Commonwealth v Verwayen

170 CLR 394
95 ALR 321

(Decision by: GAUDRON J)

Between: COMMONWEALTH
And: VERWAYEN

Court:
High Court of Australia

Judges: Mason C.J.
Brennan J.
Deane J.
Dawson J.
Toohey J.

Gaudron J.
McHugh J.

Subject References:
Estoppel

Judgment date: 5 September 1990


Decision by:
GAUDRON J

In February 1964 there was a collision at sea between two ships of the Royal Australian Navy, HMAS Voyager and HMAS Melbourne. Many of the crew of the Voyager were injured, some fatally. Mr Verwayen was on board the Voyager and claims to have suffered injuries in the collision.

It seems that for a number of years it was generally assumed that there was no liability in negligence on the part of the Commonwealth of Australia, its officers, servants or agents in respect of the collision. However, following the decision of this Court in Groves v. The Commonwealth (1982) 150 CLR 113 , the services of Messrs Vaccaro and Taylor, Barristers and Solicitors of Myrtleford, Victoria, were retained by some of the survivors from the Voyager to investigate the possibility of their recovering damages from the Commonwealth. In November 1983 Messrs Vaccaro and Taylor secured agreement from the Commonwealth that it would "not rely on the Statute of Limitations" in an action arising out of the collision commenced by Mr Robert Palmer. In February 1984 the Commonwealth admitted liability in that action. Damages were to be assessed.

In September 1984 Messrs Vaccaro and Taylor wrote to the Secretary, Department of Defence, noting that in the case of Mr Robert Palmer the Commonwealth had "waived the Statute of Limitations" and had "admitted liability". A request was made on behalf of Mr Verwayen and four other persons that "you treat these men the same and waive the Statute to allow us to proceed on their behalf". A reply was received from the Minister Assisting the Minister for Defence stating that the request had been referred to the Australian Government Solicitor (Victoria) who would advise of the Commonwealth's position.

On 2 November 1984, Mr Verwayen commenced proceedings against the Commonwealth in the Supreme Court of Victoria claiming damages for negligence. On 25 January 1985, the Australian Government Solicitor advised that the Commonwealth proposed to admit liability and to waive the Statute of Limitations in that action. Thereafter, on 14 March 1985, the Australian Government Solicitor delivered a defence which, in terms, admitted negligence as pleaded in Mr Verwayen's statement of claim. There was no plea that the action was statute barred. As the pleadings then stood, the only issue was as to Mr Verwayen's injuries, loss and damages. Thereafter, during 1985, the Australian Government Solicitor joined in five applications made by or on behalf of Mr Verwayen for an expedited hearing of that issue. In November 1985, the Minister Assisting the Minister for Defence wrote to Mr Verwayen stating, inter alia, that "the Commonwealth has admitted negligence and is not pressing the statutory limitation period as a defence". In that letter there was an expression of regret as to "any delay in the finalization of claims" and an assurance that "all reasonable steps are being taken to expedite these matters, consistent with normal legal requirements".

Mr Verwayen's action was prepared for trial. It seems that it was expected that the trial would be held during the Wangaratta sittings commencing on 3 June 1986. However, on 22 May 1986, application was made for leave to amend the Commonwealth's defence. The application was opposed. Leave was granted. An amended defence was filed on 29 May 1986. By that amended defence the Commonwealth denied negligence and asserted that the Voyager and the Melbourne were, at the relevant time , warships engaged in combat exercises and that, by reason thereof, no duty of care was owed to Mr Verwayen. For the sake of convenience the matter thus pleaded will be referred to as "the combat exercise defence". Additionally, it was pleaded that the action was barred by s 5 of the Limitation of Actions Act 1958 (Vic.).

A reply to the amended defence was filed. Issue was joined on the denial of negligence. Additionally, the reply -

(a)
denied that the Voyager and the Melbourne were engaged in combat exercises;
(b)
asserted that the claim that the Voyager and the Melbourne were warships engaged in combat exercises did not amount, in law, to a defence to the plaintiff's claim;
(c)
asserted that "the Limitation Act does not apply to (the Commonwealth)";
(d)
alternatively, asserted that the Commonwealth had waived or was estopped from raising "the combat exercise defence" and the defence that the action was statute barred.

The question raised by the plea that "the Limitation Act does not apply to (the Commonwealth)" has been decided against Mr Verwayen and that decision has not been challenged. It is convenient to note two other matters relating to the amended defence and the reply. First, the reply did not assert that the Commonwealth had waived any right to raise or was estopped from raising a general denial of negligence. This may have resulted from an assumption, which seemed to underlie the argument put to this Court, that the only basis on which negligence is denied by the Commonwealth is that comprehended in "the combat exercise defence". Secondly, the questions of waiver and estoppel raised on behalf of Mr Verwayen go to both "the combat exercise defence" and the defence that the action is statute barred.

The issues raised by the amended defence and the reply were determined as preliminary issues by O'Bryan J., his Honour taking the view that none of these issues involved any factual issue for a jury to determine. So far as is presently relevant, his Honour held -

(i)
that "the combat exercise defence" did not amount, in law, to a defence to the plaintiff's action; and
(ii)
that the Commonwealth was not precluded (whether by waiver or estoppel) from relying on a defence that the action was statute barred. In the result, judgment was entered for the Commonwealth, but, by reason of the course which the action had taken, the Commonwealth was ordered to pay Mr Verwayen's costs of and incidental to the hearing before O'Bryan J.

Mr Verwayen appealed and the Commonwealth cross-appealed to the Full Court of the Supreme Court of Victoria. It was held by majority (Kaye and Marks JJ., King J. dissenting) that the Commonwealth was estopped, by virtue of a promissory estoppel, from relying on its defence that the action was statute barred. It was further held by the majority (King J. not finding it necessary to decide the issue raised by "the combat exercise defence") that the facts did not disclose that "at the time of collision Voyager was engaged in a military manoeuvre as such or otherwise doing anything which could remotely be described as training for battle". Accordingly, the appeal was allowed and the cross-appeal was dismissed. It was ordered that the judgment entered at first instance be set aside and that the proceedings be remitted for trial on the issues of negligence and damages. The order remitting the issue of negligence flowed from the denial of negligence by the Commonwealth in its amended defence, which denial was not the subject of any claim of waiver or estoppel in the reply. The Commonwealth now appeals to this Court.

In this Court two distinct issues were argued on behalf of the Commonwealth. First, it was argued that the Commonwealth was not precluded from raising the defence that the action was statute barred (Appeal Ground 4). Secondly, it was argued that "(t)he Full Court erred ... in failing to find ... that (Mr Verwayen) was owed no duty of care by (the Commonwealth) or by any member of the armed forces engaged in the operations of either or both of HMAS Melbourne and HMAS Voyager" (Appeal Ground 5).

It is not now in issue that, if the Commonwealth is entitled to rely on its defence that Mr Verwayen's action is statute barred, it is a complete answer to his claim. Accordingly, if the Commonwealth is correct in its first argument, it is unnecessary to consider its second argument. And, because the questions of waiver and estoppel go equally to "the combat exercise defence" and the defence that the action is statute barred, then, unless there is some difference arising from the nature of the two defences, if the Commonwealth is not successful on its first argument, the question posed by "the combat exercise defence" does not arise.

The starting point of the argument made on behalf of the Commonwealth is that waiver, unless constituted by Deed or by an agreement supported by consideration, does not exist independently of estoppel. There was neither a Deed nor agreement supported by consideration in the present case. The Commonwealth acknowledges that there was a promise, knowingly and intentionally made, which gave rise to a promissory estoppel. But, it was argued, the object of promissory estoppel is to avoid detriment, not to secure performance of the promise made. The only detriment suffered by Mr Verwayen, it was said, was that involved in preparing his action for hearing. And, according to the argument, that detriment was fully and appropriately avoided by cost orders fashioned to the particular circumstances of the case.

In Craine v. Colonial Mutual Fire Insurance Co. Ltd. (1920) 28 CLR 305 this Court, in a judgment delivered by Isaacs J., sought to distinguish (at pp 326-328) between waiver and estoppel by conduct; it was said (at p 328) that "estoppel may be established where waiver cannot, and conversely waiver may be found where estoppel does not exist". The distinction made was between "an intentional act with knowledge" (Earl of Darnley v. Proprietors, etc. of London, Chatham, and Dover Railway (1867) LR 2 HL 43, at p 57) and conduct which, even if done unintentionally, without knowledge and not amounting to a positive act, is such that "it would be unjust ... to throw the consequences on the person who believed his statement and acted on it": Sarat Chunder Dey v. Gopal Chunder Laha (1892) LR 19 Ind App 203, at p 216.

Contemporary understanding of the nature of the conduct which will ground an estoppel allows that the conduct which was identified in Craine as a waiver is conduct which may ground an estoppel. See, for example, Thompson v. Palmer (1933) 49 CLR 507 , per Dixon J. at p 547, and Grundt v. Great Boulder Pty. Gold Mines Ltd. (1937) 59 CLR 641 , per Dixon J. at p 675. And that the same conduct might be characterized either as waiver or as founding an estoppel was recognized by Isaacs J. in Sandringham Corporation v. Rayment (1928) 40 CLR 510 , at pp 528-529.

Given that the same conduct may constitute what was characterized as waiver in Craine and provide the foundation for an estoppel, there has been a tendency, in recent times, to question whether and, if so, in what circumstances waiver exists independently of the general law of estoppel. And this question has led to the further question whether the word "waiver" is not productive of confusion. Thus in Kammins Co. v. Zenith Investments (1971) AC 850, Lord Diplock (at p 882) observed that the word "waiver" was "sometimes used loosely to describe a number of different legal grounds on which a person may be debarred from asserting a substantive right ... or from raising a particular defence". His Lordship went on to say that the first type was "better categorised as 'election' rather than as 'waiver'" and that "(t)he ordinary principles of estoppel apply to (the second category of waiver)". In the same case Viscount Dilhorne (at pp 872-873) quoted the statement in Spencer Bower and Turner, The Law Relating to Estoppel by Representation, 2nd ed. (1966), at pp 291-292, that the word "waiver" has "dangers which may be avoided only by forgoing it as a useful term when considering either estoppel or election" and that its use in the authorities is more probably to "be found to connote 'election' than 'estoppel'". (See now 3rd ed. (1977), at pp 319-320.)

In Craine, Isaacs J. (at p 326) referred to waiver as "a doctrine of some arbitrariness introduced by the law to prevent a (person) in certain circumstances from taking up two inconsistent positions". The expression "taking up two inconsistent positions" is wider than the expression "asserting two inconsistent rights". It is the assertion of inconsistent rights that is generally understood to be at the heart of what is called "election". See Sargent v. A.S.L. Developments Ltd. (1974) 131 CLR 634 , per Stephen J. at p 641; Lissenden v. C.A.V. Bosch Ltd. (1940) AC 412, per Lord Wright at pp 435-436. For present purposes the question whether there is a doctrine, be it called "waiver" or anything else, which operates by reference to the taking of inconsistent positions rather than the assertion of inconsistent rights can be confined to the situation where, in the course of litigation, a person asserts a right to take a position which is inconsistent with one earlier taken in the same litigation .

If, in the course of litigation, a person fails to plead a matter, take an available objection or pursue a particular point of law, the matter proceeds on the basis that the point which might have been taken is not in issue. Were it otherwise the conduct of litigation would be unmanageable. Of course, leave may be granted for the point to be raised notwithstanding the failure to take the point at the appropriate time. Generally, leave is granted if the point can be raised without injustice to the other party. That question may depend upon whether disadvantage to the other party can be avoided by adjournment or an appropriate costs order. But other issues may be taken into account. In Ketteman v. Hansel Properties (1987) AC 189 Lord Griffiths (at p 220) said "justice cannot always be measured in terms of money". His Lordship then observed that there was to be weighed in the balance "the strain the litigation imposes on litigants ..., the anxieties occasioned by facing new issues, the raising of false hopes". Additionally, his Lordship noted the necessity to take into account "the pressure on the courts" and the public interest in "legal business (being) conducted efficiently".

When a party to litigation deliberately chooses not to take a point or fails to take a point when it comes to notice, the courts may adopt a more stringent attitude, treating the point as having been irrevocably abandoned. Usually the party who has thus failed to take the point is said to have "waived" it.

In Wilson v. McIntosh (1894) AC 129 a question arose as to the consequence to be attached when a party to litigation had stated his case and required the other party to file her case in an application for the removal of a caveat under the Real Property Act 1862 (NSW) (26 Vict. No 9) notwithstanding that the caveat had by then lapsed. In that case the Privy Council approved a statement of Sir Frederick Darley C.J. in Phillips v. Martin (1890) 11 NSWLR 153, at p 158, where it was said:

"(I)t is quite clear that a man may by his conduct waive a provision of an Act of Parliament intended for his benefit. The caveator was not brought into Court in any way until the caveat had lapsed. And now the applicant, after all these proceedings have been taken by him, after, doubtless, much expense has been incurred on the part of the caveator, and after lying by and hoping to get a judgment of the Court in his favour - asks the Court to do that which but for some reasons known to himself he might have asked the Court to do before any other step in the proceedings had been taken. I think he is altogether too late. It is to my mind a clear principle of equity, and I have no doubt there are abundant authorities on the point, that equity will interfere to prevent the machinery of an Act of Parliament being used by a person to defeat equities which he has himself raised, and to get rid of a waiver created by his own acts."

The same principle is to be found in Graham v. Ingleby (1848) 1 Ex 651 (154 ER 277); Park Gate Iron Co. v. Coates (1870) LR 5 CP 634; St. Victor v. Devereux (1845) 14 LJ Ch 244.

There are two matters of significance in the statement approved in Wilson v. McIntosh that serve to indicate that what was considered in that case and in the case of Phillips v. Martin was neither election nor estoppel as those doctrines are presently understood. First, the situation there considered concerned the taking of inconsistent positions rather than the assertion of inconsistent rights in the strict sense. Secondly, to the extent that the incurring of expense might equate with detriment for the purposes of the law of estoppel, that detriment was presumed rather than established. One other matter may also be noted by reference to Wilson v. McIntosh. If the incurring of expense were the only consideration, it is difficult to see that it could not have been dealt with by an order for costs. But it was not the only or, indeed, the relevant consideration. The relevant consideration was that there were "equities which he (had) himself raised". What those equities were was not made explicit.

To some extent the equity which underlies the doctrine approved and applied in Wilson v. McIntosh can be distilled from the situations in which the doctrine has been applied or, if not applied in terms, like considerations have resulted in a party to litigation being precluded from taking a point previously open.

A party to litigation who has failed to object that a condition attaching to the exercise of jurisdiction has not been satisfied or that the proceedings were irregularly instituted may, by reason of his subsequent participation in the proceedings, be precluded from later raising the defect. See, for example, Broad v. Perkins (1888) 21 QBD 533; In re Jones v. James (1850) 19 LJ QB 257; Moore v. Gamgee (1890) 25 QBD 244. So too, a litigant may be precluded from raising a matter going to the disqualification of the person constituting the court if, with knowledge of the disqualification, he participates in the proceedings without objection. See Vakauta v. Kelly (1989) 167 CLR 568 . See also Corrigal v. The London and Blackwall Railway Company (1843) 5 Man and G 219 (134 ER 545); Shrager v. Basil Dighton Ltd. [1924] 1 KB 274 , a case concerning jurisdiction of Official Referees appointed under the Rules of the Supreme Court (UK).

Once a matter has passed into judgment similar considerations may operate to limit the matters which may be raised on appeal. A party to an appeal may be precluded from taking a point not argued at trial, even if the matter was pleaded and particularized: Water Board v. Moustakas (1988) 62 ALJR 209; 77 ALR 193 . See also Suttor v. Gundowda Pty. Ltd. (1950) 81 CLR 418 ; Maloney v. Commissioner for Railways (NSW) (1978) 52 ALJR 292; 18 ALR 147. So too, a party to an appeal may be precluded from relying on the pleadings if some different basis was chosen by the parties for the determination of the matter at trial. See Browne v. Dunn (1893) 6 R. 67, at pp 75-76, cited with approval in Rowe v. Australian United Steam Navigation Co. Ltd. (1909) 9 CLR 1 , at pp 24-25; Gould and Birbeck and Bacon v. Mount Oxide Mines Ltd. (In Liquidation) (1916) 22 CLR 490 , per Isaacs and Rich JJ. at p 517.

There is a common aspect to the situations above discussed. The relationship of the parties has changed. In cases involving questions relating to jurisdictional defect or irregularity attending the institution of the proceedings the parties have become or are treated as having become parties to a proceeding. In the case of failure to raise a matter of personal disqualification, the parties have entered a new relationship, namely parties to a proceeding which is in the course of adjudication. Again, once a matter has passed into judgment, the relationship of the parties is according to the judgment, subject only to such powers as may be exercised by an appellate court if an appeal is instituted. And, it is significant that a respondent to an appeal who fails to object that the appeal has not been properly instituted may be precluded from later raising that issue. See Park Gate Iron Co.; Ward v. Raw (1872) LR 15 Eq 83. Again, in that situation the parties are or are deemed to be in a new relationship, namely, that of appellant and respondent.

Perhaps there is a principle of wider application, but it is clear that a party to litigation will be held to a position previously taken (that position having been intentionally taken with knowledge) if, as a result of that earlier position, the relationship of the parties has changed. The changed relationship, in the terms used in Phillips v. Martin and approved in Wilson v. McIntosh, constitutes an "equit(y) which (the other) has ... raised".

Given that the position deliberately adopted by one party has brought about a change in the relationship of the litigants, a doctrine which holds the parties to that relationship may be seen as resting either on general policy considerations or on principles analogous to those of estoppel. Such a doctrine, by ensuring fair dealing in the conduct of litigation and by promoting the finality of litigation, aids the efficient administration of justice. By analogy with the general law of estoppel, one may treat the doctrine as operating by reference to an assumption that a particular relationship has been constituted, which assumption has been occasioned by the deliberate failure to take an available point when it comes to notice. But the doctrine does not require proof that detriment will be suffered. Rather, to continue the analogy, it presumes that putting the parties back in some earlier relationship is, itself, a detriment. And, in a sense, so it is, for there could be no certainty that the parties would thereafter secure the rights against each other that marked the relationship brought about by the failure to take an available point. For example, if proceedings had to be started afresh because of some procedural defect attending their institution, there could be no certainty that service would again be effected or that it would be effected before the expiry of some limitation period. Although the doctrine is analogous to general principles of estoppel, it operates because there is no injustice in holding a party to a changed relationship where that relationship is referable to a deliberate failure to take an available point. Conversely, if the failure is not deliberate, there is no injustice (whether viewed from the perspective of estoppel or otherwise) in allowing that point to be later taken if disadvantage to the other side can be avoided by adjournment or an order as to costs. It matters not whether the doctrine is called "waiver" or anything else. For ease of expression I shall continue to use the word "waiver", using it in the present context to signify deliberate action or inaction which has resulted in a changed relationship to which the parties will be held whether or not detriment is actually established.

Ordinarily the failure to raise a particular defence will not effect a change in the relationship of parties to litigation. If, for example, liability is in contest, the relationship is not altered by expanding the grounds of that contest. Thus, ordinarily and subject to those considerations relevant to the grant of leave, the pleadings may be amended to enable all matters relevant to that issue to be raised. See, for example, Cropper v. Smith (1884) 26 ChD 700. However, in the present case, the relationship of the parties was altered by the defence originally delivered by the Commonwealth. As earlier mentioned that defence, in terms, admitted negligence. That admission having been made and it not having been pleaded that the action was statute barred, the relationship between Mr Verwayen and the Commonwealth changed to one in which Mr Verwayen became entitled to a verdict in his favour, subject only to damages being established and assessed. This new entitlement was recognized by the Commonwealth when, on five occasions, it joined in applications for an expedited hearing on the issue of damages. The new relationship was the direct result of the Commonwealth's original defence. And, it is not in issue that the Commonwealth intentionally and with knowledge of the defences available to it delivered a defence admitting liability and raising neither "the combat exercise defence" nor a defence that the action was statute barred. Unless something renders "the combat exercise defence" or the defence that the action was statute barred insusceptible of abandonment, Mr Verwayen is entitled to have his claim determined without intrusion of the issues thereby raised.

The starting point of any consideration of whether the defences are insusceptible of abandonment must be Judiciary Act 1903 (Cth) which relevantly provides:

"In any suit to which the Commonwealth ... is a party, the rights of parties shall as nearly as possible be the same ... as in a suit between subject and subject."

It was not contended that anything requires that the present matter be determined on any different basis from that applicable in proceedings between subject and subject.

The general principle is that a "an individual cannot waive a matter in which the public have an interest": Graham v. Ingleby, per Alderson B. at p 657 (p 279 of ER) referring to Reg. v. Bloxham [1844] 6 QB 528 (115 ER 197). See also Ross v. Australian Postal Commission (1982) 69 FLR 376 , at p 382; Phillips v. Martin, at p 158. Conversely, a person may waive a right that is for his or her own benefit: Great Eastern Railway Co. v. Goldsmid (1884) 9 App Cas 927, at pp 936-937; Toronto Corporation v. Russell (1908) AC 493, at p 500. Where a right is conferred by statute a question may arise whether the statute confers a personal or a public right. See, for example, Ross, at pp 382-383; Park Gate Iron Co., at pp 638-639. A statutory right to plead that an action is statute barred, such as that conferred by s 5 of the Limitation of Actions Act, which bars the remedy rather than the right or the right to invoke a court's jurisdiction, is a personal right. See Kammins, per Lord Diplock at p 881. Cf. Adams v. Chas. S. Watson Pty. Ltd. (1938) 60 CLR 545 , where the issue under consideration was whether a time limitation ousted jurisdiction.

From one perspective "the combat exercise defence" asserts a defence deriving from what may be described as an inherently governmental function. However, on proper analysis, the matter thus pleaded does no more than assert that, in the particular circumstances, no duty of care was owed to Mr Verwayen. The right to answer a claim of negligence by the denial of a duty of care is a personal right. Accordingly, both "the combat exercise defence" and the defence that Mr Verwayen's action was statute barred were susceptible of waiver. And being so susceptible, for the reasons earlier given, the Commonwealth is precluded from relying on them.

It follows from what has been said that, had Mr Verwayen's reply asserted that the Commonwealth was precluded from denying negligence, Mr Verwayen would be entitled to have his claim determined in a hearing limited to the issue of damages. It may be that an application will be made for leave to amend the reply. Unless such application is made and granted, Mr Verwayen's claim must proceed to a hearing on the issues of negligence and damages as ordered by the Full Court.

Although it is not necessary for me to deal with the argument that the object of an estoppel is to avoid detriment and not to make good the assumption on which it is founded, it is convenient that I note my agreement with Mason C.J. that the substantive doctrine of estoppel permits a court to do what is required to avoid detriment and does not, in every case, require the making good of the assumption. Even so, it may be that an assumption should be made good unless it is clear that no detriment will be suffered other than that which can be compensated by some other remedy. Where the nature or likely extent of the detriment cannot be accurately or adequately predicted it may be necessary in the interests of justice that the assumption be made good to avoid the possibility of detriment even though the detriment cannot be said to be inevitable or more probable than not. On that basis and were the present matter to be determined by reference to the substantive doctrine of estoppel, the mere possibility of increased stress and anxiety to Mr Verwayen would tend in favour of making good the assumption that liability would not be put in issue by the Commonwealth. As that aspect was not fully explored in argument it is undesirable that I express a concluded view on the matter. However, that aspect aside, the present matter was determined, on the application of the Commonwealth and contrary to the argument made on behalf of Mr Verwayen, on the basis that the issues raised by the pleadings involved no issue of fact for a jury to determine. Were the resolution of this case to depend on whether or not Mr Verwayen could establish detriment over and above that which is appropriately dealt with by an order for costs it would be necessary, at the very least, that he be given an opportunity of making that case.

The appeal should be dismissed.