2 DefinitionIn simple terms, an estoppel is an equitable claim that prevents someone from denying the existence of a state of affairs in circumstances where such denial would be unconscientious. This necessarily has an impact upon those legal rights which would otherwise be exercisable by the person estopped. A simple example would be a situation where A has induced B to believe that A will not insist upon his or her strict legal rights under a contract that exists between them. If B relies upon the assumption that B will not be exposed to liability should B fail to perform his or her obligations exactly, the law recognises that it is unconscionable to allow A to subsequently sue B for breach of contract on those grounds.
3 COMMON LAW ESTOPPELAt common law the focus has been upon assumptions of fact. These could arise by means of judicial decision (estoppel by record or issue estoppel), agreement by both parties (estoppel by deed or estoppel by convention), and also by representation made by one to the other (estoppel by representation). The general principle of common law estoppel was stated by Dixon J in Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641, at 674 as being that, ‘the law should not permit an unjust departure by a party from an assumption of fact which he has caused another party to adopt or accept for the purpose of their legal relations’
4 COMMON LAW ESTOPPELit is commonly said of common law estoppel that it is a rule of evidence while estoppel in equity may confer substantive rights. By this it is meant that common law estoppel is a device used merely to determine the facts upon which the legal rights of the parties will then be determined by the court, whereas, in equity, rights flow directly from the operation of estoppel in equity. This classification is a natural consequence of the first distinction — if the scope of common law estoppel is confined to representations of fact, its true role is to establish which facts the court will adjudge. If the estoppel is successfully raised, then the representor will be precluded from denying the facts assumed by the representee.
5 Differences b/w CL and Eq In Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466, at 472, Priestley JA set out a series of enumerated points in order to clarify the law on estoppel. The first three offer a concise summary of the ideas presented so far:1. Common law and equitable estoppel are separate categories, although they have many ideas in common.2. Common law estoppel operates upon a representation of existing fact, and when certain conditions are fulfilled, establishes a state of affairs by reference to which the legal relation between the parties is to be decided. This estoppel does not itself create a right against the party estopped. The right flows from the court’s decision on the state of affairs established by the estoppel.3. Equitable estoppel operates upon representations or promises as to future conduct, including promises about legal relations. When certain conditions are fulfilled, this kind of estoppel is itself an equity, a source of legal obligation.
6 MODERN EQUITABLE ESTOPPEL Equitable estoppel is the result of bringing together the two significant forms of estoppel that existed in equity — promissory estoppel and proprietary estoppel
7 Promissory estoppelCentral London Property Trust Ltd v High Trees House Ltd  1 KB 130. In that case Central London Property Trust (CLPT) leased a block of flats to High Trees House (HTH) for a period of 99 years. In 1940, CLPT agreed to accept a reduced rent, which was paid for the next five years by HTH. CLPT accepted the reduction because of the low occupancy rate for the flats during World War II. In 1945, with the flats all fully let, CLPT asserted a claim for the full rent thereafter. Denning J said that CLPT was entitled to the full rent as claimed, on the basis that the agreement for a reduced rent was only for as long as the flats were not fully let. The critical aspect of the case was the statement by Denning J that, if CLPT had claimed the full rent for the years 1940–1945, it would have failed. Even though the promise to accept a reduced rent was not supported by consideration, the principle of promissory estoppel would have been raised against CLPT, preventing recovery of the forgone rent.
8 Limitations1. the promise had to be in the context of one intended to affect a pre-existing legal relationship between the parties: Combe v Combe  2 KB 215, at 220. In High Trees, this was satisfied in that the parties were in a lease relationship and the promise was in relation to terms agreed under that lease.
9 Limitations2. promissory estoppel could only be used as a defence to an action brought by the promisor against the promisee. It was said that it could only be used as a ‘shield’ and not as a ‘sword’: Combe, at 220. In High Trees, this was satisfied as it was HTH, the defendant/promisee, that would have used promissory estoppel as a defence to a claim for the forgone rent by CLPT, the plaintiff/promisor
10 Proprietary estoppelIn relation to proprietary estoppel, it always was able to act as a sword as well as a shield and it is this feature that it has brought to equitable estoppel generally
11 Proprietary estoppelProprietary estoppel’s other major difference from promissory estoppel is its operation in the realm of real property law. This estoppel operates to restrict the legal rights of landowners if they have encouraged the belief in another, or at least acquiesced in that other’s belief, that she or he has some entitlement over the property and that belief has been acted upon, for example, by some alteration or improvement having been made to the land. However, no proprietary estoppel claim is available if the plaintiff and defendant have a legally enforceable contract relating to the property: Giumelli v Giumelli (1999) 196 CLR 101, at 121; 161 ALR 473, at 482; Riches v Hogben  2 Qd R 292, at 301. As Young CJ in Eq observed in Barnes v Alderton  NSWSC 107, at , ‘contract and proprietary estoppel are mutually exclusive’.
12 Two streamsDillwyn v Llewelyn  All ER 384 is the classic example of estoppel by encouragement. In that case a father put his son into possession of land which he purported to voluntarily convey to his son. The conveyance was ineffective. With his father’s assent and approval, the son built and occupied a house on the land. After the father’s death the son sought a declaration that he was the owner of the land in equity and that the trustees of the land be ordered to convey the land to him absolutely. The House of Lords made these orders.
13 Two streamsThe other stream of proprietary estoppel is estoppel by acquiescence which was succinctly explained by Cranworth LJ in Ramsden v Dyson (1866) LR 1 HL 129, at 140–1:If a stranger begins to build on my land supposing it to be his own, and I, perceiving his mistake, abstain from setting him right, and leave him to persevere in his error, a Court of equity will not allow me afterwards to assert my title to the land on which he had expended money on the supposition that the land was his own.
14 DetrimentIn Barnes v Alderton  NSWSC 107, at , Yound CJ in Eq put it as follows:No equity arises to raise a proprietary estoppel unless the person in whose favour it is being raised, has acted to their prejudice or detriment in some way whether in terms of direct expenditure or on some other basis. However, the detriment may not necessarily be expenditure of money, commonly a claimant leaves her job, moves in with the promisor and does his housekeeping for many years … However, … minor expenditure such as day to day living expenses or minor repairs will not qualify.
15 Bringing Estoppel together In Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; 76 ALR 513, the High Court handed down its most significant decision on the topic of estoppel. The significance of this case was that it consolidated promissory and proprietary estoppels into the single, and broader, principle of equitable estoppel
16 Bringing Estoppel together Mason CJ and Wilson J, at CLR 404; ALR 524, said:One may therefore discern in the cases a common thread which links them together, namely, the principle that equity will come to the relief of a plaintiff who has acted to his detriment on the basis of a basic assumption in relation to which the other party to the transaction has ‘played such a part in the adoption of the assumption that it would be unfair or unjust if he were left free to ignore it’: per Dixon J in Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641 at 675 … Equity comes to the relief of such a plaintiff on the footing that it would be unconscionable conduct on the part of the other party to ignore the assumption.
17 Bringing Estoppel together Brennan J, in Waltons, at CLR 428–9; ALR 542, set out what he saw as the elements that had to be satisfied, as follows:In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff’s action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and 6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise.
18 RepresentationTo establish a case based upon principles of equitable estoppel there needs to be a promise or a sufficiently clear and unambiguous representation. In Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd  VSCA 86, at , Dodds-Streeton JA said that, when construing a representation, the court must assess its meaning ‘by how it would be reasonably understood by the addressee in the context of the surrounding circumstances’. In Australian Crime Commission v Gray  NSWCA 318, at , Ipp JA, speaking for the New South Wales Court of Appeal, said:
19 RepresentationThe underlying reason for the rule that, generally speaking, an ambiguous or unclear representation will not give rise to a promissory estoppel is that the foundation of promissory estoppel is unconscionability. Unconscionability is usually difficult to establish when the representation is ambiguous or unclear.
20 RepresentationThe promise or representation can be either express or implied: Legione v Hateley, at CLR 438–9
21 Assumption or expectation If the assumption is one of an existing fact, a case of common law estoppel arises. (In Waltons the minority found for the Mahers on this basis, viewing the evidence as establishing that the Mahers believed that Waltons had completed the exchange of the lease.)
22 Assumption or expectation Equitable estoppel will arise if the assumption is that the representor will act in a particular way in the future. According to Brennan J, the relying party needs to show that he or she assumed that a particular legal relationship existed or would exist between the parties. According to the majority in Waltons, this was established on the facts of that case. A similar approach is detected in Mobil Oil Australia Ltd v Lyndel Nominees Pty Ltd (1998) 153 ALR 198, at 235, where the Full Court of the Federal Court said that ‘it is a necessary element of the principle that the [representor] has created or encouraged an assumption that “a particular legal relationship” or “interest” would arise or be granted’
23 InducementInitially, it needs to be stressed that it is the assumption that is induced by the promise or representation, rather than the promise or representation itself, that forms the basis for a claim based upon equitable estoppel: Waltons at CLR 413– 14, 428–9, 458–9; ALR 531, 542, 564–5; Commonwealth v Verwayen (1990) 170 CLR 394, at 412–13, 444–5, 453–6, 500–2; 95 ALR 321, at 332–3, 356–7, 363–4, 396–8.
24 InducementDeane J said the following in Commonwealth v Verwayen, at CLR; ALR at 356:The cases indicate four main, but not exhaustive, categories in which an affirmative answer to that question may be justified, namely, where that party:(a) has induced the assumption by express or implied representation;(b) has entered into contractual or other material relations with the other party on the conventional basis of the assumption;(c) has exercised against the other party rights which would exist only if the assumption were correct;(d) knew that the other party laboured under the assumption and refrained from correcting him when it was his duty in conscience to do so.
25 RelianceThe relying party must act, or refrain from acting, in reliance on the assumption. A causal link between the assumption and the action or conduct by the relying party must be established. The action or conduct undertaken must be reasonable in all the circumstances
26 Knowledge or intention According to Brennan J, the representor must actually know, or intend, that the relying party will act or refrain from acting in reliance on the assumption or expectation. In cases of assumptions based upon a promise or representation, knowledge is ‘easily inferred’. In cases where the assumption arises outside the context of a promise or representation, the requirement of knowledge or intention is more difficult to establish: Waltons, at CLR 423; ALR 538. However, it can be established, as was the case in Waltons, in cases where ‘the defendant encourages a plaintiff to adhere to an assumption or expectation already formed, or acquiesces in an assumption or expectation when, in conscience, objection ought to be stated’: Pazta Company Pty Ltd v Idelake Pty Ltd  NSWSC 941, at .
27 Knowledge or intention Furthermore, according to Brennan J, it is not enough that the representor ought to have known that the relying party would act or refrain from acting in reliance on the assumption or expectation. A contrary view was suggested by Deane J in Commonwealth v Verwayen, at CLR 445; ALR at 356. In New Zealand Pelt Export Company Limited v Trade Indemnity New Zealand Limited  VSCA 163, at , the Victorian Court of Appeal expressed a preference for the view of Deane J over that of Brennan J on this issue.
28 DetrimentThe relying party must suffer, or stand to suffer, detriment if the assumption made by it is not fulfilled. There must be a link between the detriment and the assumption or expectation
29 DetrimentIn Sullivan v Sullivan  NSWCA 312, at  Handley JA said that ‘[t]he detriment that makes an estoppel enforceable is that which the party asserting the estoppel would suffer, as a result of his or her original change of position, if the assumption which induced it was repudiated by the party estopped’
30 ReliefEstablishing the elements of equitable estoppel gives rise to an equity in favour of the relying party. This simply means that the relying party is entitled to some equitable relief. The relief is not based upon there being a promise or representation, but rather upon the expectation that the promise or representation generated: Giumelli v Giumelli (1999) 196 CLR 101, at 121; 161 ALR 473, at 482. Prima facie, the equity is enforced by ‘the making good of the relevant assumption on which the plaintiff acted, although where that relief would be disproportionate to the requirements of conscionable behaviour, equity may, as a matter of discretion, decree something less’: McKay v McKay  NSWSC 177, at .
31 ReliefIt is thus often said that there needs to be proportionality between the relief ordered and the detriment suffered, or that the court will, in making its orders, determine the minimum equity required to do justice to the relying party. Furthermore, relief may be structured to recognise practical considerations such as the need for a clean break. The court should also take into account the impact of its orders on relevant third parties and any hardship or injustice they would suffer: Giumelli, at CLR 113-4, 125; ALR 476, 485.
32 ReliefIn Giumelli, parents promised their son that, if he continued to live on a property owned by his parents, they would subdivide it and give him the portion containing the house that he lived in. On the basis of this the son stayed and gave up a career opportunity that would have taken him away from the property. The relationship between the parents and son broke down when the son married a woman of whom his parents did not approve and they refused to transfer the property to the son. The High Court granted the son monetary relief to the value of the property that should have been transferred to him by the parents. The High Court did not order a transfer of the property to the son. However, the monetary compensation was nevertheless a remedy based upon the son’s lost expectation rather than reliance loss or any actual detriment suffered by the son.