Trentelman v The Owners - Strata Plan No 76700 [2022] HCATrans 98 (13 May 2022)

Last Updated: 19 May 2022

[2022] HCATrans 098

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S187 of 2021

B e t w e e n -

NATALIA TRENTELMAN

Applicant

and

THE OWNERS – STRATA PLAN NO 76700

Respondent

Application for special leave to appeal

KIEFEL CJ
GLEESON J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 13 MAY 2022, AT 2.30 PM

Copyright in the High Court of Australia
MR M.A. ASHHURST, SC: May it please your Honours, I appear with my learned friends, MR G.N.H. FARLAND and MR M.T. KEENE, for the applicant. (instructed by Bannermans Lawyers)

MR W.G. MUDDLE, SC: May it please the Court, I appear with MS J.K. MEE for the respondent. (instructed by I A McKnight Solicitor)

KIEFEL CJ: Yes, Mr Ashhurst.

MR ASHHURST: Your Honours, the applicant contends that in this matter, the New South Wales Court of Appeal combined unique elements of promissory estoppel with unique elements of proprietary estoppel so as to produce a result that would not have been achievable if either of those principles had been separately applied. The applicant contends that if leave is granted to prosecute this appeal, it will demonstrate the essential differences between promissory and proprietary estoppel that the applicant submits were critically overlooked in the judgments below.

KIEFEL CJ: What are those essential differences?

MR ASHHURST: In promissory estoppel, what the promisor is estopped from denying is the nature or the terms of the promise, or to put it more correctly, the terms of the promise as reasonably understood by the promisee. With proprietary estoppel, what the promisor is estopped from denying is not the terms of the promise, but rather the nature or the interest in property that the promisee has reasonably understood that they will receive.

KIEFEL CJ: It is still the same thing, though. It is what is conveyed, is it not? This case is really just about reliance.

MR ASHHURST: I will come to that in a moment, but, with respect, no. What is critical here is that the nature of the interest in property, which the lower courts did not look at, was speculative in nature only, because the promise, as it was found, was that the promisor would create an interest in land if she went ahead and removed the development blocks from the strata plan. Now, she had no obligation to do that, so at the time the vote was taken, there could not have been any reliance on an expectation of receiving an interest in land.

KIEFEL CJ: Really, what you are saying is there could not be reliance because the representation was not clear enough.

MR ASHHURST: With respect, no. It was more – it had both aspects. Paragraph 277 of the primary judge’s judgment points out that it has two aspects. One is the uncertain nature of as to what the terms would be, but the other is whether or not there would ever be any interest in land, because the applicant may not proceed with the removal of the development lots from the strata plan. So, why that is so critical, and why one has to look at what it is that someone is being estopped from doing, if one looks at promissory estoppel, one can say, yes, but you promised that if you removed these lots then you would create an interest in land.

Now, promissory estoppel has its problems here, because of the inchoate nature and the uncertainty that the primary judge found, which is the second aspect in paragraph 277, but the first aspect, whether or not any interest in land would ever be created, because the applicant, if she had said, after that resolution was passed, thank you for passing that resolution but in fact I am not going to go ahead and remove these lots from the strata plan - in fact, she did not remove Lot 7 – let us take, as an example, she did not remove all three of the lots, no interest in land could possibly have ever been created.

Now, in those circumstances, what that means is if we look at the reliance through the lens of proprietary estoppel rather than through the lens of promissory estoppel, at the time that the vote was taken those lot‑holders could not possibly or reasonably have understood that there would be an interest in land, because that was speculative, and what they were relying upon, your Honours, was not that an interest in land would necessarily be created, what they were relying upon was the promise that if she went ahead she would produce the interest in land.

GLEESON J: Effectively she did go ahead.

MR ASHHURST: Yes, but one has to consider, for the purposes of proprietary estoppel and, indeed, for promissory estoppel, one has to look at the act of detriment. The act of detriment, and the act of reliance, more importantly, was the vote. So, at the point in time of the vote, was there reliance, detrimental reliance, on the reasonable expectation of an interest in land? That is what you need for proprietary estoppel. There could not have been that, because no interest in land might ever have been created. Instead, what the Court of Appeal did was to look at the promise and say, look, it was reasonable for this owners’ corporation or for the lot owners to have anticipated that she would comply with her promise, and that if she went ahead, she would produce an interest in land. But that is, with respect, looking at promissory estoppel, not proprietary estoppel, and that is the big error.

They took a little piece of promissory estoppel, which was look at the promise, not the interest of land, and then – they could not have, the respondent could not have got up on promissory estoppel because it was not the necessary amount of certainty in relation to the representations. Then what the Court of Appeal did was to apply the less stringent test of proprietary estoppel.

So, they took an amalgam, proprietary estoppel and promissory estoppel, and achieved a result that they could never have achieved with just one of them, and what this – if this judgment is allowed to stand, then effectively what it could be used as authority for is the circumvention of contractual requirements.

As Justice Keane in this Court said in Crown Melbourne v Cosmopolitan Hotel, the reason why you have a stringent requirement for certainty in relation to promissory estoppel is because promissory estoppel arises in circumstances where there either is a contractual relationship or negotiations for a contractual relationship. For that reason, it is critical that there be certainty in the representation, so that the ‑ ‑ ‑

KIEFEL CJ: But either estoppel – they do not operate in the context of contract.

MR ASHHURST: No. What Justice Keane said in Crown is that they operate in circumstances where there is contract ‑ ‑ ‑

KIEFEL CJ: As a question of fact, they often arise in contractual relationships.

MR ASHHURST: Indeed, his Honour would go further and say they either arise in a contractual relationship or in circumstances where the parties are negotiating with an expectation that there will be a contractual relationship. What you are, in those circumstances, seeking to estop them from doing is estop them from denying the nature of the promise that they made, but because it cannot be used - promissory estoppel cannot be used to circumvent the law of contract and the need for certainty, then the court requires certainty as well.

Now, compare and contrast that to proprietary estoppel, where in certain circumstances, and as the Chief Justice puts to me, ordinarily, one does not require, or may not require, the same level of certainty for proprietary estoppel, in that instance, what is required for the conscience of the representor to be impugned so as to support an estoppel is there has to be certainty, not in the nature of the representation, there has to be certainty as to the interest in the property, the expected interest in the property reasonably assumed by the representee.

GLEESON J: You accept, I think, and conceded in the Court of Appeal that your client had acted unconscionably.

MR ASHHURST: What we said is that there is an argument that, taking the benefit of an inchoate promise without providing anything in return can be considered to be acting unconscionably, but as Lord Scott made quite clear in Cobbe v Yeoman’s Row Management, estoppel is not created because of that sort of unconscionability.

It is not some wide‑ranging form of unconscionability. There is promissory estoppel, where the conscience, the effect on the conscience, is that the representations were sufficiently certain in a manner described by contract law, sufficiently certain that the representor would be held to be unconscionable not to comply with the terms of their promise, or with proprietary estoppel, where the terms of the representation do not have to be sufficiently precise in certain circumstances. It is unconscionable for the representor to allow the representee to rely on an interest in land that it was reasonable for the representee to assume that they were going to receive.

GLEESON J: The unconscionability, the finding of unconscionability, depended on finding of detrimental reliance, did it not?

MR ASHHURST: Yes, by mixing promissory and proprietary estoppel together. So, what came from the promissory estoppel was the nature of the promise and the fact that the courts considered the nature of the promise and said that the promisor, the applicant, should not be allowed to resile from that promise. Then what was said to be unconscionable was that she was seeking to resile from the promise. So, ordinarily, that claim would have had unconscionability, but it would have failed because of the lack of certainty of the promise.

How that was avoided, simply because this happened to be a contract involving land, the Court of Appeal and the first instance judge said, well, we get there by proprietary estoppel. But that misunderstands the critical element of proprietary estoppel, which is not adherence or an understanding or an estoppel being estopped from resiling from the terms of the contract, what needs to occur in proprietary estoppel is the representee has to have understood that they were going to receive an interest in land.

GLEESON J: What is uncertain about an easement conferring a continuing right to use a swimming pool?

MR ASHHURST: Because the applicant did not have to go ahead and remove – at the time the resolution was passed, the applicant did not have to go ahead and remove ‑ ‑ ‑

KIEFEL CJ: It just makes it a contingent interest.

MR ASHHURST: Yes, and a contingent interest is a speculative interest.

KIEFEL CJ: No, it is not.

MR ASHHURST: With respect, it is, and that is what Lord Scott says in Cobbe v Yeoman’s at paragraph 25. He explains, and this is what he says ‑ ‑ ‑

GLEESON J: Is that.....Court of Appeal judgment?

MR ASHHURST: Is that extract in the Court of Appeal judgment – no, it is not. It is a short passage. He says this:

The reason why, in a ‘subject to contract’ case, a proprietary estoppel cannot ordinarily arise is that the would‑be purchaser’s expectation of acquiring an interest in the property in question is subject to a contingency that is entirely under the control of the other party to the negotiations . . . The expectation is therefore speculative.

That is precisely the situation here.

KIEFEL CJ: That is different facts.

MR ASHHURST: With respect, Chief Justice, not relevantly so. Here, what is important is – and pose this question. If, after the resolution was passed, the applicant had said I am not going ahead and removing any of these properties from the strata plan, what cause of action would the owners’ corporation have had against her? None. So, the cause of action can only arise from the act of her performing removing the properties. What is the estoppel there?

It is promissory, because it is only the promise to provide the interest in land upon the removal of the development lots that could possibly create the estoppel, because it cannot be proprietary estoppel, because at the time they voted in favour of the resolution – they never knew there was going to be an interest in land. In fact, there may never have been any interest in land, and therefore it was speculative, and that does not satisfy the test for proprietary estoppel. That is described - again in Cobbe v Yeoman’s Row Management, conveniently Lord Scott said this, after describing the speculative nature:

This is not, in my opinion, the sort of expectation of “a certain interest in land” that Oliver J in the Taylors Fashions case or Lord Kingsdown in Ramsden v Dyson had in mind.

Now, I note the time, so I will move to the second point, but the critical point, and why this is so important for not just these two protagonists, is that if this approach of using parts of, of looking at the conduct of the promisor based on concepts of unconscionability and being held to your promise, but applying the test of certainty from proprietary estoppel, then you have effectively combined the two principles of estoppel, and we have, in Australia, a combined statement of estoppel by stealth.

Now, the second aspect and the second special leave question we say this appeal creates is this. As your Honours have seen, only a special resolution was needed to pass - to grant authority to remove these development lots from the strata plan. That meant that the respondent at least had to establish, to prove reliance, that at least 25 per cent of the voters did so because, in whole or in part, they were motivated by the promise that had been made, or, more accurately, if we are actually applying proprietary estoppel, did so because they understood they were to receive an interest in land.

Now, only 19 per cent – of people with voting entitlements, 19 per cent were called. Critically, of those 19 per cent who were called, some of them actually said they understood that what they were going to get out of this was an extension of their existing easements. Those easements were in favour of the lot owners personally, not the owners’ corporation. They were for 10 years, they had three more years to run, and one could understand why they would think that what was being extended was their personal easements.

If the lot owners who voted on this understood that what was occurring was an extension of their own easements, which is a reasonable thing to assume, then that is not an understanding that the respondent was going to receive an interest in land, that is an understanding that you personally are going to receive an interest in land.

Now, the second possible motivating factor is that it was a term of the proposal that if they were voted in favour, the development that was to go up on Lot 7 was a much smaller scale than what had previously been provisioned, just three townhouses. So, there were two possible reasons why these members could have been voting in favour of this resolution. One is that they thought they were doing so because they were going to extend their own easements, the second is that they thought this would lock in a smaller‑scale development.

Now, in those circumstances, it is necessary, for the reasons that are explained in Smith v Chadwick, that the court cannot draw an inference in a party’s favour when there is more than one possible inference when you do not call the decision‑makers. This issue did not arise in Sidhu, because in Sidhu the decision‑makers were called and were cross‑examined.

But what happened both below and in the Court of Appeal is their Honours drew an inference in favour of the respondent, even though the respondent only called witnesses who had a voting entitlement of 19 per cent, and even though some of those witnesses said that their understanding was that they were personally to receive an interest in land or, alternatively and equally importantly, they understood that any interest in land would be offered to them and they would be able to accept it or reject it, so that there was no certainty.

So, there are two critical aspects of this decision which will stand as important precedents if special leave is not granted. The first is that one will be able to go to this case as authority for the proposition that when one is considering a proprietary estoppel one can effectively estop the person from resiling from their promise as if it was promissory estoppel, but then apply the less stringent test in relation to certainty that comes from proprietary estoppel.

The second aspect of this decision, the second critical aspect of this decision is that, contrary to what Sidhu said, when Sidhu says one must consider reliance by looking at all of the evidence, this will stand for the fact that one does not have to actually call the decision‑makers to be able to draw those inferences.

Now, there are two other matters that we say, two other special leave matters, that we say are raised by this appeal. The first is the question of Gallagher v Rainbow. As your Honours are no doubt well aware, that case stands for authority for the proposition that if a lot is benefitted by an easement and there is a subdivision, both lots then gain the benefit of that subdivision, but what this Court has not considered is what happens if one of those lots is common property. Does that mean that the entirety of the common property of the strata plan is benefitted by the easement?

That is the third of the issues that we say this appeal raises, and the fourth of them is the question under section 254 of the Strata Schemes Management Act and the extent to which that section permits owners’ corporation to maintain proceedings not in respect of common property, but in respect of the lot owners’ personal property, in this case, what may have been their equitable interest in extending their personal easements. They are the applicant’s submissions.

KIEFEL CJ: Yes, thank you. The Court will adjourn to consider the course that it will take.

AT 2.51 PM SHORT ADJOURNMENT

UPON RESUMING AT 2.52 PM:

KIEFEL CJ: We need not trouble you, Mr Muddle.

We do not consider that there are sufficient prospects of success to warrant the grant of special leave to appeal. Special leave is refused with costs.

The Court will adjourn to 10.00 am on Tuesday, 7 June.

AT 2.53 PM THE MATTER WAS CONCLUDED