To the disappointment of the prospective tenants, James Packer’s Crown Resorts refused to include an option period in the leases of two upmarket restaurants at its Melbourne Casino and Entertainment Complex.
After signing the leases but before returning them to Crown, the tenants nevertheless sought assurances – before embarking on refurbishments at a cost of $4.5 million – they would not be evicted after just 5 years.
That’s when they claim to have received a promise that they would be “looked after at renewal time” in meetings and encounters with director Lloyd Williams and retail manager David Boesley.
At the end of their terms in 2010– after only a few years enjoying the benefits of their substantial investment – eateries Cosmopolitan and Fish & Co were not “looked after” at all.
Their worst fears were realised when all that was offered was a four week termination period.
The companies – both controlled by prominent restaurateur Nicolas Zampelis – filed claims in the Victorian Civil and Administrative Tribunal alleging that on the strength of Crown’s promise they were entitled to another 5 year lease on identical terms.
VCAT ruled that the “looked after at renewal time” promise was a separate collateral contract to offer a renewal of the leases for a further 5 years on terms to be decided by Crown.
It also concluded that Crown was “estopped” from denying the existence of that arrangement and ordered that by reason of its breach, Crown pay Cosmopolitan $468k and Fish $1.1 mil compensation.
Raising the stakes, the Packer side appealed to the Victoria Supreme Court and succeeded in overturning that judgement. Being “looked after at renewal time” was too vague a commitment to constitute a binding collateral contract, ruled the court.
That state’s Court of Appeal – when the restaurateur increased the wager on his side of the table – agreed that the statement was too vague to be binding but concluded it might be enough to constitute a “promissory estoppel”.
“A reasonable person would consider that the statement amounted to a promise that Crown would give notice that it would renew each of the 2005 leases.”
But given the paucity of evidence on what sort of lease might be the “baseline” under the “looked after” scenario, the appeal judges remitted the promissory estoppel point back to VCAT to decide.
Crown doubled down yet again by appealing to the High Court of Australia.
In August, the High Court decided by a 5–2 majority that the statement was not capable of giving rise to a claim for estoppel, deciding the case in Crown’s favour.
Because the tenants acted on the expectation they would be offered further five year leases at renewal time on identical terms as before – rather than on terms to be decided by Crown as VCAT ruled was the appropriate interpretation – their reliance was upon something illusory.
After all, Crown could have offered completely uncommercial leases.
There’s little consolation for the tenants and Zampelis that Justices Gageler and Gordon dissented with the majority opinion found in their favour and ruled the VCAT order should be reinstated on both grounds.
“Crown’s obligation under the collateral contract was to give each Tenant a notice amounting to an offer which the Tenant would be able to accept,” ruled Justice Gageler. “The fact that the choice of the terms on which Crown would make that offer was left to Crown did not render the obligation illusory: that Crown could choose the terms did not contradict its obligation to make an offer.”
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