McDonalds had not prior to termination of the negotiations, agreed upon. The perceived need to offer it at this stage highlights the failure to reach any contractually binding agreement for the development of the quarry on 'Oakdale'. On the plaintiffs' alternative case under the Fair Trading Act Bainton J found that the following misrepresentations the plaintiffs relied on were, in fact, made: "(a) In October 1992, that Fisher and Keogh 'had a deal' and should therefore as part of it get Horwath & Horwath 'off their backs' by paying their overdue account of $5,000. (b) On 28 January 1993, after the Yarrowlumla Shire Council meeting that Fisher and Keogh should 'get stuck into it and get the quarry opened', ie that there was an agreement granting to them the appropriate rights and that they should set about exercising them. (c) On 1 June 1993 that the McDonalds would sign an agreement for the development of the quarry when it had been prepared. (d) On 25 October 1993 that 'there has to be mutual trust between the parties. We have given you our word that you can develop the quarry. We will not go back on our word'. (e) On 3 August 1994. This was the occasion of the angry meeting in the kitchen of the homestead on 'Oakvale'. What is relied on was the statement that the McDonalds would sign the Development Application (for the quarry) if they could see that their father had signed the Development Application when Leightons were proposing to develop the quarry, a course consistent only with an intention to go ahead with development by Keogh and Fisher." Bainton J said: "T have found that all these representations were in fact made. I find also that neither of the McDonalds had any such intention. Their purpose in entertaining the discussions with Fisher and Keogh was first to get them to pay some outstanding obligations of the McDonalds that they either could not, or were not willing to pay themselves out of their own resources and secondly to have Fisher and Keogh carry out steps at their expense designed to establish whether or not establishment of a quarry on the McDonalds' property would be likely to be permitted, and would or might probably be a profitable venture. Favourable answers to these questions would improve the value of 'Oakvale', either on sale, or more significantly in their minds I think, for mortgage purposes. Those findings make it unnecessary for me to consider whether the representations were 'with respect to any future matter', within the meaning of s41 rather than being representation of their intentions at the time of making the representations. They were untrue statements of the McDonalds' intentions when they were made and the making of them contravened s41 if they were made 'in trade or commerce'. If any of them is properly to be described as being 'with respect to any future matter', for example to execute an agreement, then such of 12 UNREPORTED JUDGMENTS them as are in that category were on my findings then untrue so that neither of the McDonalds had reasonable grounds for making any such representation." In assessing damages, his Honour said that the plaintiffs' claim for the present value of the profits they expected to gain from the quarry operation was a claim for "expectation" damages. Had they succeeded in establishing a contractual entitlement, those damages would have been recoverable, but they did not. However, the plaintiffs' claim for reliance damages entitled them to recover the moneys expended in reliance on the McDonalds' representations. The expenses which his Honour held had been incurred by the plaintiffs and which they were entitled to recover consistently with his reasons were: "1. The $5.,000 paid to Horwath & Horwath by four instalments between 16 December 1992 and 4. March 1994. 2. The $800 paid to Johnson & Sendall on 4 May 1994. 3. The $32,510 paid to Connell Wagner (by six instalments between 5 August 1993 and 23 December 1994). 4. Their legal costs paid to Manion & McCosker $3,568. 5. Consultancy fees paid to Weltone Pty Ltd $4,800 in relation to advice on the development of the quarry, at some date after May 1995S. 6. Fisher's travelling expenses. The evidence relating to those expenses is somewhat sparse. It asserts twenty seven journeys of various distances all in Fisher's car totalling approximately 5,000 km. There is no evidence that had Fisher not made these journeys he would have gainfully otherwise used the time so spent. I propose therefore only to allow travel costs, which I determine at $2,500." Bainton J said: "There was no_ evidence that Keogh actually incurred any out-of-pocket-expenses, or that his time spent in relation to [the] quarry proposal would have been otherwise remunerated. Nor does the evidence establish with precision the date of some of the above payments." In his reasons for judgment of 20 September 1996 his Honour mistakenly quantified the total of the claims as $54,978. On 14 March 1997 he substituted the correct total of $49,178. For the purpose of calculating interest he assumed that the total of the six items was all paid by 31 December 1994 (recognising of course that some were paid earlier and some possibly later) and added interest to 20 September 1996. As amended on 14 March 1997 the judgment totalled $59,331.57. Referring to the effect of PtS2A 133(2) of the Supreme Court Rules his Honour expressed the opinion that it should have been apparent to the plaintiffs, properly advised, that their claim for damages for breach of contract had no prospects of success and accordingly made no order as to costs. APPEAL AND CROSS-APPEAL The plaintiffs appealed on the grounds that Bainton J erred in finding that the defendants were not estopped from denying that the plaintiffs were entitled to specific performance of an agreement for the development and operation of the quarry, in failing to deal with and determine the plaintiffs' claim for reimbursement of costs and expenses on a quantum meruit, in not finding damages in the amount of $93,515.10 in accordance with the plaintiffs' uncontested evidence and in finding that the plaintiffs were not entitled to their costs of the proceedings. The defendants cross-appealed on the ground that there was no evidence to support the finding of liability. URJ FISHER v McDONALD (Sheller JA) 13 ESTOPPEL The plaintiffs put their submissions on alternative bases: ¢ First, that the circumstances were such that there was an agreement (or proposed agreement) between the parties, the terms of which were known, but which was not enforceable; Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; * Secondly, the circumstances were such that the plaintiffs, despite being unable to point to some such agreement, were entitled to equitable relief of a proprietary kind, along the lines determined by the Privy Council in Plimmer v Mayor of Wellington (1884) LR 9 App Cas 699. The plaintiffs submitted that Bainton J dealt only with the first of these alternatives. The difference between these approaches is discussed in the judgment of Priestley JA in Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582 at 604. The circumstances in Waltons Stores "were that there was no dispute about any of the term of the agreement; the question... was whether relief could be obtained by means of estoppel in circumstances where an agreement, or a proposed agreement, the terms of which were known, was not enforceable." Priestley JA said at 604 that Plimmer was a clear example of the case "where a plaintiff, despite being unable to point to some agreement which, although unenforceable, contains precise terms describing what he expected from the defendant, has nevertheless been held to be entitled to equitable relief which may be of a proprietary kind." Although in dissent, Priestley JA's distillation of the relevant principles was accepted as "cogent" by the Full Federal Court in S & E Promotions Pty Ltd v Tobin Brothers Pty Ltd (1994) 122 ALR 637 at 653 and Mobil Oil Australia Ltd v Lyndel Nominees Pty Ltd (1998) 153 ALR 198 at 234. Approaching the matter in this way, the plaintiffs have not persuaded me that the terms of any agreement or proposed agreement between the parties for the grant of a licence to develop and operate a quarry on the defendants' property were known. In the course of his oral submissions, Mr Hunt, who appeared for the plaintiffs, conceded quite properly that on 8 October 1993 Mr Fisher did not consider that any binding agreement between the parties had been reached; see Mr Fisher's letter on the letterhead of Pacific Earthmoving Pty Ltd of that date. Nothing that occurred after that date produced consensus about the terms of any proposed agreement. Bainton J said that the history which he recounted revealed "apart from all the other matters still 'up in the air', that by the time the McDonalds refused to proceed, there was not even agreement as to the identity of the proposed licensee." Mr Hunt argued with some force that the agreement was to the effect that the plaintiffs could nominate who the licensee would be. But there were other matters outstanding, most significantly, agreement about the method for escalating the licence fee, whether by calculation based on the Consumer Price Index, as the defendants wanted (see the original draft agreement and P19) or geared to the selling price of the blue metal, as the plaintiffs wanted (see the letter of 22 October 1993 which they signed). Mr Hunt relied upon evidence to the effect that if the McDonalds disagreed with anything in a particular document they would have something to say about it at the time and that neither of them said anything at the time to indicate that they disagreed with the contents of the letter of 22 October 1993. Bainton J made no such finding and I do not think it was open. Mr Brett McDonald refused to sign the letter as requested. In form it left open 14 UNREPORTED JUDGMENTS matters yet to be agreed. The plaintiffs merely confirmed that they were "keen" to develop the quarry "subject to obtaining the necessary approvals and confirming viable financial backing for the project". In para4 they indicated they would like to discuss further annual increases of the royalty to be paid. Quite clearly they were not agreeing to increases by reference to the Consumer Price Index. On 10 February 1994 Mr Fisher wrote pointing to the complicated process still in hand before the money was in the bank. I agree with Bainton J's conclusion that the parties never made a binding agreement nor do I think that the terms of any proposed agreement had been agreed. Accordingly, in my opinion, the plaintiffs' submission that there was an estoppel on the first basis upon which it was put, fails. In the alternative the plaintiffs submitted that they assumed that an agreement to develop and operate the quarry would come into existence and that the defendants were bound to fulfil the expectation or pay damages for their failure to do so. The defendants had, it was alleged, induced the plaintiffs to adopt that assumption or expectation, the plaintiffs acted in reliance on the assumption or expectation, the defendants knew or intended the plaintiffs to do so, the defendants' action would occasion detriment if the assumption or expectation was not fulfilled and the defendants had failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise. See Waltons Stores at 428-9 per Brennan J and Austotel at 610-612. The plaintiffs relied upon what Brennan J said at 430 in Waltons Stores, namely: "Having elected to allow Mr Maher to continue to build, it was too late for Waltons to reclaim the initial freedom to withdraw which Waltons had in the days immediately following 11 November. As the Mahers would suffer loss if Waltons failed to execute and deliver the original deed, an equity is raised against Waltons. That equity is to be satisfied by treating Waltons as though it had done what it had induced Mr Maher to expect that it would do, namely, by treating Waltons as though it had executed and delivered the original deed. It would not be appropriate to order specific performance if only for the reason that the detriment can be avoided by compensation. The equity is fully satisfied by ordering damages in lieu of specific performance." The plaintiffs sought damages on that basis. However, in Waltons Stores the assumption induced by the defendant to the detriment of the plaintiffs was that a contract of known terms had been made or would be entered into by the defendant. In the present case, there could be no such assumption and none was found to exist. The relief the plaintiffs claim is damages in lieu of specific performance of a contract which did not exist and the terms of which were never agreed. Whatever may be the correct basis for measuring the remedy in terms of damages for the detriment the doctrine of estoppel is designed to avoid, in my opinion, damages so calculated would be quite disproportionate and beyond the minimum relief necessary to do justice between the parties; see The Commonwealth v Verwayen (1990) 170 CLR 394 at 416, 430-31, 441-435 476 and 487; but compare 462. In his written submissions, Mr Hunt relied upon a number of cases said to exemplify an expectation measure of detriment. The plaintiffs submitted that unless this basis was adopted the defendants would reap a substantial benefit from their unconscionable conduct. But, in reality, the heart of the complaint was the deliberate misrepresentation that the McDonalds were prepared, subject to terms being agreed, to grant a licence to the plaintiffs to develop and operate the quarry when they never had any such intention of doing so. I do not think this URJ FISHER v McDONALD (Sheller JA) 15 entitles them to the same relief as was available in Waltons Stores where the terms of the agreement had been reached but the formalities not completed. If, for example, the parties had not been prepared to agree on the escalation clause neither side was bound to an agreement for a licence. In my opinion, the appropriate damages, assuming the estoppel to have been made out, were no greater than those recoverable for the misrepresentations found, namely, costs incurred in the belief that at the time they were incurred the defendants intended to enter into an agreement for licence. I do not think the plaintiffs are entitled to any greater relief based on estoppel. DAMAGES FOR MISREPRESENTATION Mr Fisher attached to his statement a schedule he had prepared setting out his estimate of time and travelling expenses incurred by him during the course of negotiations with the McDonalds and meeting with persons in relation to the EIS, the Council and Manion McCosker concerning the proposed quarry project. The total shown was $15,750 which was based on rates from financial data from preceding years and included $1,080 for telephone calls. This evidence was unchallenged. His Honour allowed only $2,500 because he said there was no evidence that had Mr Fisher not made these journeys he would have gainfully otherwise used the time so spent. However, I see no reason why he should not be compensated for the time wasted in activities undertaken in reliance upon the defendants' representations. The method chosen to assess the objective monetary value of Mr Fisher's loss seems to me appropriate and his Honour's disallowance, with due respect to him, wrong; compare Van Gervan v Fenton (1992) 175 CLR 327 at 333-4 and 347-8. Bainton J's calculation also omitted the claim for telephone calls in the amount of $1,080. No reason was given for this and the amount should have been allowed, unchallenged as it was. Mr Keogh gave like evidence to Mr Fisher of the cost of time and travelling expenses incurred during the course of negotiations with the McDonalds and meeting with persons in relation to the EIS, the Council and Manion McCosker concerning the proposed quarry project which based on rates on financial data for preceding years came to $31,085.36, of which $170 was incurred before October 1992 when the defendants made the first misrepresentation relied on. Bainton J disallowed this amount in whole because he said there was no evidence that Mr Keogh actually incurred any out of pocket expenses, or that his time spent in relation to the quarry proposal would have been otherwise remunerated. Nor did the evidence establish with precision the date of some of the above payments. Again, in the absence of any challenge to Mr Keogh's evidence, in my opinion, this amount should have been allowed as an appropriate assessment of the damages suffered because of the waste of Mr Keogh's time as a result of the misrepresentations. I would allow the claim less $170. This produces a total amount which should have been awarded by way of damages of $93,343.36 made up as follows: Payment to Horwath & Horwath $ 5,000 Payment to Johnson & Sendal $ 800 Payment to Connell, Wagner $32,510 Payment to Manion McCosker $ 3,568 Payment to Weltone Pty Ltd $ 4,800 Compensation for time wasted Mr Fisher and 16 UNREPORTED JUDGMENTS telephone calls of $1,080 $15,750 Compensation for time wasted Mr Keogh $30,915.B6 TOTAL $93,343.86 Interest at Supreme Court rates calculated from 31 December 1994 (the date Bainton J chose) to the date of this judgment will need to be calculated and added. QUANTUM MERUIT In the light of my conclusion about the appropriate damages for misrepresentation, this alternative ground of appeal need not be pursued. CROSS-APPEAL The defendants' cross-appeal was directed to Bainton J's finding that neither of the McDonalds had the intention which their representations expressed. The representations were made between October 1992, before the payment to Horwath & Horwath, and 3 August 1994. The finding his Honour made as to the defendants' purpose in entertaining discussions with the plaintiffs was, it was submitted, not based on evidence and contrary to the evidence. In particular, it was never put to the defendants or either of them that before July 1994, when their solicitors wrote indicating that they did not intend to proceed with the matter any further, they lacked the intention to proceed with the quarrying project. Accordingly, the defendants' argued, in relation to representations made before that time, that no situation arose during the hearing which would have required them to discharge the onus otherwise cast upon them by s41(2) of the Fair Trading Act. S41, so far as presently material, provides as follows: "(1) For the purposes of this Part, where a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the person does not have reasonable grounds for making the representation, the representation shall be taken to be misleading. (2) The onus of establishing that a person had reasonable grounds for making a representation referred to in subs(1) is on the person." Furthermore, the defendants submitted that the inference that they were motivated by desire to improve the value of their property and for this reason made false representations as to their intentions was one not capable of being drawn from the evidence. It was submitted there was evidence against the drawing of that inference particularly the investigative work already carried out on the establishment of the quarry in 1985 and 1986 which resulted in the approval on 24 December 1986 by the Council of a development application for the establishment of the quarry. There was no evidence to support the conclusion that the defendants were desirous of improving the value of their property for the purposes either of sale or mortgage. S41(2) of the Fair Trading Act provides that the onus of establishing that a person had reasonable grounds for making a representation with respect to any future matter including the doing of or the refusing to do any act is on the person. The critical representation on | June 1993, which preceded most of the plaintiffs' expenditure, that the McDonalds would sign an agreement for the development of the quarry when it had been prepared fell within this category. The defendants gave no evidence that they had reasonable grounds for making this representation. But with respect to the earlier representations of October 1992 and January 1993, though of present matter, on 11 November 1994 the URJ FISHER v McDONALD (Sheller JA) 17 defendants' solicitors wrote advising "that our clients deny that there was ever any intention to proceed with an agreement to quarry." In the absence of any explanation of this statement, it seems to me that it was open to the trial Judge to find that neither of the McDonalds had any intention at the time they made the representations to make an agreement for the development of the quarry or sign one when it had been prepared. I agree with the defendants' submission that the inference his Honour drew as to their purposes in entertaining the discussions may well go beyond the evidence but these remarks were unnecessary and do not, in my opinion, detract from the principal finding of intentional misrepresentation supported by the statement in their solicitors' letter which was left unexplained. Accordingly, I would dismiss the cross-appeal. COSTS The plaintiffs began these proceedings on 21 March 1995. PtS2A 133(2) provides, relevantly, that where in proceedings commenced after 30 June 1993 but on or before 1 October 1997 a plaintiff recovers a sum not more than $75,000 the plaintiff shall not be entitled to payment of his or her costs of the proceedings unless, it appearing to the Court that the plaintiff had sufficient reason for commencing or continuing proceedings in the Court, the Court makes an order for payment. The correct assessment of damages in this case by Bainton J would have meant that the rule did not apply and, accordingly, that his Honour erred in applying it. This being so, his Honour erred, in my opinion, in making no order as to costs. No reason has been advanced why, if r33(2) does not apply, costs should not have followed the event. INDEMNITY COSTS The plaintiffs submitted that, if their appeal on the quantum of damages succeeded, they were entitled to costs on an indemnity basis and relied on an affidavit of Peter Robert Sandel of 3 September 1998 to which was annexed a letter from the plaintiffs' solicitors to the defendants' solicitors dated 24 November 1995 advising that the plaintiffs would agree to settle the proceeding on the following terms: 1. Verdict and judgment for the plaintiffs against the defendants for $80,000; 2. Defendants pay the plaintiffs' costs as agreed or assessed. The offer remained open for acceptance until 10 am on 27 November 1995. No response was received to this letter. In reliance upon this letter the plaintiffs claimed that their costs, both of the hearing and of the appeal, should be assessed on an indemnity basis from 24 November 1995; Calderbank v Calderbank (1975) 3 All ER 333 at 342-3; State Authorities Superannuation Board v Property Estates (Queensland) Pty Ltd (1991) 11 BCL 28 at 37-8 and AWA Ltd v Daniels (unreported) 8 October 1992 Rogers CJ Comm D at 4 and 34-35. This submission was uncontested and, in my opinion, is correct. CONCLUSION I would propose the following orders: 1. Appeal allowed; 2. Set aside the judgment entered on 25 March 1997 for $59,331.57 and substitute therefor a judgment for $93,343.36 plus interest at Supreme Court rates from 31 December 1994 to the date of this order; 3. Dismiss the cross-appeal with costs; 4. Respondents to pay the appellants' costs of the proceedings before Bainton J and of this appeal, such costs to be paid by the respondents on an indemnity basis from and after 24 November 1995. 18 UNREPORTED JUDGMENTS Stein JA I agree with Sheller JA. _ Appeal allowed; 2. Set aside the judgment entered on 25 March 1997 for $59,331.57 and 5 substitute therefor a judgment for $93,343.36 plus interest at Supreme Court rates from 31 December 1994 to the date of this order; Dismiss the cross-appeal with costs; 4. Respondents to pay the appellants' costs of the proceedings before Bainton J and of this appeal, such costs to be paid by the respondents on 10 an indemnity basis from and after 24 November 1995. » Counsel for the appellant: R W Hunt Solicitors for the appellant: Manion McCosker 15 Counsel for the respondent: I F Byrne Solicitors for the respondent: Snedden Hall & Gallop