Moratic Pty Ltd v Gordon [2007] NSWSC 5; (2007) 13 BPR 24

Facts: Under a lease of certain property upon which the lessees operated a hotel business, the lessee, Moratic, agreed to pay (in addition to standard rent) the lessors, Mr and Mrs Gordon, "further rent" calculated at the rate of 4% of the value of liquor delivered to or for the hotel business (cl 20). The lessee did not contemplate paying rent under cl 20 when it purchased the business from the previous lessee (and was assigned the lease). No amount of "further rent" was ever demanded or paid, even though it was part of the contract. The lessee commenced proceedings seeking a declaration that it was not liable to pay any amount under cl 20, arguing an estoppel by convention (and equitable promissory estoppel).

Issue: Was the lessee successful? 

Held (Brereton J at [32]): No. In CL conventional estoppel, it is necessary for a plaintiff to establish: 

1. that it has adopted an assumption as to the terms of its legal relationship with the defendant;

2. that the defendant has adopted the same assumption; 

3. that both parties have conducted their relationship on the basis of that mutual assumption; 

4. that each party knew or intended that the other act on that basis; and 

5. that departure from the assumption will occasion detriment to the plaintiff (Waterman v Gerling Australia Insurance Company Pty Ltd [2005] NSWSC 1066, [83], [96]]).