Estoppel Prof Cameron Stewart.

Estoppel Prof Cameron Stewart

Definition In 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.

Seven Network (Operations) Ltd v Warburton (No 2) [2011] NSWSC 386
Pembroke J at [41] observed that [i]n broad terms, estoppel, a word of Old French derivation that has become enshrined in our law, refers to a bar or impediment preventing a party from asserting a fact or a claim that is inconsistent with a position previously taken

The Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) (2008) 225 FLR 1
Owen J said at 393: Put in general terms, [estoppel] is a doctrine designed to protect a party from the detriment that would flow from that party’s change of position if the assumption or expectation that led to it were to be rendered groundless by another.

COMMON LAW ESTOPPEL estoppel by deed estoppel by judgment and
estoppel by conduct

COMMON LAW ESTOPPEL 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’

Estoppel by deed Estoppel by deed is an evidentiary rule relating to deeds. The rule states that precise and unambiguous statements in a deed, usually to be found in the recitals to a deed, are “taken as binding between the parties and privies, and therefore as not admitting any contradictory proof”: Greer v Kettle [1938] AC 156 at 171 In practical terms, this means that, in any dispute between the parties in relation to the transaction that is the subject of the deed, the facts set out in the deed are accepted as being true and beyond the need of any proof: Dabbs v Seaman (1925) 36 CLR 538 at 568–9.

Estoppel by judgment Issue estoppel; Res judicata; and Anshun estoppel

Issue estoppel The elements of issue estoppel are:
that the same issue has been decided; that the judgment in the case that creates the estoppel was a final one; and, that the parties to the case are the same persons as the parties to the proceedings in which the estoppel is raised. Kuligowski v Metrobus (2004) 220 CLR 363 at 373

Issue estoppel Where the basis for “issue estoppel” has been established, the Court retains an overriding discretion to permit the proceedings to continue:National Australia Bank Limited v Sayed (No 4) [2015] NSWSC 420 at [113]. However, this discretion is likely to be exercised only in exceptional circumstances. Issue estoppel only applies to civil proceedings. It does not apply in criminal proceedings: Rogers v The Queen (1991) 181 CLR 251 at 254

Res Judicata When a final judgment on a matter has been handed down, one party to the litigation is prevented from taking proceedings against for the same cause of action or any other cause of action against the other based upon the facts of the earlier case

Blair v Curran (1939) 62 CLR 464 Dixon J said at 531–2.
A judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies. The estoppel covers only those matters which the prior judgment, decree or order necessarily established as the legal foundation or justification of its conclusion, whether that conclusion is that a money sum be recovered or that the doing of an act be commanded or be restrained or that rights be declared.

Blair v Curran (1939) 62 CLR 464 Dixon J said at 532:
The distinction between res judicata and issue estoppel is that in the first the very right or cause of action claimed or put in suit has in the former proceedings passed into judgment, so that it is merged and has no longer an independent existence, while in the second, for the purpose of some other claim or cause of action, a state of fact or law is alleged or denied the existence of which is a matter necessarily decided by the prior judgment, decree or order.

Res Judicata The rationale for res judicata is based upon public policy considerations of putting an end to litigation and preventing hardship to an individual by having to go to court twice for the same cause: Lockyer v Freeman (1877) 2 App Cas 519 at 530.

Anshun estoppel An extended form of res judicata that prevents a party raising a claim or defence if in some earlier proceedings between the parties it would have been relevant and reasonable to have raised the claim or defence: Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 In Champerslife Pty Ltd v Manojlovski (2010) 75 NSWLR 245 at 247, Allsop P stressed that for an Anshun estoppel to arise, it needs to be shown that the matter had to be “so relevant as to make it unreasonable not to raise it” in the earlier proceedings. It is insufficient if the matter is one that “could have been raised”

COMMON LAW ESTOPPEL it 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.

Estoppel by Conduct/Estoppel in Pais
In Grundt v Great Boulder Proprietary Gold Mines Limited (1937) 59 CLR 641 at 674, Dixon J said that common law estoppel by conduct — also referred to as estoppel in pais — is based on the premise 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”. His Honour went on to say at 674: [T]he basal purpose of the doctrine … is to avoid or prevent a detriment to the party asserting the estoppel by compelling the opposite party to adhere to the assumption upon which the former acted or abstained from acting. This means that the real detriment or harm from which the law seeks to give protection is that which would flow from the change of position if the assumption were deserted that led to it.

Estoppel by Conduct/Estoppel in Pais
Estoppel by conduct takes two forms, namely estoppel by representation and estoppel by convention. The distinguishing feature between the two is that, for estoppel by convention, the estoppel is grounded in “a common participation in an assumed state of affairs”, whereas in estoppel by representation, it is grounded in a representation made by one party to another. See R Mulholland, “Estoppel by Convention” [2002] New Zealand Law Journal 295 at 397.

Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 307 ALR 512
Gaegler J said: The “real detriment or harm” which that party must prove to ground an estoppel can be any “material disadvantage” which would arise from permitting departure from the assumption on the faith of which that party acted or refrained from acting. Material disadvantage must be substantial, but need not be quantifiable in the same way as an award of damages. Material disadvantage can lie in the loss of a legal remedy, or of a “fair chance” of obtaining a commercial or other benefit which “might have [been] obtained by ordinary diligence”.

Estoppel by representation
The essence of estoppel by representation is the making of a representation of fact by one person which leads the other person to alter his or her position. In Newbon v City Mutual Life Assurance Society Limited (1935) 52 CLR 723 at 738, Starke J listed the following as elements of estoppel by representation: The representation made must be clear and unambiguous; it must be intended to induce a course of conduct on the part of the person to whom it is made, and must result in some act or omission by the person to whom it is made.

Estoppel by convention
Estoppel by convention arises when “parties conduct their relations with each other on the basis of agreed or assumed facts … [that] precludes either party … from denying an assumption which formed the conventional basis of the relationship between them”. Sze Tu v Lowe [2014] NSWCA 462 at [432]–[433].

Con-Stan Industries of Australia Proprietary Limited v Norwich Winerthur Insurance (Australia) Limited (1986) 160 CLR 226 at 244 The High Court said at 244 : Estoppel by convention is a form of estoppel founded not on a representation of fact made by a representor and acted on by a representee to his detriment, but on the conduct of relations between the parties on the basis of an agreed or assumed state of facts, which both will be estopped from denying … [T]here is no estoppel unless it can be shown that the alleged assumption has in fact been adopted by the parties as the conventional basis of their relationship.

Estoppel by Convention
Authorities subsequent to this case establish that the assumption is not confined to facts, but also extends to assumptions at to the law. J D Heydon, M J Leeming and P G Turner, Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies, 5th ed, LexisNexis Butterworths, Sydney, 2015, pp 512–3.

Moratic Pty Ltd v Gordon [2007] NSWSC 5
Moratic Pty Limited was the lessee of a pub, the Oaklands Hotel, in respect of which it holds an hotelier’s licence to which seven Poker Machine Entitlements (PME) were attached. The defendants Lawrence Gordon and Judith Gordon were the lessors, and owners of the freehold. Moratic wanted to sell some of its PME The Gordons, were against the transfer and claimed that they had a financial interest in the licence by reason of a lessee’s covenant to pay, in addition to the fixed rent, a “further rent” equivalent to 4% of annual liquor purchases for the hotel (clause 20). No amount had ever been demanded or paid under that covenant Moratic claiming an estoppel that it was not liable to pay any amount under clause 20. The Gordons brought a cross-claim for the “further rent” under clause 20, of $972,478

Moratic claimed both estoppel by convention and promissory estoppel Basis: The amount had never been sought under cl 20 When the lease had previously been assigned the lessor had not asked for the amount

Brereton J at [32] (a) the plaintiff has adopted an assumption as to the terms of its legal relationship with the defendant; (b) the defendant has adopted the same assumption; (c) both parties have conducted their relationship on the basis of that mutual assumption; (d) each party knew or intended that the other act on that basis; and (e) departure from the assumption will occasion detriment to the plaintiff

Although I accept that detriment is an element of conventional estoppel…, and that each party must know or intend that the other act on the relevant assumption, there is no requirement that either have induced, or acquiesced in, the adoption of the assumption by the other, and in particular there is no requirement that either know that the other may incur detriment by reliance on the assumption. To the contrary – since the assumption is one common to both parties, and may involve a mistaken interpretation of the contract – the possibility that either party might incur detriment by reliance on it will usually not occur to the other

Estoppel by convention established at [47]: Moratic assumed that the only rent payable by it under the lease was that reserved by clause 4.1, · The Gordons adopted the same assumption; · Both parties conducted their relationship on that basis; · Each party knew that the other was conducting the relationship on that basis; and · Departure from that assumption would occasion detriment to Moratic.

Mears Ltd v Shoreline Housing Partnership Ltd [2015] EWHC 1396 (TCC)
Akenhead J offered the following as a summary of the principles of estoppel by convention: (a) An estoppel by convention can arise when parties to a contract act on an assumed state of facts or law. A concluded agreement is not required but a concluded agreement can be a “convention”. (b) The assumption must be shared by them or at least it must be an assumption made by one party and acquiesced in by the other. The assumption must be communicated between the parties in question. (c) At least the party claiming the benefit of the convention must have relied upon the common assumption, albeit it will almost invariably the case that both parties will have relied upon it. There is nothing prescriptive in the use of “reliance” in this context: acting upon or being influenced by would do equally well.

Mears Ltd v Shoreline Housing Partnership Ltd
d) A key element of an effective estoppel by convention will be unconscionability or unjustness on the part of the person said to be estopped to assert the true legal or factual position. I am not convinced that ‘detrimental reliance’ represents an exhaustive or limiting requirement of estoppel by convention although it will almost invariably be the case that where there is detrimental reliance by the party claiming the benefit of the convention it will be unconscionable and unjust on the other party to seek to go behind the convention. In my view, it is enough that the party claiming benefit of the convention has been materially influenced by the convention … (e) Whilst estoppel cannot be used as a sword as opposed to a shield, analysis is required to ascertain whether it is being used as a sword. In this context, the position of the party claiming the benefit of the estoppel as claimant or indeed as defendant is not determinative or does not even raise some sort of presumption one way or the other. While a party cannot in terms found a cause of action on an estoppel, it may, as a result of being able to rely on an estoppel, succeed on a cause of action on which, without being able to rely on the estoppel, it would necessarily have failed (f) The estoppel by convention can come to an end and will not apply to future dealings once the common assumption is revealed to be erroneous.

Differences b/w CL and Eq
At common law the focus has been upon assumptions as to existing facts. These could arise by means of judicial decision (estoppel by judgment 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). I was in Jorden v Money [1843–60] All ER Rep 350 that the House of Lords confined common law estoppel to assumptions and representations of existing fact. This limitation was intended by their Lordships to apply to all forms of estoppel and should be understood in light of the development of contract law during this time. Representations of future intention (that is, promises) were to be governed by the presence of a contractual relationship between representor and representee, with a price being paid for the promise in the form of sufficient consideration .

Estoppel in equity, however, never really laboured under the restriction imposed by Jorden v Money. Parties who made representations of future intention were estopped from denying them in situations where they had been reasonably relied upon by others. The second distinction between estoppel under the two jurisdictions is that it is commonly said of common law estoppel that it is a rule of evidence. However, 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; Low v Bouverie [1891] 3 Ch 82 at 105.

Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466 lease entered into between landlord and tenant for 10 years with license to use other land Lease could not be registered but caveat was lodged Land then sold to purchaser with knowledge but when registered threatened to remove the nursery Estoppel found Remedy - personal licence coupled with an interest in the nature of a profit á prendre and as such was more than a personal interest and was sufficient to prevent the later equitable interest of the purchaser, acquired under the contract for sale, from prevailing over the earlier equitable rights

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.

Moratic Pty Ltd v Gordon [2007] NSWSC 5 at [33], Brereton J said: The similarities between the two doctrines should not be allowed to mask their differences, which reflect the disparate origins of promissory estoppel and conventional estoppel. Promissory estoppel, a creature of equity, is, typically, focussed on the conscience of the defendant: it operates when the defendant has induced or acquiesced in the adoption by the plaintiff of an assumption that the defendant will not assert its strict legal rights, so to prevent unconscionable (or unconscientious) insistence by the defendant on its strict legal rights. On the other hand, conventional estoppel, a creature of the common law, is focussed on the consensual basis of the parties’ relationship: it operates when both parties have adopted the same assumption as the basis of their relationship, often without appreciating that any departure from the strict legal position is involved, so as to hold both parties to their common understanding ... .

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

Promissory estoppel Central London Property Trust Ltd v High Trees House Ltd [1947] 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.

Limitations 1. the promise had to be in the context of one intended to affect a pre-existing legal relationship between the parties: Combe v Combe [1951] 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.

Limitations 2. 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

JE Maintiendrai Pty Ltd v Quaglia (1980) 26 SASR 101
The lessor (JE Maintiendrai )leased shops which were leased at a rental payable monthly At the request of Quaglia, and without consideration, the lessor agreed to accept a reduction of rental for an indefinite period. After accepting the reduced rent for a period of about eighteen months, the lessor claimed payment of the arrears of the full rent, and sued the lessee in a Local Court for the arrears. At trial the judge the claim held that the lessor was estopped from recovering the arrears, on the ground that the detriment to the lessee in being required to pay the accumulated arrears in a lump sum, instead of paying monthly as the rent fell due, was sufficient to give rise to a promissory estoppel Was their any detriment?

King CJ It is clear from the above formulation that there can be no estoppel unless the promisee has altered his position on the faith of the promise. …The basic principle underlying both types of estoppel is, I apprehend, the same. It rests upon the injustice to the representee or promisee of allowing the representor or promisor, in the circumstances which exist, to depart from the representation or promise. If the representee or promisee will suffer no detriment as a consequence of the other party resiling from his position and asserting his strict legal rights, it is difficult to see where the injustice of permitting him to do so would lie. I can see no valid reason for making a distinction between these two types of estoppel in this respect. In my opinion, a person who promises or states his intention to another not to enforce or insist upon his legal rights is not estopped from resiling from that position and reverting to the strict legal position, unless his doing so would result in some detriment and therefore some injustice to that other.

King CJ The evidence as to detriment is sparse. The respondents' case would be stronger if there were evidence of financial hardship or embarrassment as a result of the debt accumulating or…that the money had been spent in other ways and that the respondents were unable to pay, at any rate without difficulty or inconvenience. It would be stronger if there were evidence that they had conducted their affairs differently as a result of the reduction, for example that they had refrained from exploring the possibility of selling the business and assigning the lease. The sparsity of evidence of detriment has caused me to consider anxiously whether the learned Judge's conclusion can be supported. In the end I have reached the conclusion that we should not disturb it. The respondents conducted a small business. There was some evidence of their financial position and the learned trial Judge heard it given. He was in a better position than is this Court to judge whether the accumulation of arrears of this magnitude would be a detriment to the respondents, and to assess whether any significance was to be attached to the respondents' failure to say so expressly. I think that we should accept the conclusion which he reached.

Proprietary estoppel In 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 Two streams – estoppel by encouragement and estoppel by acquiesence

Proprietary estoppel 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 [1985] 2 Qd R 292, at 301. As Young CJ in Eq observed in Barnes v Alderton [2008] NSWSC 107, at [55], ‘contract and proprietary estoppel are mutually exclusive’.

Willmott v Barber (1880) 15 Ch D 96
Fry LJ at 105-6: A man is not to be deprived of his legal rights unless he has acted in such a way as would make it fraudulent for him to set up those rights. What, then, are the elements or requisites necessary to constitute fraud of that description? In the first place the plaintiff must have made a mistake as to his legal rights. Secondly, the plaintiff must have expended some money or must have done some act (not necessarily upon the defendant’s land) on the faith of his mistaken belief. Thirdly, the defendant, the possessor of the legal right, must know of the existence of his own right which is inconsistent with the right claimed by the plaintiff. If he does not know of it he is in the same position as the plaintiff, and the doctrine of acquiescence is founded upon conduct with a knowledge of your legal rights. Fourthly, the defendant, the possessor of the legal right, must know of the plaintiff’s mistaken belief of his rights. If he does not, there is nothing which calls upon him to assert his own rights. Lastly, the defendant, the possessor of the legal right, must have encouraged the plaintiff in his expenditure of money or in the other acts which he has done, either directly or by abstaining from asserting his legal right.

Crabb v Arun District Council [1976] Ch 179
Crabb bought 2 acres from the estate of Alford. At the same times adjoining land was sold to the Council Crabb had two access points. One through a formal easement. The other through the Council’s land. Crabb later sold off part of his land which had the access through the easement, believing he retained access through the Council land The Council had erected a gate Crabbe padlocked it an this caused a dispute, with the Council replacing he gate with a fence Crabb asked the Council to rebuild the gate but they demanded £3000 At trial Crabb lost on the basis that there was no agreement to bind the Council Court of Appeal finds for Crabb

Lord Denning MR: When Mr. Millett, Q.C., for Mr. Crabb said that he put his case on an estoppel, it shook me a little: because it is commonly supposed that estoppel is not itself a cause of action. But that is because there are estoppels and estoppels. Some do give rise to a cause of action. Some do not. In the species of estoppel called proprietary estoppel, it does give rise to a cause of action.

The basis of this proprietary estoppel - as indeed of promissory estoppel - is the interposition of equity. Equity comes in, true to form, to mitigate the rigours of strict law. The early cases did not speak of it as "estoppel". They spoke of it as "raising an equity". If I may expand that, Lord Cairns said: "It is the first principle upon which all Courts of Equity proceed", that it will prevent a person from insisting on his strict legal rights - whether arising under a contract, or on his title deeds, or by statute - when it would be inequitable for him to do so having regard to the dealings which have taken place between the parties, see Hughes v Metropolitan Railway Co (1877) 2 AC 448. What then are the dealings which will preclude him from insisting on his strict legal rights? -If he makes a binding contract that he will not insist on the strict legal position, a Court of Equity will hold him to his contract. Short of a binding contract, if he makes a promise that he will not insist upon his strict legal rights - then, even though that promise may be unenforceable in point of law for want of consideration or want of writing - then, if he makes the premise knowing or intending that the other will act upon it, and he does act upon it, then again a Court of Equity will not allow him to go back on that promise, see Central London Property Trust v High Trees House (1947) KB 130: Richards (Charles) v Oppenhaim (1950) KB 616, 623. Short of an actual promise, if he, by his words or conduct, so behaves as to lead another to believe that he will not insist on his strict legal rights - knowing or intending that the other will act on that belief - and he does so act, that again will raise an equity in favour of the other: and it is for a Court of Equity to say in what way the equity may be satisfied.

Estoppel by encouragement
Dillwyn v Llewelyn [1862] 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.

Estoppel by acquiescence
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. But it will be observed that to raise such an equity two things are required, first, that the person expending the money supposes himself to be building on his own land; and, secondly, that the real owner at the time of the expenditure knows that the land belongs to him and not to the person expending the money in the belief that he is the owner. For if a stranger builds on my land knowing it to be mine, there is no principle of equity which would prevent my claiming the land with the benefit of all the expenditure made on it. There would be nothing in my conduct, active or passive, making it inequitable in me to assert my legal rights

Big difference? In Ward v Kirkland [1967] Ch 194 at 239, Ungoed-Thomas J observed as follows: It was suggested before me that there was a distinction between an act which is acquiescing or encouraging a person in such circumstances to expend money and merely standing aside with the knowledge that such money was being expended in reliance on having the right which is claimed. I, for my part, fail to see any substance in this distinction. The fundamental principle of the equity is unconscionable behaviour, and unconscionable behaviour can arise where there is knowledge by the legal owner of the circumstances in which the claimant is incurring the expenditure as much as if he himself were requesting or inciting that expenditure. It seems to me that abstention as well as request or incitement can fall within the principle from which the recognition of the claimant’s equity arises.

Pascoe v Turner [1979] 2 All ER 945
Pascoe left his wife for his housekeeper, Turner They lived together for 10 years after which he found another paramour Pacoe had promised to gift the house to Turner Turner spent money on improvements Court of Appeal finds that both estoppel by acquiescence and encouragement could be found

Pascoe v Turner [1979] 2 All ER 945
Cumming-Bruce LJ – remedy of license or the fee simple? the minimum equity to do justice having regard to the way in which she changed her position for the worse by reason of the acquiescence and encouragement of the legal owner Fee simple

Detriment In Barnes v Alderton [2008] NSWSC 107, at [42], Young 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.

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

the Mahers owned commercial premises in Nowra which Waltons was interested in leasing. Waltons wanted to relocate its business in Nowra to new premises and the Mahers’ site was available. The agreement that was reached was that the Mahers would demolish the existing premises and erect a new building to meet the specifications of Waltons. A draft agreement for lease was sent to the solicitors for the Mahers and some amendments were discussed. Waltons’ solicitors indicated that they expected their client’s agreement to the alterations and said they would let the Mahers know if the amendments were not acceptable. The Mahers’ solicitors sent the amended lease, duly executed by the Mahers, to Waltons’ solicitors “by way of exchange”. The letter was not acknowledged by Waltons’ solicitors until two months later. The Mahers began to demolish the existing premises, as time was critical if they were to complete the demolition and rebuilding in time for the start of the lease agreement. Waltons was found to know what the Mahers were doing. However, after receiving the letter and executed lease, Waltons reconsidered its position and a few months later wrote to the Mahers’ solicitors, saying that the lease had not been executed by Waltons and that Waltons was not proceeding with it. The Mahers sued Waltons for damages for breach of contract on the basis that Waltons was estopped from denying the existence of the lease.

The majority of the High Court (Mason CJ, Wilson and Brennan JJ) found for the Mahers on the basis of equitable estoppel. The minority of Deane and Gaudron JJ found for the Mahers on the basis of common law estoppel.

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.

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.

Representation To 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 [2008] VSCA 86, at [134], 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’.

Tadrous v Tadrous [2012] NSWCA 16
Meagher JA observed that an equitable estoppel can be established notwithstanding that the expectation contains elements that would not be sufficiently certain to amount to a valid contract or is formed on the basis of vague assurance”.

Legione v Hateley (1983) 152 CLR 438
Legione v Hateley, Mason and Deane JJ said: The requirement that a representation as to existing fact or future conduct must be clear … does not mean that the representation must be express. Such a clear representation may properly be seen as implied by the words used or to be adduced from either the failure to speak where there was a duty to speak or from conduct. Nor is it necessary that a representation be clear in its entirety. It will suffice if so much of the representation as is necessary to found the propounded estoppel satisfies the requirement.

Sullivan v Sullivan [2006] NSWCA 312
Hodgson JA said: It has been said that in some respects at least more certainty is required for an estoppel than for a contractual variation; but it is also the case that a promise or representation may support an estoppel even though it is not sufficiently certain to operate as a contract. Generally, a promise or representation will be sufficiently certain to support an estoppel if it was reasonable for the representee to interpret the representation or promise in a particular way and to act in reliance on that interpretation, thereby suffering detriment if the representor departs from what was represented or promised. Generally, if there is a grey area in what is represented or promised, but it was reasonable for the representee to interpret it as extending at least to the lower limit of the grey area and to act in reliance on it as so understood, I see no reason why the Court should not regard the representation or promise as sufficiently certain up to this lower limit.

Westpac Banking Corporation v The Bell Group Ltd (in liq) (No 3) (2012) 44 WAR 1
Drummond AJA expressed the view that ambiguity or lack of clarity will be fatal to any promissory estoppel case. However, this was not necessarily so in proprietary estoppel cases, where “vague and imprecise conduct is often enough to give rise to an equitable proprietary estoppel”. His Honour observed that this was so because, unlike promissory estoppel cases, proprietary estoppel cases “do not depend on proof of clear representations or promises but on conduct with respect to property of the parties said to be estopped that is often diffuse and ambiguous, but which is sufficient, in the circumstances of the particular case, to attract the intervention of equity”.

Representation The promise or representation can be either express or implied: Legione v Hateley, at CLR 438–9

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.)

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’

On the other hand, in Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603 at 735, Campbell JA said that the first requirement, insofar as it relates to an expected future legal relationship, involved an expectation “that, at the time of the events alleged to give rise to the estoppel, the plaintiff expected that a particular legal relationship would in future exist with the defendant and, at that time, the plaintiff also expected that the defendant would not be free to withdraw from the expected legal relationship”. .

Finally, for an estoppel to arise, the relying party’s assumption must, in all the circumstances, be reasonable. In this respect, in Hammond v J P Morgan Trust Australia Ltd [2012] NSWCA 295 at [53], Meagher JA said: When addressing whether conduct is reasonably capable of giving rise to a particular representation or promise it is necessary to have regard to the context in which it occurred and to consider what it would have conveyed to a person in the position of the recipient.

Inducement Initially, 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.

Inducement Commonwealth v Verwayen
Verwayen was a sailor injured in the Voyager disaster in 1964 He commenced an action in 1984 Cth filed its defence and admitted all the allegation barring V’s injuries. Cth did not plead the limitation of actions not the lack of a duty of care Solicitors had said in expedition hearings that Cth would not dispute grounds of liability; Minister wrote to V stating the same thing Later Cth sought to amend its defence HC – Cth was estopped Deane J, Dawson J – estoppel by conduct – costs not sufficient Mason CJ – estoppel by conduct but could be awarded costs Brennan J – equitable (promisory) estoppel – compensation sufficient McHugh J – no estoppel – costs would be sufficient Toohey and Gaudron JJ – waiver Combination of Deane, Dawson, Toohey and Gaudron JJ meant Cth could not plead defence

Inducement Deane 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.

Reliance The 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

Reliance The action or conduct undertaken must be reasonable in all the circumstances. In Commonwealth Bank of Australia v Carotino (Australia) Pty Ltd [2011] SASC 42 at [145], Kelly J said: [R]eliance on the assumption must be reasonable in two ways. First, it must be reasonable for the [relying party] to adopt the assumption in question on the strength of the representation made. Secondly, the action taken by the [relying party] in reliance upon the representation must be itself reasonable. .

Reliance An important factor in assessing reasonableness here will be the characteristics of the relying party, including whether he or she is advised by lawyers, and whether he or she is well resourced and used to dealing in commercial transactions. In cases of substantial commercial enterprises that are legally represented, the court will carefully scrutinise whether the relying party’s actions are reasonable. If not, an estoppel claim will be denied. In Waltons Stores (Interstate) Limited v Maher, although the Mahers were legally represented, the facts were such that both the Mahers and their solicitors were encouraged and induced to make the same mistake, thereby not precluding the finding of an estoppel

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 [2008] NSWSC 941, at [26].

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 [2004] VSCA 163, at [99], the Victorian Court of Appeal expressed a preference for the view of Deane J over that of Brennan J on this issue. And in Leading Synthetics Pty Ltd v Adroit Insurance Group Pty Ltd [2011] VSC 467 at [69].

Detriment The 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

Detriment In Sullivan v Sullivan [2006] NSWCA 312, at [18] 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’

Detriment In Walsh v Walsh [2012] NSWCA 57 at 14 Meagher JA, speaking for a unanimous Court of Appeal, said that “[t]he detriment which can support an estoppel by encouragement need not be financial and it is not necessary, where that detriment is the expenditure of money, that the expenditure have been on the property in respect of which the estoppel is sought to be enforced”. The detriment suffered cannot be minor. It has been variously described as needing to be material or significant or substantial. In Ashton v Pratt (2015) 318 ALR 260 at 288, Bathurst CJ observed that the detriment must be “substantial although it need not be quantifiable in the same was as an order for damages”.

Reliance or expectation loss?
In assessing the existence of detriment, one must distinguish between expectation and reliance loss. It is clear that it is the reliance loss, and not expectation loss, that goes to establishing detriment. In Delaforce v Simpson-Cook (2010) 78 NSWLR 483 at 491, Handley AJA summarised the position as follows: The relevant detriment is not the loss flowing from non-fulfilment of the promise or assurance. The detriment that makes an estoppel enforceable is that which the [relying party] would suffer, as a result of his or her original change of position, if the assumption which induced it was repudiated by the [representor]. In the context of the facts of Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387 the expectation loss suffered by the Mahers was the loss of rent they expected Waltons to pay during the term of the anticipated lease. The reliance loss was the wasted expenditure incurred in demolishing and rebuilding the premises. It was the reliance loss, and not the expectation loss, that established detriment in that case.

Sidhu v Van Dyke [2014] HCA 19 Sidhu and his wife owned Burra Station
An un-subdivided block was rented to the Van Dyke’s called Oaks Cottage Mr Sidhu had an affair with Mrs Van Dyke Sidhu promised Van dyke that he would give her Oaks Cottage She worked part time on the station and other places for the Sidhu’s and paid rent – she did not pursue full time employment because of the promise to her regarding the land Further promises were made in writing by Sidhu that he would transfer the land to her after the subdivision was effected One her divorce from her husband Sidhu promised van Dyke that she didn’t need a property settlement in the divorce as she would be given Oaks Cottage After six years the relationship ended Van Dyke argued that Sidhu should be estoppel from denying the promises to transfer the land which had now been subdivided At trial the Supreme Court of NSW was not convinced that she ahd acted to her detriment The Court of Appeal disagreed and found that Sidhu should pay equitable compensation – Barrett JA argued that in cases of inducement the onus of proof shifts to the defendant to prove that there was no reliance

Sidhu v Van Dyke [2014] HCA 19 High Court – all found in favour of Van Dyke – equitable compensation was ordered for the market value of the land No presumption of reliance – it must be proved However the onus of proof is always borne by the plaintiff

French CJ, Kiefel, Bell and Keane JJ
[56] The line of English authority on which Barrett JA relied was founded on the statement by Lord Denning MR in Greasley v Cooke[61]that "[t]here [was] no need for [the promisee] to prove that she acted to her detriment or to her prejudice." In the present case, this statement was treated as involving a shift in the burden of proof on the issue of detrimental reliance. [57] Lord Denning's view is contrary to observations of high authority in Smith v Chadwick[62] by Lord Blackburn, with whom the Earl of Selborne LC and Lord Watson agreed. Lord Blackburn spoke of the circumstances in which a fair inference of fact might be drawn in terms substantially repeated by Wilson J in the passage from Gould v Vaggelas set out above; but his Lordship expressly rejected the suggestion that a defendant might be obliged to disprove inducement once the making of a material representation had been proved. [58] In point of principle, to speak of deploying a presumption of reliance in the context of equitable estoppel is to fail to recognise that it is the conduct of the representee induced by the representor which is the very foundation for equitable intervention. Reliance is a fact to be found; it is not to be imputed on the basis of evidence which falls short of proof of the fact. It is actual reliance by the promisee, and the state of affairs so created, which answers the concern that equitable estoppel not be allowed to outflank Jorden v Money[63] by dispensing with the need for consideration if a promise is to be enforceable as a contract[64]. It is not the breach of promise, but the promisor's responsibility for the detrimental reliance by the promisee, which makes it unconscionable for the promisor to resile from his or her promise

Unconscionability Austotel v Franklins (1989) 16 NSWLR 582 Austotel were building a new shopping entre Franklins were interested in renting a space and made requests for specifications Austotel asked them to sign a lease or commit in writing Franklins refused Austotel went into negotiations with BiLo Franklins claimed an estoppel

Estoppel in commercial settings
Kirby P – no concluded agreement, not unconscionable We are not dealing here with ordinary individuals invoking the protection of equity from the unconscionable operation of a rigid rule of the common law. Nor are we dealing with parties which were unequal in bargaining power. Nor were the parties lacking in advice either of a legal character or of technical expertise. The Court has before it two groupings of substantial commercial enterprises, well resourced and advised, dealing in a commercial transaction having a great value. As has been found, they did not reach the point of formulating their agreement in terms which would be enforced by the law of contract. This is not, of itself, a reason for denying them the beneficial application of the principles developed by equity. But it is a reason for scrutinising carefully the circumstances which are said to give rise to the conclusion that an insistence by the appellants on their legal rights would be so unconscionable that the Court will provide relief from it.

Relief Establishing 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 [2008] NSWSC 177, at [32].

Relief It 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: Pascoe v Turner 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.

Commonwealth v Verwayen
Verwayen was a sailor injured in the Voyager disaster in 1964 He commenced an action in 1984 Cth filed its defence and admitted all the allegation barring V’s injuries. Cth did not plead the limitation of actions not the lack of a duty of care Solicitors had said in expedition hearings that Cth would not dispute grounds of liability; Minister wrote to V stating the same thing Later Cth sought to amend its defence HC – Cth was estopped Deane J, Dawson J – estoppel by conduct – costs not sufficient Mason CJ – estoppel by conduct but could be awarded costs Brennan J – equitable (promisory) estoppel – compensation sufficient McHugh J – no estoppel – costs would be sufficient Toohey and Gaudron JJ – waiver Combination of Deane, Dawson, Toohey and Gaudron JJ meant Cth could not plead defence

Mason CJ The question then is whether an order for costs is a sufficient recompense for the respondent in respect of the detriment suffered by him. An order for costs has traditionally been regarded as a sufficient adjustment to meet prejudice in terms of expense and inconvenience occasioned by the pleading of new defences and I am not persuaded that principle or circumstance call for any different answer in the present case.

Brennan J I would allow the appeal, set aside the order of the Full Court and in lieu thereof order: 1. that the matter be remitted to the trial judge to ascertain what detriment was suffered by the plaintiff in continuing with the action until the defence was amended and what amount would be fair compensation for that detriment; and 2. that, upon payment by the defendant to the plaintiff of the amount so ascertained, the action stand dismissed. The plaintiff should pay the costs of the proceedings after amendment. of the defence, and the parties should have leave to submit appropriate minutes of order setting off the amounts due between them.

Deane J If the Commonwealth were now allowed to depart from the assumed state of affairs, the detriment which Mr. Verwayen would sustain could not be measured in terms merely of wasted legal costs. The past stress, anxiety, inconvenience and effort which were involved in the pursuit of the proceedings would be rendered futile. More important, Mr. Verwayen would be subjected to the potentially devastating effects of a last-minute denial of an expectation of just compensation for his injuries in circumstances where those injuries were sustained in the course of the service of the Commonwealth by reason of the negligence of another or others in that service and

Dawson J No doubt the respondent was, or could be, compensated by an award of costs for any actual expense incurred as a result of the appellant's failure to plead the statute of limitations at the beginning. But the real detriment to the respondent was that he was induced by the assumption that the appellant would not insist upon the statute to allow the litigation to proceed for more than a year without taking any steps to bring it to a conclusion by way of settlement or, if necessary, withdrawal

Relief In 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.

Milling v Hardie [2014] NSWCA 163
Mr Milling owned a homestead In 1992, Milling’s daughter and son-in-law (the Hardies) moved into the homestead and in the ensuing years undertook various improvements to it and its grounds. The Hardies paid no rent and Milling paid all relevant rates and taxes. No representations were made by Milling as to ownership of the property. The Court of Appeal found that Milling’s invitation to the Hardies to occupy the homestead and consenting to them undertaking improvements to it, justified an expectation that the Hardies would be able to occupy the property for a substantial period of time. The Court held that the expenditure on improvements had been amortised over the period that they had been in occupation and that, in the circumstances, the appropriate relief was to grant the Hardies the right to occupy the homestead during the lifetime of Mr Milling. .

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