In any consideration of government contractual arrangements, contract negotiators need to be mindful of the latest developments in equity jurisprudence. The commentary in this section of the Report has been included for the purpose of completeness and as a reminder of the complexities that can arise in the course of the contracting process¹⁴¹. It is, nonetheless, a matter of immediate practical importance in the management of government contracting procedures.

Sir Anthony Mason has observed¹⁴²:

It is settled law that the Government is not immune from the operation of equitable principles that protect reasonable and legitimate expectations and which seek to alleviate the consequences of detrimental reliance. In Commonwealth v Verwayen¹⁴³ the High Court made it clear that government can be subject to equitable doctrines to the same extent as individuals.

Where government transactions are complex and the details of contractual arrangements are confidential the likelihood that outsiders will misunderstand the nature of the relationship between the Government agency and the private parties increases substantially. The result is a potential future liability of government for the reasonable reliance by those outsiders due to representations made by either the Government agency or the private parties involved in the transaction. It has been suggested that the protection of reasonable expectations is more important when government is involved because Îgovernment should act and be obliged to act as a Îmoral exemplarâ in its relationships and dealings with members of the communityâ¹⁴⁴.

In this context, I consider that it is timely to draw attention to possible liabilities of government, as well as independent contractors who may have an agency relationship with some part of government, arising from the interaction of the Government agency and an outside party.

In the decision of Walton Stores v Maher (1988) 164 CLR 387, the High Court of Australia enunciated a doctrine of general applicability in commercial and other dealings under which in certain circumstances, the Court will require that a party observe specified legal obligations. The central principle of the doctrine is that the law will not permit an unconscionable departure by one party from an assumption which has been adopted by another party as the basis for some relationship, course of conduct, act or omission, which would operate to the other partyâs detriment if the assumption be not adhered to. The question of whether such departure is seen as unconscionable is always a matter for the Court to determine by reference to all the circumstances of the case.

Since the decision in Walton Stores v Maher, the Courts have applied the doctrine against governmental entities in cases such as The Commonwealth v Verwayen (1990) 64ALJR540 and Metropolitan Transit Authority v Waverley Transit (1991) 1 VR 181.

The possibility of an estoppel operating to create liabilities for government entities and/or their contractors is thus a realistic possibility which must be taken into account in the administration of the affairs of government and its authorities, instrumentalities and contractors.

AUDIT OBSERVATIONS

I have had occasion in a previous Report to draw attention to the Îmoral exemplarâ expectations of government entities in external relationships¹⁴⁵. Those involved in public administration need to be aware that in their dealings with external parties, conduct which falls below an exemplary level has the potential to create unexpected legal obligations against government, for example, where an estoppel arises.

In the nature of things, it is difficult to foresee, and, more difficult still to provide for such obligations, because they arise only in the context of other parties' actions in response to representations or conduct by or on behalf of the Government entity. Nevertheless, the controls put in place by public authorities in the conduct of their affairs should take into account the fact that the doctrine of equitable estoppel has recently entered the law of this country and is likely to play a significant part in public law.

It has been pointed out by one learned commentator that: