Estoppel

Estoppel operates where **//non-contractual promises//** and **//representations//** have been relied upon, and protect the relying party from detriment that may occur as a result of the other party’s change of position. The effect of the estoppel is that the rights of the parties are determined on the basis of the assumed state of affair; i.e. on the basis that the contract has been signed, even though it has not.

Estoppel = Where a party (Representor) **//by words or conduct//** has led another party (Representee) to believe in the existence of a certain situation and that party has **//acted to their detriment in reliance//** on the (1) **//representations//**; or (2) the **//assumptions//** generated by those representations. The representor is blocked/not allowed to assert their strict legal rights as a result


 * Types of estoppel **

· Common law estoppel concerns an **//assumption of fact//** · rights of parties determined on **//assumed state of affairs//** · **// EG //** : Builder negotiates contract with customer, neither intends to be bound without signed written document. Builder signs contract, sends to customer, customer calls and says he has signed it (even though he has not) – thus, **//assumption as to existing FACT//**. · Rule in **//__Jorden v Money__//**- an estoppel can arise at CL **//only from//** an assumption of existing fact (**//not//** an assumption as to the **//future//** conduct of the representor)
 * (a) Common Law estoppel **

· ** 1. Proprietary ** : relying party acts to his/her detriment on the faith of an assumption that the relying party has or will be granted an **//interest in land//**; · ** 2. Promissory ** : any application of equitable estoppel that does **//not relate to an interest in land.//** · Note: since the HC has accepted that promissory estoppel and proprietary estoppel are manifestations of a single principle- equitable estoppel for both · Equitable estoppel **//precludes representor acting inconsistently with an assumption//** · In the absence of a binding contract (where there is no pre-existing legal relationship between the parties, but the representor has implicitly promised to enter into a contract with the relying party), a party may rely on equitable estoppel (EE) as a means to obtain some relief: **//__Waltons__//** (HC 1983). · This would be an example of EE as a shield (a defensive claim). · Note that even if there is no contract or existing contractual relationship, EE can still arise:
 * (b) Equitable Estoppel **
 * // (of fact or future) //**
 * //__ Waltons __//**


 * (II) Elements of estoppel **

· List of elements were proposed by Brennan J in **//__Waltons Stores v Mahers__//**- they are not definitive but a guide


 * (1) Assumption **

The relying party must have adopted an **//assumption//** that a particular **//legal relationship//** (**//Waltons//**) or “**//interest//**” (**//Giumelli//**) **//existed// OR //will exist//** – **//Mobil//**//.//

· Nature of assumption (i.e. whether assumption as to existing fact cf. assumption of future conduct) determines whether CL or equitable estoppel

· In **//__Waltons__//**, Brennan J held that it **//was necessary//** for a P to prove that he/she **//assumed that a particular legal relationship existed or would exist//** between the P and the D, · This suggests that an equitable estoppel **//cannot//** arise where one person assumes that another person will behave in a particular way in the future **//OUTSIDE the context of a legal relationship//** · In some cases, such as Mobil, the expectation of an interest in land is taken to constitute an exception to the rule stated by Brennan J · In **//Mobil//**, the court held that ‘it is a necessary element of the principle that the D has created or encouraged an assumption that **//“a particular legal relationship” would arise or be granted//**
 * (a) The assumption must relate to a legal relationship **
 * AND **, that the **//D would not be free to withdraw from the relationship//**


 * (2) Inducement **

The assumption adopted by the relying party must have been **//induced//** by the **//conduct//** of the representor

· Assumption may be induced by an express representation or promise by the representor, but need not be express · It must be ‘unqualified, firm and specific’: **//__Mobil__//**//__.__// · The position taken in other cases is often different and conflicting:

· Mason and Deane JJ in **//__Legione v Hateley__//** held that the inducement must be an **//unequivocal promise or representation//** as to future conduct (i.e. an ambiguous promise is incapable of founding an estoppel: **Legione v Hateley**) · Note: an unauthorized promise may give rise to an estoppel if it is followed by an assumption or expectation encouraged or induced by a person in authority: **//__Corpers No 664 v NZI Securities__//**
 * // (a) __Legione v Hateley__ //**** - unequivocal promise/representation needed **

· ** BUT **, in **//__Walton__s//** no express promise or representation was made. · Silence by acquiescence may be inducement (**//__Waltons__//**__)__ but there needs to be **//some other factor which makes it unconscionable//** (eg: knowledge). · i.e. where an assumption is induced by silence, necessary to show that: the representor intended reliance, knew of acts of reliance or should reasonably have expected reliance · **// Note //** : the principle that a clear/unequivocal promise or representation is required to establish an estoppel did **//not//** command majority support in **//__Legione__//** and is inconsistent with later decisions · **// Preferred approach //** now is to ask: whether the relying party was induced to adopt an assumption as to the future conduct of the representor, rather than to ask whether a promise or representation has been made
 * (b) __C.f //Waltons v Maher//__- no express promise needed/ silence sufficient **


 * (3) Detrimental reliance **

The relying party must have acted on the assumption in such a way that he or she will **//suffer detriment//** if the representor does not adhere to the assumption/departs from it

· Detriment is assessed **//at the//** **//time//** the representor seeks to **//resile from//** the relevant assumption. · The detriment suffered or to be suffered by relying party as a result of reliance on the relevant assumption must be **//material//** (**//Thomas v Palmer//**), **//significant//** (**//__Verwayen__//**__),__ or **//substantial//** (**//__Je Maintiedrai__//**) · **// Note //** : the **//prospect//** of detriment is sufficient in CL or equitable estoppel · If the representor has threatened to depart, but has not actually done so, the relevant question then is: whether the relying party **//will or would//** suffer detriment if the representor were allowed to do so · **// Note //** : however, a mere speculative possibility of detriment is **//not//** sufficient to establish an  estoppel: **//__Territory Insurance Office v Adlington__//**


 * (a) Two different types of loss **

1. **Expectation loss** = the loss of the benefit the relying party assumed she had expected to receive. 2. **Reliance loss** = is the loss suffered as a result of the relying party’s reliance on the relevant assumption when the representor acts inconsistently with the assumption.

· ** EG ** : in **//__Waltons__//**, expectation loss = the rent they expected W to pay during the term of the lease; reliance loss = the wasted expenditure incurred in demolishing the existing building and starting construction · **// expectation loss will always result from the breach of a promise to confer a valuable benefit //**, but **//reliance loss will arise ONLY where the relying party has taken some action or inaction on the faith of the promise//**, which proves detrimental when the promise is breached

· **// Note //** : the relying party’s detrimental reliance is essential to the establishment of estoppel because it is that detrimental change of position that makes it unjust or unconscionable for the representor to depart from the assumption. C.f. in England- where it has been held that detriment is not essential to the establishment of a promissory estoppel (this approach has been rejected by Australia)


 * (b) Types of detrimental reliance **

Detrimental reliance requirement can be satisfied in many different ways— · **// Activity //** = the relying party may expend time and energy in the performance of services for the representor, e.g. domestic services or building work. (**//__Waltons__//** demolition of building) · **// Inactivity //** = detrimental where it results in the loss of an opportunity to obtain a benefit or avoid a loss, e.g. relying party may fail to exercise a contractual right such as an option to renew a lease, or may fail to commence litigation during the statutory limitation period

· **// EG //** : wasted expenditure of money, either on improvements to the representor’s land, or in preparation for a contract with the representor · **// Note //** : inactivity will **//not//** be regarded as detrimental when there is nothing the relying party could have done to improve their position · In **//__Je Maintiedrai__//**, prior to the landlord demanding payment of the arrears, the tenants had actually obtained a benefit in that they could pay less rent. Only when the demand for payment was made did the detriment arise. · **// Can take into account party’s circumstances: //** **//__Je Maintiedrai__//** · Detriment in **//__Je Maintiedrai__//** arose because the promisee had **//altered//** his position on the faith of the promise, and would thereby suffer detriment if the promisor was subsequently allowed to assert his/her strict legal rights

· Emotional distress can amount to detriment: **//__Verwayen__//**. Nevertheless, detrimental reliance **//must be material//** (Mason CJ in **//__Verwayen__//**). · This could include: · Wasted expenditure, cost of preparing formal contract, and solicitor fees. · Effort of services, bearing kids //(**__W v G__**//), payment of lump sum when in financial trouble //(**__Je__**// · Inaction where it results in loss of opportunity: **//__Giumelli__//**  · Loss of opportunity – but not mere loss of a promised or expected benefit.  · **// Was there something he could have done to improve his position that he didn’t do //**
 * (c) Detriment need not be financial: //Commonwealth v Verwayen// **
 * //__ Maintiedrai __//** )
 * // and would have //**** //done had he not been induced?// ** If yes, DR. If no, not DR.


 * (4) Reasonableness **

The court must be satisfied that the relying party has acted reasonably in **//adopting//** and **//acting upon//** the relevant assumption. Thus, **//reasonableness = whether the relying party is deserving of protection//**. Reasonableness requirement involves two separate questions— (use objective person test) · Whether the relying party acted **//reasonably//** in adopting the relevant **//assumption//** · Whether the relying party acted **//reasonably//** in taking the relevant **//detrimental action on the faith of the assumption//**

· **// Nature of assumption //** : unreasonable if highly unlikely expectation (**//__Overton__//**); unreasonable if mere hope (**//__Chelleram__//**) · **// Inducement //** : less reasonable if inducement by acquiescence/objectively equivocal representation (**//__Legione__//**); reasonable if induced by government (**//__Verwayen__//**) or someone with expertise/authority · **// Parties’ relationship //** (**//__W v G__//**): more reasonable if close relationship
 * (a) The //assumption// must be objectively reasonable. Look to: **

· **// Type of the action taken //** : Unreasonable if excessive: eg entry into 2nd contract which outlasts first contract · **// Parties’ relationship //**__ (**//W v G//** __ ): more reasonable if close relationship · **// Identity of representor //** (**//__Verwayen__//**): reasonable if government/person with expertise; unreasonable if 2 parties at arms length with access to legal advice · **// Inducement //** : reasonable where express inducement; less reasonable where inducement by acquiescence/objectively equivocal representation (**//__Legione__//**); unreasonable where no real inducement
 * (b) The //detrimental action// must also be objectively reasonable. Look to: **


 * (5) Unconscionable conduct **

It must be unconscionable in the circumstances for the representor to depart from the assumption. Ask- **//Does the representor deserve blame?//**

· Can be used to: grant relief because it is unconscionable to depart from an assumption which one has induced another to adopt and detrimentally rely upon (eg: **//__Waltons__//__;__** · Unconscionability involves a **//broad approach//**, takes into account all the circumstances of the case  · Focuses on the **//role of the representor in inducing the adoption of the assumption//**  · The representor’s knowledge of the relying party’s assumption (eg: in **//__Waltons__//**) and any intention to induce reliance are relevant, particularly where assumption has been induced by silence by representor  · i.e. where the only thing the party suffering DR can point to is silence, it is not enough for other party to merely change his mind. To have acted unconscionably, the party must have had actual/constructive knowledge of the other party’s detrimental reliance (see · Note: it cannot be unconscionable for the representor to deny responsibility for detriment sustained as a result of unreasonable reliance: **//__Galaxidis v Galaxidis__//**
 * //__ Verwayen __//** ) **and** in other cases, unconscionable conduct has been one of the elements that the relying party must establish (eg: **//__Forbes v Australian Yachting Federation Inc__//**)
 * //__ Waltons __//** ).


 * (6) Departure or threatened departure **

The representor must **//depart or threaten to depart//** from the assumption adopted and acted upon by the relying party (this constitutes unconscionable conduct) - that is, the representor seeks to breach the promise or deny the truth of the assumption

· Thus held that ‘an equitable estoppel cannot arise until there has been an unjust or unconscionable departure or threat to depart from the assumption adopted and acted upon by the party seeking to assert the estoppel.’: **//__Ashton Mining Ltd v Commissioner of Taxation__//** **//OR//** · Once an assumption has been induced and reasonably relied upon, the representor is under an obligation not to act inconsistently with it without taking steps to ensure the departure does not cause harm to the relying party: **//__Kintominas v Secretary, Department of Social Security__//** · **// Note //** : this element is not so important because the relying party will have nothing to complain about if this were not the case.


 * (III) The Effect of an Estoppel **

· The effect of establishing an equitable estoppel is to raise an ‘equity’ (entitlement to some equitable relief) in favour of the relying party · The relying party **//cannot//** assert a right to a particular remedy, but must persuade the court to give a remedy suitable to the facts · Traditionally, proprietary estoppel has been more flexible c.f. CL and promissory estoppel · However, the unification of promissory and proprietary estoppel in **//__Waltons__//** led to the discretionary approach from proprietary estoppel being applied to all forms of equitable estoppel · Question= whether the courts should aim to protect the relying party’s **//reliance interest//**
 * (a) Satisfying the ‘equity’ **
 * OR ** **//expectation interest//**

· Any remedy must be proportionate to the detrimental reliance – the minimum necessary to avoid the detriment. · This may involve granting expectation-based relief or a narrower reliance-based relief, depending on the detriment suffered.
 * (b) Relief **

Reliance-based approach to relief is based on the idea that the object of equitable estoppel is to **//prevent detriment flowing from reliance on promises//**, **//rather than to enforce those promises//**, and relief determined accordingly · order the representor to pay monetary compensation for the detriment suffered by the relying party in reliance in the relevant assumption
 * // Reliance based relief = //** The court can grant relief which ensures that the relying party does not suffer loss as a result of his/her reliance on the relevant promise or representation.
 * EG: **

interest by providing a remedy which puts the C in the position he/she would have been in had the relevant promise been fulfilled. · court orders specific performance, or payment of damages in lieu of specific performance · refuse to allow the representor to depart from representation as to future · orders the representor to pay monetary compensation to the relying party calculated by reference to the value of the expectancy conduct · orders the representor to transfer to the relying party a promised or expected interest in land;
 * // Expectation based relief = //** Alternatively, the court can protect that claimant’s expectation
 * EG: **

· CL estoppel is about enforcing promises i.e. rights of the parties are determined on the assumed state of affairs. · The main measure of relief/remedy is expectation damages (i.e. damages may = same remedy as in contract). · Expectation damages may be awarded either by way of · specific performance; OR  · giving value in damages that is equivalent to the promise.
 * __Common Law Estoppel__ **

· Main remedy is specific performance but also possible to make orders for compensation. · Most would think this is compensation for acts of reliance, not enforcing of assumption/promise therefore RELIANCE DAMAGES (not expectation). · However it is worth noting that courts are often generous when deeming what is the minimum equity needed to avoid injustice: · **//__ Waltons __//** : Reliance – demolition & construction; Expectation – rent (would be higher → will usually be larger). Court ordered amount equivalent to rent (expectation damages). Why? Not just demolition & construction, but also didn’t seek another tenant. · **//__ W v G __//**// : // Relief expectation costs (child support). Not reliance damages (cost of birth – IVF treatment, work foregone etc.)
 * __Equitable Estoppel__ **
 * // Remedy: ‘minimum equity to avoid injustice’ //**** . ** In **//__Waltons__//**, Brennan J interpreted the ‘minimum equity’ raised by equitable estoppel as the minimum necessary to prevent detriment being suffered by the relying party as a result of his/her reliance


 * (c) Current status of the reliance-based approach **
 * Although a reliance-based approach was favoured by a majority in HC in **//__Verwayen__//**, the courts have continued to grant expectation relief in most equitable estoppel cases
 * In **//__Verwayen__//,** reliance-based approach of Brennan J in **//__Waltons__//** was adopted, but the relief ultimately granted was in the expectation measure
 * In **//__Giumelli__//**, the HC did not explicitly reject the reliance based approach to relief, but the court’s failure to consider the possible compensation on reliance basis suggests a shift away from the approach in **//__Verwayen__//**
 * Move towards- allowing the party a prima facie right to expectation relief, which would be displaced only where the representor could demonstrate that reliance could adequately be protected by some other means
 * Thus appropriate to adopt expectation relief as starting point for remedy, given the difficulty of compensating reliance (i.e. not possible to quantify the detriment with any precision)


 * (IV) Equitable estoppel as a cause of action **

Does an estoppel create independently enforceable rights, or can it be relied on by a plaintiff
 * // only when it supports another cause of action //** (i.e. an action in contract or tort?)- support for both views

· Many cases in which equitable estoppel has been applied where the estoppel itself must have provided the cause of action, because no other cause of action was available on the facts · **// EG //** : proprietary estoppel cases (proving a cause of action), in which Ps were able to claim interest in land solely on the basis that they had relied on an assumption, induced by the conduct of the D, that they had been, or would be, given an interest in the subject of land · Subsequent cases show that equitable estoppel is being accepted as a cause of action at the Supreme court level in cases outside the proprietary estoppel context · **// EG //** : **//__W v G__//**- the estoppel upheld by Hodgson J resulted in the enforcement of the D’s promise to assist the P in raising the children, and cannot be seen as supporting any other cause of action
 * (a) The use of estoppel as a cause of action **

· 2nd problem with the notion that equitable estoppel does not provide a cause of action is that an estoppel arising from an assumption as to the future conduct of the representor logically cannot have a preclusionary effect · The estoppel clearly operates as an independent source of rights
 * (b) Estoppels arising from future conduct **