Estoppel(LAWS2385)

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This article is a topic within the subject Equity and Trusts.

Contents

Required Reading

M.W. Bryan & V.J. Vann, Equity and Trusts in Australia (Cambridge University Press, 2012), pp. Chapter 7 (7.2-14) and revise from Contracts.

Inwards v Baker [1965] 2 QB 29 (per Lord Denning).

Thorner v Major [2009] 1 WLR 776 (per Lord Walker).

Giumelli v Giumelli (1999) 196 CLR 101.

In all types of estoppel, one party is prevented from enforcing a legal right or from departing from an assumption relied upon by the other party, where it would be unconscionable to do so.

Common law estoppel

[1]This estoppel prevents a person who, by a representation of fact, has induced another to alter their position, from denying the fact represented. It is confined to representations of existing fact, not to representations as to future intention (Jordan v Money).[2]

Equitable (or promissory) estoppel

[3]Equitable estoppel applies where the representation made, or assumption created, relates to a future state of affairs and not existing fact, and the party relies on the representation or assumption to their detriment.

Waltons Stores (Interstate) Ltd v Maher[4]

Facts: Waltons negotiated with the Mahers to lease the Mahers’ property, which Waltons intended to use as a supermarket. This required demolition of the building on the site and construction of new premises to Waltons’ specifications. A draft contract was prepared and amendments negotiated between the parties. Waltons’ solicitor indicated to the Mahers’ solicitor that the amendments were probably acceptable but that client consent had not been obtained, concluding “We shall let you know tomorrow if any amendments are not agreed to”. Having heard nothing from Waltons’ solicitor, the Mahers’ solicitor forwarded an executed draft contract for exchange. The Mahers demolished the existing building. Waltons had decided not to go ahead with the lease and instructed their solicitors to ‘go slow’ in the negotiations with the Mahers. They informed the Mahers that they would not lease the property when the supermarket was 40% complete.
'Held: The majority of the High Court held that Waltons was estopped from denying that an exchange of contracts would occur. Brennan J identified criteria for a valid estoppel:
a) Assumption. The plaintiff assumes that a particular legal relationship exists between the plaintiff and the defendant or that it will exist. In the latter case, the plaintiff must assume that the defendant is not free to withdraw from the expected legal relationship.
b) Inducement. The defendant has induced the plaintiff to adopt that assumption or expectation.
c) Reliance. The plaintiff acts or abstains from acting in reliance on the assumption or expectation.
  • The reliance must be reasonable (Australian Securities Commission v Malborough Gold Mines Ltd).[5]
d) Knowledge. The defendant knew or intended the plaintiff to act on the assumption.
e) Detriment. The plaintiff’s actions or inaction will occasion detriment if the assumption or expectation is not fulfilled.
f) Failure to prevent detriment. The defendant has failed to act to avoid that detriment, whether by fulfilling the assumption or expectation or otherwise.
  • Detriment can be avoided by giving reasonable notice of an intended departure from assumption (Commonwealth v Verwayen).[6]

Prior to Waltons Stores estoppel was “a shield, not a sword”, but the case established that estoppel could create enforceable rights where not contractual or other common law claim could be brought.

  • A promise will only be enforceable through estoppel to the extent that it prevents unconscionable conduct. It does not allow representations to be made good.
  • In Austotel Pty Ltd v Franklins Selfserve Pty Ltd,[7] the court refused to recognise estoppel on facts similar to Waltons Stores, except that the parties had not agreed some of the terms of the proposed lease, because it would undermine the principle that a contract will not be valid if its essential terms are unclear or unsettled.
  • In estoppel cases, the court’s aim is to achieve practical justice between the parties. Therefore courts have preserved the flexibility of equitable relief by awarding the relief that does the most complete justice to the parties on the facts of the case.
  • In Commonwealth v Verwayen,[8] the plaintiff sued the Commonwealth in negligence in respect of injuries sustained in a naval accident. The Commonwealth initially stated that it would not rely on the statute of limitations as a defence and was later estopped from changing its plea. A costs order would have protected Verwayen’s “reliance interest” by compensating him for his wasted expenditure but the court decided to enforce the “expectation interest” by placing him in the position he would have been in if the Commonwealth had not changed its policy.

Proprietary estoppel

[9]Equity has long exercised a jurisdiction to prevent a holder of an interest in property from insisting upon their legal rights to property where they have encouraged another to act to their detriment on the faith of a belief that they had, or would be granted, some rights over the property in question (Dillwyn v Llewelyn).[10]

  • The criteria for this doctrine are the same as for equitable estoppel and therefore in Waltons Stores, the High Court recognised that the doctrines were merged.
  • A court will 'more readily enforce a plaintiff’s reasonable expectations in cases of proprietary estoppel since there is no danger of the principles of contract law being subverted.
  • Enforcement will not necessarily mean that the plaintiff obtains a proprietary interest in the defendant’s property. A personal order of equitable compensation may be preferred.
  • In Giumelli v Giumelli,[11] the plaintiff’s parents were ordered to pay him a sum representing the present value of the promised plot of land, as an award of proprietary interest, by way of constructive trust, would defeat the interest that other family members had in the land.


End

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References

Textbook refers to M.W. Bryan & V.J. Vann, Equity and Trusts in Australia (Cambridge University Press, 2012).

  1. Textbook, p 98.
  2. (1854) 5HL Cas 185.
  3. Textbook, pp 98-102.
  4. (1988) 164 CLR 387.
  5. (1999) 196 CLR 101.
  6. (1990) 170 CLR 394.
  7. (1989) 16 NSWLR 582.
  8. Textbook, pp 102-3.
  9. Textbook, pp 102-3.
  10. (1962) 4 De GF&J 517.
  11. (1999) 196 CLR 101.
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