WALTON STORES (INTERSTATE) LTD V MAHER AND ANOR (1988) 164 CLR 387

High Court of Australia – 19 February 1988

FACTS
Mr & Mrs Maher (the Mahers) had been negotiating with Walton Stores to lease a commercial property, which the Mahers
owned in Nowra. In October 1983 a draft lease was sent to the Maher’s solicitors. Amendments were discussed and Walton’s
solicitors were informed that the Mahers had begun to demolish the old building. On 7 November 1983 Walton’s solicitors
were told that it would be impossible for the new building to be completed on time unless the agreement was completed in the
next day or two. Walton was also told that the Mahers did not want to demolish a new part of the old building until the
agreement was finalised.
On 11 November 1983, Mahers’ solicitors forwarded to the Walter solicitor an executed lease “by way of exchange”. The
Mahers then began to demolish the building. Walton had second thoughts about proceeding with the transaction, and instructed
their solicitors to “go slow”. Shortly thereafter Walton became aware that the demolition was proceeding. Early in January
1984 the Mahers commenced building works.
The building was about 40 per cent completed, when on 19 January, the company said it did not intend to proceed. There was
no prior legal relationship between the parties.
Maher’s claimed that Walton’s were estopped from going back on their earlier representations about the lease.
ISSUES
Was Waltons estopped from retreating from its promise to complete the contract?
FINDING
Although leases were not exchanged, Walton was estopped from denying that it was bound. Walton was estopped from
retreating from its implied promise to complete the contract because, knowing the owner was exposing himself to detriment by
acting on the basis of false assumptions, it was unconscionable for Waltons to adopt the course of inaction which encouraged
the Mahers to demolish the building and build a new building.
QUOTE
Mason CJ & Wilson J said:
“The doctrine extends to the enforcement of voluntary promises on the footing that a departure from the basic
assumptions underlying the transaction between the parties must be unconscionable. A failure to fulfil a promise
does not of itself amount to unconscionable conduct, mere reliance on an executory promise to do something,
resulting in the promisee changing his position or suffering detriment, does not bring promissory estoppel into play.
Something more would be required. A-G of Hong Kong v Humphreys Estate (Queen’s Gardens) Ltd [1987] AC 114
suggests that this may be found, if at all, in the creation or encouragement by the party estopped in the other party of
an assumption that a contract will come into existence or a promise will be performed and that the other party relied
on that assumption to his detriment to the knowledge of the first party.” – page 406 of (1988) 164 CLR 387

IMPACT
Parties to proposed contracts should be aware that their conduct before the contract is entered into may support an action in
estoppel by the other party should the other party rely on their representation and the estopped party have knowledge of this.
This may be the case notwithstanding that contractual terms are still to be agreed.
It was not crucial that there be an intention of the parties to enter contractual relations.

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