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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.
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 19401945, 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
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
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
Proprietary estoppel
Proprietary estoppels 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 others 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 [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.
Two streams
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 fathers assent and approval, the son built and occupied a house on the land. After the fathers 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.
Two streams
The 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 1401: 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.
Detriment
In Barnes v Alderton [2008] NSWSC 107, at [42], 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.
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. In Australian Crime Commission v Gray [2003] NSWCA 318, at [200], Ipp JA, speaking for the New South Wales Court of Appeal, said:
Representation
The 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.
Representation
The promise or representation can be either express or implied: Legione v Hateley, at CLR 4389
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.)
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
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, 4289, 4589; ALR 531, 542, 5645; Commonwealth v Verwayen (1990) 170 CLR 394, at 41213, 4445, 4536, 5002; 95 ALR 321, at 3323, 3567, 3634, 3968.
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
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.
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
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. 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 1134, 125; ALR 476, 485.
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 sons lost expectation rather than reliance loss or any actual detriment suffered by the son.