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Lecture 6Estoppel

The first thing to make clear is that estoppel provides a way in which promises can be legally

binding, even though there is no consideration. Estoppel is reliancebased and, you may recall,

reliance was never sufficient to constitute a consideration. Estoppel is, strictly speaking, nothing to do

with contract, that is, it is not part of contract law in the traditional sense. It is something which existsas a separate body of law - just like negligence or trespass. Its importance is that it has impacted on

the law of contract by making it possible to argue for legal obligations which are contract-like but

which do not satisfy the traditional requirements of consideration.

stoppel by agreement or convention

The first sub-category is estoppel by agreement which is sometimes called estoppel by convention.This is where two parties have agreed as to an existing state of facts. They may have agreed that thefacts are other than they really are, but if they have both agreed, then each is estopped from denyingthe state of facts as agreed. So, if someone says "Let us assume for present purposes that the A$1 isworth US 70 cents" and the other party agrees and then both act on that assumption in some material

way, then one party cannot come along later and say that the A$1 is in fact worth US 65 cents.This type of estoppel can also arise if there is simply a mutual assumption without any explicitagreement.

Proprietary estoppel

The courts of equity developed a special branch of estoppel which was to do with land. We cameacross this briefly in Beaton McDivittin whicha possible basis for allowingthe promisee in that case aremedy was proprietary estoppel (although that argument got lost in the course of the litigation).Generally speaking, land transactions require certain formalities. You will learn about these in theProperty course. Even the law of contract treats land as a special category and insists that contracts

involving an interest in land should be in writing. The courts of equity, however, recognised thatpeople do not always behave as the law would have it and they make informal arrangementsconcerning land. Take the following example.A farmer says to his newly married daughter and son in law: "I have no use for the bottom paddock.Why don't you use it and build a house on it. You can treat it as yours. In any case you will get it in theend in my will." On the basis of this, the newly married couple build a house on the land and livethere. Some time later, there is a falling out between the daughter and her father. What rights has thecouple over the land?We do not need to investigate the ins and outs of property law but, suffice it to say that there is nolegalbasis for saying that the land belongs to the couple. The law of contract is not much help either.There may be no intention to create legal relations, no consideration and no writing.Equity steps in and says that it is most unfair to encourage someone to make a major commitmentsuch as building a house and then to deny that the people who have acted on that encouragementhave any rights. It is, in other words, unconscionablefor the father to deny that his daughter has somerights over the land. That word - "unconscionable" - is one which is a very important one in anydiscourse about equity and its role. We will come across it time and again.

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you will see from the extract from Chitty on pp 210-211 that proprietary estoppel can arise not justwhen the owner of land has encouragedanother to use the land (as in the example I just gave) butalso in a situation where the owner of the land has simply stood byand allowed someone to use theland - sometimes called acquiescence. An example might be where the owner knows that the otherparty has made a mistake (for example about where a boundary is) and says nothing while the otherbuilds a barn on the land. Estoppel can operate to prevent (estop) the owner from asserting his or her

title to the land on which the barn stands. This means that the other party has a remedy which mayinclude being granted an interest in the land.We will see that proprietary estoppel played a major part in the breakthrough that occurred in theWaltonscase even though Waltonswas not a case about title to

It is a topic that relates to a lot of other topicsnegotiation of a contract, the rules of formation, the

doctrine of consideration, the modification of a contractual relationship, breach, the settlement

process and the conduct of litigation. The theory of estoppel comes logically after consideration.

Types of estoppel:

1)Estoppel by representation (or in pais) operates to prevent departure from a representation, by

words or conduct, of existing fact if the representee has acted in reliance on it.

2) a related concept is estoppel by convention whereby a party is not permitted to depart from an

assumption that has been adopted by both parties, if to do so would be unjust in the circumstances

3) Proprietary estoppelgives enforceable rights over land to a person who has been assured that

he or she has, or will have, an interest in the land owned by the person giving such assurance, so

long as the promise acts on the assurance, by, for examplemaking improvements.

4)Promissory estoppelwas reborn in the High Trees case and prevents departure from promissory

(of a promising nature) statements that have been relied on.

*Promissory estoppel was thought to be quite controversial because it generated positive rights (for

example to allow for compensation or to an interest in land). Unifying of estoppel has made it

possible for the doctrine to be used as a basis of enforcing positive promises.

The elements of estoppel exist when a promise, representation or conduct of one party leads

another to assume that the first party will follow a certain course of action or that certain facts are

established or that a certain legal relationship exists or will exist and the other acts on that

assumption in some material wayrelies on the promise, representation or conduct to his or her

detrimentso that it would be unconscionable for the first party to go back on the promise or

representation or to undermine the assumption generated by his or her conduct.

*I+t is called an estoppel because a mans owne act or acceptance stoppeth or closeth up his

mouth to alleage or plead the truth

(Sir Edward Coke,The First Part of the Institutes of the Laws of England; Or, A Commentary upon

Littleton 1628)

A man shall not be allowed to blow hot and cold to affirm at one time and deny at another

making a claim on those whom he has deluded to their disadvantage, and founding that claim on the

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very matters of the delusion. Such a principle has its basis in common sense and common justice,

and whether it is called estoppel, or by any other name, it is one which Courts of law have in

modern times most usefully adopted. (Cave v Mills (1862) 7 Hurlstone & Norman 913, 927-8 Court

of Exchequer)

Basic elements: in order to establish an equitable estoppel

1) the plaintiff assumed that a particular legal relationship then existed between the P and D or

expected that a particular legal relationship then existed between them and, in the latter case, that

the defendant would not be free to withdraw from the expected legal relationship.

2)the D had induced the P to adopt that assumption or expectation

3) the P acts or abstains from acting in reliance on the assumption or expectation

4) the D knew or intended him to do so

5) the Ps action or inactions will occasion detriment if the assumption or expectation is not fulfilled

6) the D has failed to act to avoid that detriment whether by fulfilling the assumption or expectation

or otherwise.

**Thus it can be seen that determining whether an estoppel operates is a very fact-specific enquiry.

The word can also be used as a verbthe first party is estopped from denying the state of affairs

that has been acted on by the other party.

Once these elements are established, the court must then fashion an appropriate remedy to remove

the detriment suffered by the second party.

Estoppel will also work to set the scene for other causes of action. Estoppel then has a merely

evidentiary roleparticularly so when the promise or representation relates to purely factual

matters. The one party will be estopped from denying the facts that, in turn, may provide the basis

for some cause of action. Estoppel is not confined to circumstances where a promise is made; it

covers a wider range of conduct.

Statements or conduct that is clear and unambiguous:

-if the basis for an estoppel argument is a promissory statement, it must be reasonably clear and

unambiguousotherwise courts will say it doesnt operate. The clearer it is the more likely thecourts will accept it. Sometimes courts have insisted on the statement being promissory in intent,

such intention is to be judged objectively.

In the end, the statement that is put forward as a basis for estoppel must be construed in its context

and so it may be possible for apparent ambiguity to be removed by consideration of surrounding

circumstances and the parties evident intention.Australian Crime Commission v Gray [2003].

**More difficult questions arise when the basis of an estoppel argument is not promissory conduct.

The need for clarity is more difficult to satisfy. However, it can still operate on the basis of an

understanding, assumption or non-promissory conduct.

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In Hughes v Metropolitan Railway Co it was held that there was an implied understanding or

assumption that the running of the period was suspended.

What about where a person has let a person pay late previously?

Unless a clear and unambiguous assurance can be spelt out from the indulgent partys conduct, anestoppel will not operate to defeat his or her contractual rights.

Regarded as one of the founding statements in estoppel:

It comes to this: when a man, by his words or conduct, has led another to believe in a particular

state of affairs, he will not be allowed to go back on it when it would be unjust or inequitable for him

to do so.Moorgate Ltd v Twitchings [1976] QB 225 (Denning LJ)

His judgements are very good for clarity: In the UK the modern law of estoppel:

The word estoppel only means stopped. You will find it explained by Coke in his Commentaries on

Littleton (19th

ed., 1832), vol. II, s. 667, 352a. It was brought over by the Normans. They used the old

French estoupail. That meant a bung or cork by which you stopped something from coming out. It

was in common use in our courts when they carried on all their proceedings in Norman-French.

Littleton writes in the law-French of his day (15th

century) using the words pur ceo que le baron est

estoppe a dire, meaning simply that the husband is stopped from saying something.

Other words the language of the court was in French.

From that simple origin there has been built up over the centuries in our law a big house with many

rooms. It is the house called Estoppel. In Cokes time it was a small house with only three rooms,

namely, estoppel by matter of record, by matter in writing, and by matter in pais. But by our time

we have so many rooms that we are apt to get confused between them. Estoppelper rem

judicatam, issue estoppel, estoppel by deed, estoppel by representation, estoppel by conduct,

estoppel by acquiescence, estoppel by election or waiver, estoppel by negligence, promissory

estoppel, proprietary estoppel, and goodness knows what else. These several rooms have this much

in common: They are all under one roof. Someone is stopped from saying something or other, or

doing something or other, or contesting something or other. (McIlkenny v Chief Constable of the

West Midlands [1980] QB 283, 316-7 (Lord Denning))

**The Australian courts have gone some way to deal with the unknown ambiguity of estoppel.

How estoppel works:

The basic principle underlying the idea of estoppel is the popular saying that you cannot blow hot

and cold. It is about inconsistent behaviour where that behaviour adversely affects another.

1. Introduction - What is estoppel?

Estoppel can come up when you are attempting to go back on what has been said or doneyou are

prevented to go back on what you have done.

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*Originally you were estopped from giving evidence that would go back on your own

representation so your mouth was plugged. You are prevented by law from acting inconsistent

with or departing or residing from an earlier representation. Now potentially wider estoppel can

be used as a sword, not just a shield. Australia seems to be moving towards a unified theory of

estoppel.

How do we use estoppel in contract law?

The basic purpose of estoppel is to prevent the injustice which results from one person repudiating

the foundation of a belief or an assumption which he or she inducedwhen repudiation will cause

harm to the person holding that belief or acting upon that assumption. These basic notions of

estoppel are reflected both in the CL and equitable principles. The problem in contract law is that it

occurs in context outside of contractit has become a house with many roomstherefore we get

confused. However, all of these rooms are under one roof. It is important to be able to recognise

estoppel as it is relative to contract.

Waltons Stores (Interstate) Ltd v Maher(1988)

The High Court suggested that all of these doctrines appear to be developing into a unified theory of

estoppel.

2. The Strategic use of estoppel in contract law.

We know in relation to the structure of the course that it is placed after consideration

therefore we can use estoppel when one of the parties hasnt given good consideration.

Also useful where, during negotiations to enter into a contract, an offeree, believing that the

offer will not be revoked proceeds to act to his detriment upon that belief (this is right at the

point of acceptance); Waltons Stores (Interstate) Ltd v Maher(1988) 164 CLR 387;Austotel v

Franklins (1989) 16 NSWLR 582

Where there has been non-compliance with the statutory requirement of writing with

respect to a contract involving land.

In last weeks tutorial (sale/purchase for the interest ofland) there are formalities which need to

followedif they havent been complied with then estoppel can be used.

Where the rule in Hoyts Pty Ltd v Spencer(1919) 27 CLR 133 precludes the finding of an

alleged collateral contract but the parties havent been able to establish it: Wright v

Hamilton Island Enterprises Ltd[2003] QCA 36;

Second semesterWhere the doctrine of privity prevents a third party to the contract from

enforcing it: Trident General Insurance Co Ltd v McNiece Bros Pty Ltd(1988) 165 CLR 107 at

145;

We wont do this at allWhere a contract is rendered illegal and thus unenforceable

because a party to it is not licenced as required by legislation, but had stated to the other

party that he or she was so licenced.

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We will deal with thisWhere there has been a failure of considerationContract variation

-Je Maintiendrai v Quaglia (1980) 26 SASR 101 c/fAgricultural and Rural Finance Pty Limited

v Gardiner[2008] HCA 57

Contract termination - Legione v Hately(1983) 152 CLR 406 (in relation to the limitations on

termination).

In relation to our lifecycle it can come up in relation to:

-consideration

-agreement

-consideration (variation)

-restrictions on termination

-restrictions on enforcement

-rules in relation to intention and certainty

-intention in relation to preliminary agreements

*Remember that even though it is theoretically applicable, it may be a poor claim.

3. The varieties of estoppel

Common Law Estoppel

1. Estoppel by deed;

2. Estoppel by judgment (record):

(a) issue estoppel; and

(b) res judicata;

3. Estoppel in pais (conduct):

(a) estoppel by representation; and

(b) estoppel by convention.

Equitable Estoppel

1. Proprietary Estoppel

(a) estoppel by encouragement; and

(b) estoppel by acquiescence.

2. Promissory Estoppel

Bear in mind that Australia is moving to this unified theory of estoppel which attempts to link the CL

and equitable varieties of estoppel into one overarching set of requirements.

Differences between CL/equitable estoppel:

They originally had very different basis and traditionally quite different effectsthat has an effect

on how the law has developed in this areas.

3. The varieties of estoppel

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*Estoppel in pais (in fact ie it does not come from a record or a deed, but from conduct or words)

Common law proprietary estoppel (form of equitable estoppel) were grouped together in Waltons

Stores into what the HC was starting to develop as a single theory of estoppel.

Common Law Estoppel

Remember there were three forms of CL estoppel.

A CL estoppel was not the source of the legal obligation (the estoppel wasnt the source of the

obligation). The source is the obligation that the representee hasassumed to exist and the

represented was estopped from denying). Therefore CL estoppel could be regarded as a rule of

evidence, or a shield from the legal position that would exist except for the estoppel being applied.

At CL if a representor made a statement and the referentee assumed the conduct to be true, then

the representor was prevented from denying the truth of itmeant that if the representor then

went back and attempted to sue the representeethe representee could go back and use thatstatement as a defence. That is why it is a shieldthey can say that the representor said it so I

assumed it to be truethough it couldnt be used as a sword to create a legal right.

However, that is a bit out of date in Australia. If we have a look at the categories of common law

estoppel that are most relevant today:

1. Estoppel in pais (a generic term for all sorts of estoppel arising from the conduct of a

person)

Thompson v Palmer(1933) 49 CLR 507, 747, Dixon J

Estoppel in

pais

Common law

estoppel

Equitable

estoppel

Waltons StoresProprietary

estoppel

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The object of estoppel in pais is to prevent unjust departure by one person from and

assumption adopted by another as the basis of some act or omission which, unless the assumption

be adhered to, would operate to that others detriment. Whether a departure by a party from the

assumption should be considered unjust and inadmissible depends on the part taken by him in

occasioning its adoption by the other party. He may be required to abide by the assumption because

it formed to the conventional basis upon which the parties entered into contractual or other mutual

relations (e.g. bailment, or because he has exercised against the other parties rights which would

exist only if the assumption were corrector because knowing the mistake the other relied on he

refrained from correcting him when it was his duty to do so or because his imprudence

(carelessness) where care was required by him was the proximate or mere cause of the other partys

adopting or acting on the faith of the assumption.

*But in each case he is not bound to adhere to the assumption unless as a result of adopting it as the

basis of action or in action the other party will have placed himself in a position of material

disadvantage if departure from the assumption is permitted.

In other words, because he relied on the actions, he suffered detriment or disadvantage.

Requires

Legione v Hately (1983) 152 CLR 406 (Mason and Deane JJ) confirmed that a CL estoppal in

pais requires a clear and unambiguous representation of a past or existing fact which is

either express or otherwise to be implied from the words used or failure to speak where

there was a duty to speak.

At this stage we are still talking about the estoppal only acting as a shield as a defence to a cause

of actionthis is the old CL estoppal in pais.

We then have another couple of forms of the ancient CL estoppal:

Estoppel by representation

Haoucher v Minister for Immigration (1986) 169 CLR 648, (McHugh J)

Estoppel by convention

Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd(1986) 160

CLR 226

Haoucher v Minister for Immigration (1986) 169 CLR 648, (McHugh J)

We see an example of a minister (or other government officer) being precluded or estopped from

acting inconsistently with the representation. We arent talking about representation involving the

exercise of statutory duties/discretionshere McHugh said in exercising his discretion the minister

is not bound by the governments criminal deportation policythe policy was a representation by

the minister as to how he would exercise his discretionbut it created no estoppel against the

minister. However, in matters which do not involve the exercise of statutory discretions/duties a

minister of the crown may be estopped from denying a fact or promise. The court was distinguishing

between the circumstances in which a minister makes a statement.

**Justice Tooey left open the question of whether a minister can be estopped from exercising a

statutory discretion in a particular way.

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The second example of pais was estoppel by convention which came up in: Con-Stan Industries of

Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd(1986) 160 CLR 226

The state of affairs were relied on by con-stan that parties had conducted their business relationship

on a certain basisthe broker was liable to the insurer for premiums.

The HC said estoppel by convention is a form of estoppel founded not on representation of fact and

relied on by representeebut on the conduct of relations between the partieson the basis of an

assumed or agreed state of factsboth of them were stopped of denying the existence of the facts.

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. The existence of an estoppel based on a convention between the parties

has often been recognized . (at 244-245)

When we are talking about estoppel by conventionthe convention is the background facts uponwhich the parties have based their conduct.

These two forms of estoppel in pais are becoming more prevalent in the modern law. We also have a

couple of forms of equitable estoppel which are also becoming more prevalent.

The first is:

Equitable Estoppel

(the form of promissory estoppel/which came up in High Trees case)

**Confirmed in Legione v Hately(1983) 152 CLR 406 that the English principles relating to equitable

/ promissory estoppel are applicable in Australia. Unlike the CL estoppel, which could only be used

as a shieldin the case of equitable estoppelit is possible to be used as a sword to create

enforceable rights and obligations where no one had been in existence before.

Justin Brenan in Walton stores perhaps equitable estoppel is more accurately described as an

equity created by estoppel. (Waltons Stores (Interstate) Ltd v Maher(1988) 164 CLR 164, Brennan

J). An equitable estoppel is the source of the legal obligation; it may be used as a shield or as a

sword which creates enforceable rights and obligations where none had existed before

Proprietary estoppel (it is called the proprietary estoppel because it has a relationship to property)

It can preclude the owner of an interest in property from asserting their rights against another

person if they had themselves encouraged that other person to act in a certain way in relation to

that property. For example, encourage them or suggest that they should spend money on the

maintaining the propertyas if they had rights over the proprietary. It is called proprietary because

it creates a right in rem (a right in the property itselfnot a person right) just a right over the

property. It is not a contractual righta property right. Equity in those cases will fashion an

appropriate remedy to match the benefits that had been promisede.g. order that the party convey

legal title or give an equitable charge or to clear a interest or a constructive trust.

The circumstances in which it might occur:

Estoppel by encouragement

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Sometimes used to compensate people for expenditure on anothers land where the expenditure was

actively encouraged by a promise by the owner that they would receive a benefit.

e.g. being told that you will get a house or land left to you in your parents will and so you fix the

house up and then the parent reneges (defaults) on the promise. In those cases, the equity attaches

itself to the landit creates a propriety right in remnot a personal right. You can see here that

equitable estoppel being be used as a swordbecause it is the foundation of the cause of action

rather than merely being a defense to the cause of action of the other party. It allows the

enforcement of statements without the intervention of any contract.

Equity says it is unfair to encourage someone to make a major commitment in relation to property

then to deny that the people who have acted on that encouragement have any rights in that

property. It can be used to enforce promises to confer an interest made orally and without

consideration, allowing the enforcement of statements without contract and without formalities.

The second form of equitable proprietary estoppel is :Estoppel by acquiescence

This again relates to expenditure on anothers land in which the owner has passively acquiesced

(havent complained about it). Usually, where one party is labouring under a mistake in belief that

they have that land or that they are acquiring that land and therefore they act on the strength of

that expectation. It is where the owner of the land has simply stood byand allowed someone to act

to their detriment under the mistaken belief that they have an interest in the land. Ramsden v Dyson

(1805) LR 1 HL 129

The second form of equitable estoppel is promissory Estoppel

This is the one which has been growing in the most active way in the last 50 years. The essence is

that we have a promise which is intended to be binding, and intended to be acted upon and in fact

acted uponand acting upon it has caused a disadvantage/ to the detriment of the promisee so that

it would be unconscionable for the promisor to resile (go back on) from the promise.

Justice Denning first suggested this estoppel in the High Trees casesignificance is that it wasnt just

in relation to past conduct but also to future conduct (promises). At the stage that it was originally

mooted however, it was believed that it was restricted to promises by a party to an existing contract,

not to enforce an existing contractual right.

It applies to a negative promise (eg, I will not enforce the contract as written): so still only a shield,

not a sword. It applies in context of existing contractual rights

Central London v High Trees House [1947] KB 130

Set during the second world ward.

1937

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Tenant leases property in London with the plan to sublease apartments in that

block and from that they would obtain money sufficient to pay the rent.

1940

London was subject to bombing and therefore the war reduces tenancy rates. TheLandlord agrees to 50% rent reduction.

1945

Flats back to being fully occupied. Landlord demands payment of full rent.

Problem was:

the promise in 1940 to reduce the rent by 50% was not supported by consideration by the tenant

the tenant was already under an existing contractual obligation.

How do we support this promisehow do we prevent the landlord from requiring the extra rent?

Lord J Denning mooted the creation of this promissory estoppal:

He accepted that reliance by the lessee on the lessors negative promise could give rise to an

estoppal in equityhowever after the war finished, the lessor could revert to the terms of the

original lease. Since High Trees house, the idea of this form of estoppal was brought to Australia in

Waltons Stalls. This case was thought to unify the common law and equitable estoppel into a unified

more rational estoppal.

In Australia, we had a series of cases that show the development of a more coherent form of

estoppal.

**a contracting party may be prevented from insisting on his or her strict contractual rights if, having

regard to the dealings that have taken place between the parties, in particular, assurances about

how the contract will proceed, it would be inequitable to allow such insistencesee page 65.

*A contracting party may promise the other that he or she will not insist on a contractual deadline,

and may be estopped from relying on that deadline as a basis for alleging breachLegione v Hateley

(1983). Estoppel is no longer confined to existing contractual relations.

Je Maintiendrai v Quaglia (1980) 26 SASR 101

Was in the SA Supreme Courtsimilar to a High trees situationthe lessee wanted to move to

cheaper premiseslandlord induced them to remain where they were in return for a reduced

rentalthey then tried to go back in their word and tried to recover the arrears (debts) in rent in a

lump sum. The trial judge held that a payment of the lump sum would be a detriment to the lessee

and this was upheld on the appealthe SA court was embracing the concept of promissory

estoppel. ***We know that it is only persuasive even though it is a reasonably high courtit is only

persuasive in Victoriapromissory estoppel wasnt accepted in Australia in the HC as a legitimate

substantive doctrine until 1983 in Legione v Hately(1983) 152 CLR 406.However, the doctrine

wasnt successfully invoked in the case.

Legione v Hately(1983) 152 CLR 406

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Contract for the sale and purchase of lands on termsin other words the purchaser agrees to take

possession of the land however they havent fully paid for the land yetthey pay the purchase price

in instalments together with interest (vendor financed). The transfer of title to the purchaser

(settlement) doesnt occur until the final payment is made. Here, the contract contained a term

which made time of the essence (timely payment was an essential term of the contractif they

dont pay the vendor can bring the contract to an endtermination for breachdoesnt require

notice. However, in this case the term said that failure to make payment would entitle the vendor to

terminate only if they gave written notice of the intention to do that.

After the purchaser took the possession of the propertybut before they had paid (contract on

terms) they built a housesettlement of all of the outstanding payments became due but the

purchaser had missed payments. The vendor gave intention to terminate the contract and reclaim

the land. The notice of intention to terminate required that the purchaser settle by the 10th

of

august, on the 9th

the purchaser rang the solicitors for the vendor saying that they were arranging

bridging finance so that they could pay this amount offand asked for a short extension. They didntspeak to the lawyerjust the secretaryshe said I think it will be okay but I have to get

instructionsthe purchaser thought it would be okay and they didnt make the paymentit was

discovered in evidence that if the vendor had refused to extend the time for settlement, then the

purchaser could have paid on the daybut they relied on what the secretary said. The vendors

solicitors didnt get back to the purchaser on time and they then tried or purported to terminate the

contract for non-payment. The purchaser tried at various times to settlebut this was rejected by

the vendor. Here we are dealing with an attempt by the purchaser to defend themselves against

termination for breach. The purchaser tried to argue that the vendor should be estopped from

terminating because the secretary was an agent for the vendor and her conduct induced the

purchaser to believe that they would get an extensionthat their right to terminate would be held

in abeyance until further instructions were communicated.

A majority of the high court rejected the estoppel argumentthey werent rejecting the idea of the

estoppelbut saying that the statement made by the secretary was too wishy washy to amount to a

promise not to enforce their rights. The vendor wasnt estoppedall members of the court

recognised that promissory estoppel, but:

Justice Mason & Dean said that:

there is a strong authority in equity for a doctrine of promissory estoppel restrictive to a

representation by a person in a contractual relationship that he will not enforce his contractual

rights. They attempted to clarify the scope of this promissory estoppel saying that representation

must be clear here, the statement was too equivocal. The representation not to enforce

contractual rights need not be express; it could be implied from other words used; or from a failure

to speak when there was a duty to speak; or from conduct (434-439). A person will not be estopped

from departing from an assumption or a representation unless as a result of adopting it as a basis of

action or inaction the other party will have placed themselves in a position of material disadvantage

if departure from the assumption be permitted must be detrimental reliance.

The court is sayingLook theoretically the promissory estoppel can apply however in this case it

didnt apply and the court left open the question of whether this new promissory estoppel would

apply in pre-contractual situations e.g. where a contract hadnt yet been concluded (here we are

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talking about where we have a contract and the estoppel applying in the termination). However,

they did affirm the requirement of detrimental reliance.

Since then the courts have been moving away from a compartmentalized (sorted) approach to

estoppel towards the unified doctrine and we are looking at extraction and application of CL

principles underpinning different categories.

Estoppel in Australia

Waltons Stores (Interstate) Ltd v Maher(1988) 164 CLR 387

Waltons stores used to be a large department store in Sydneythey wanted to build a store in the

South Coast of NSW and they found a site which was owned by Maher (it had buildings on it at the

time and they would need to knock those buildings down to build the store). They were in extensive

negotiationthey thought they had created a deal that Maher would build a new building and

release the store to Waltonswho were in a hurry. The contract was pretty well settled by early

November 1983on the 7th

of November a few more amendments were madesolicitors looked

okay and said they would let them know if any amendments were not agreed toothey heard

nothing furtherso they got Maher to execute/sign their part contract and sent 2 counter-part

contracts off to Sydney in a letter by saying this is a way of exchange (this is the common procedure

in relation to land contractsboth parties sign identical (2) copies of a contracttherefore Waltons

should have signed one part and signed it backthey never did). They had instructed their solicitors

to go slow because they were changing their directionthey never contacted Mahers solicitor even

though they knew that the buildings were being demolished. Waltons then finally told Maher that

they never wanted to proceedwe have no concluded contract (no finalized offer and acceptance).

Maher brought an action seeking a declaration that there was a valid contract and they also soughtspecific performance of the lease and damages (ifthey couldnt get specific performance). This is

quite differenthere the estoppel is being used as a sword against Waltons. They were ordered to

pay damages for breach of contract (couldnt get specific performance) even though it was

acknowledged that there was no binding contract. Every member held up Mahers claim but they did

differ in the analysis of their facts. In cases like this, where an estoppel argument is employed to try

and establish a contract in the absence of formal execution, the court must be able to spell out what

the alleged contract is and what its essential terms are. If an important matter has not been

finalised, the estoppel argument is very likely to fail.---Austotel Pty Ltd v Franklins Selfserve (1989).

Maher brought an action for a declaration that there was in existence a valid contract, specificperformance or alternatively damages. Waltons was ordered to pay damages in lieu of specific

performance. Waltons knew that Maher believed that the formalities of exchange had been

completed and they were estopped from denying it.

Mason CJ and Wilson J held that a promissory estoppel can operate during negotiations for a

contract (as opposed to during the contractual relationshipas in High Trees). They also found that

it could be used not only as a shield, but also as a sword.

What should be stressed is that the underlying principle is the combination of detrimental reliance

by the one party and unconscionable conduct by the other. Both of these were present in

abundance in the Waltons case so that no difficulty was encountered by the judges in invokingestoppel.

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The courts concern after the event is to provide a remedy that neutralises the detriment suffered as

a result of reliance. The crucial time is when the person who made the original promise or

representation wants to go back on it. The question to ask is whether that is going to cause

detriment to another and what, if anything can be done about it.

For example, had Waltons informed Maher immediately after changing their plans, there would

have been no case.

The case establishes:

Voluntary promises can be enforced even though there was no consideration (but only in

exceptional cases)

Promissory estoppel extends to promises/representations as to future matters. Unlike CL

estoppel by representation, it isnt just representations of past or present factsit extends

the operation of promissory estoppel for pre-contractual relationstherefore non-

contractual promises which another party has relied on.

It destroyed the notion that it could only be a shieldPromissory estoppel now able to be

used as a sword, not just a shield

A common thread: Equity will act to relieve a plaintiff who has acted to his detriment on a

basic assumption where the other party has played such a part in its adoption that it would

be unfair or unjust if he were left free to ignore it .

It didnt actually fuse CL/equitable estoppelbut it opened the way.

Foran v Wight(1989) 88 ALR 413

In this case, agitation for the adoption of the unified doctrine of estoppel gained momentum. Again

the case concerned the sale and purchase and interest of landand again time was of the essence

timely performance of the obligations was an essential term of the contractthe innocent party

could terminate the contract. The vendors solicitors indicated 2 days before the settlement date

that they wouldnt be settling because they couldnt give clear title to the landthere was a

problem. This could be analysed as an anticipatory (before the time came it was due they indicated

that they wouldnt be able to complyanticipated it) breach. The breach was not accepted by the

purchaser (they dont have to accept the breachthey can decide to accept the breach immediately

or they can wait until the date of settlement and then decided whether to terminate or apply for

specific consideration).

22nd

June:

Neither party attended at settlement

24th

June:

Purchaser purported to terminate for actual breach by the vendor (breach of the vendors

obligation to settle on time).

Purchaser sought return of deposit as well as termination of the contract.

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The formal name of the action is an action for moneys had and received on a total failure of

consideration--he paid his money and got nothing for it).

Something to know but we will focus on it more in termination

an innocent party (purchaser) cant terminate for breach of an essential term (here transfer of the

land) unless they can show that they themselves were ready, able and willing to perform their side

of the bargain.

Therefore he has to show that on the 22 June they had the moneybut he had been unable to raise

financethey said that they had given up trying to raise finance because they had been told that the

vendor couldnt settle. Therefore it would be a waste of timethus the conduct of the vendor

saying that he couldnt settle was relied on to the detriment of the purchaser and that estopped the

vendor from saying that the purchaser was not ready, able and willing to perform. The main issue

was whether the vendors conduct estopped him from arguing that the purchaser was not ready

able and willing to perform. The conduct was thererelied onwas there a detriment? The court

held that the purchaser had sustained a detriment in the form of a loss of chance to tender money

Mason dissented. The purchaser in fact got his deposit back.

This case goes a little bit furtherestoppel is not just being used in relation to formation of the

contractbut in relation to terminationJustice Dean loves organising things and acquired support

of this uniform theory of estoppel by conduct. Mason adopted the view (that he rejected in Waltons

stores) that CL and equitable estoppel should operate concurrently with respect to representation or

promises of future conduct.

Deans approach appears to represent an attempt to introduce a fused doctrine of common law

estoppel and equitable estoppel. With the absence of him from the bench, some of that will start todrop awaybut the law did continue to develop.

Commonwealth v Verwayen (1990)170 CLR 394

Where the court increased the support of the unifying doctrineit is a negligence disputevery

long running case. There was a collision between HMS voyager and Melbourne in 1964, the P was

injured and the CTH had believed and had advice that they were in fact immune for a negligence act

(they couldnt be sued) where we are talking about accidents by military personal in training

exercises and until 1982 that was apparently the casewhere there was dicta that said they were

not immune. During that period the statute of limitations was ticking on and it would bar the claim

(more than 6 years). However, the Australian AGS said that CTH wouldnt rely on Statute of

Limitations as a defence for a claim in negligence and also said the CTH would accept liability

however later the CTH had a change of policy and the CTH sought leave to amend their statement of

defence in the case and plead both a combat exercise defence and the statute of limitationswhich

would bar the claim. Thus the P is trying to estop the commonwealth from raising the defence that

the CTH said they wouldnt raise. In a slim majority, the ps action succeeded (4-3).

The results were an unsatisfactory majority:

Mason, McHugh, Brennan

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Estoppel

Cth can plead estoppel (but must pay P wasted expenditure)

Deane, Dawson

EstoppelCth cannot plead defence

Gaudron, Toohey

Waiver (which is an associated conceptsimilar to estoppel have the same effect--involve the

sterilization of a legal right otherwise then by contract).

Cth cannot plead defence

Mason moving towards unified theory of estoppelgave a strong statement that one overarching

doctrine of estoppel provides that a court of common law equity may do what is required but no

more to prevent a person who has relied on an assumption as to a present past or future state of

affairs (including a legal state of affairsthe case here) which assumption the party estopped has

induced him to hold from suffering detriment in reliance on the assumption as a result of a denial of

its correctness.

It is a messy casemessy majority.

Chesire and Fitfoot have argued that Australia now has a fused doctrine of estoppel by conductbut

when Dean and Mason left the HC the HC observed that there was no occasion to consider whether

the various doctrines of estoppel are to be brought over a single overarching doctrine.

Maybe there is nobody now to push the fusion of the doctrine.

Giumellli v Giumelli(1999) HCA 10

Robert was a son on the farm and he was working on the farm without wagesgeneral promise he

would get the house and that he could build his marital home on the land and that the house and

the ad-joining land should be his. There was a third promiseit would be sub-divided if he agreed to

stay on the propertyhe chose to do this rather than work for his father in law.

When he got marriedhis parents didnt approvethe relationship between the son/parents broke

down and the parents refused to give him the property

he left and the brother moved on to theland and improved it further.

A general promise that Robert would get part of the property to compensate him for

working without wages,

A second promise that he could build marital home, and that the house and adjoining land

(including the orchard) should be his.

A third promise that the property would be subdivided to create a lot including house and

orchard if Robert would agree to stay on the property and not take up an offer to work for

his father-in-law.

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R gave up an opportunity to pursue a different career and continued to work on the

property.

R married a woman of whom his parents disapproved and his relationship with his parents

broke down. His parents refused to complete the transfer.

Robert moved off the property and his brother Stephen then moved onto the property with

his family and made substantial improvements to the promised property

Thus you have a complex situation where they both have put in significant capital improvements to

the propertyRobert is making a claim that could not be dealt with unless the property was sold

and Steven has also furthered the value of the property.

The high court found that there was an estoppel and reaffirmed that equitable estoppel may give

rise to a remedy which makes well a parties expectationsenforcing the representations which

induced Roberts conduct. However, the remedy doesnt have to be specific relief (not the transferof the farmit could be a monetary amounthere the court said that Robert was entitled to

payment of a sum representing the present value of the lot he had been promised. That was secured

by an equitable charge over the property. Steven had also given capitalwouldnt be fair to transfer

the title--thus they fulfilled his expectation rather than compensating his reliance on the promise.

The court said:

there [is] no occasion ...to consider whether the various doctrines of estoppel are to be brought

under a single over-arching doctrine or a general doctrine of estoppel by conduct.

Agricultural and Rural Finance Pty Ltd v Gardiner[2008] HCA 38 (E)

Oceania Agricultural were promoting (OAL) tea tree plantation investment schemesmarketing that

there was a tax advantage for investorssomeone in the scheme was granted a 17 year license over

the land where at leaston the land would be planted at least 18K tea treeswhich would produce

tea tree oil. Each of these investors would pay annual license and management fees to OAL and OAL

managed the project and established and maintained the trees. There was another arrangement

whereby investors could obtain finance under a loan agreement to fund the initial management

feesand those who accepted finance from ARF had the option of entering into a loan indemnity

(insurance) agreement with OAL and ARF. For a flat fee, if amounts were paid punctually, OAL would

protect obligations made under the contract if the business seized--between October 97May 99

made 4 loans to the investor Bruce Gardinereach loan agreement required periodic payments.

Each agreement provided that the whole of the principle was immediately payable by ARF if the

gardener didnt repay when he was supposed tohe didnt always pay on timeunder three of the

four loan agreementsbut when he didnt pay on time ARF accepted payment (didnt enforce the

strict legal rights). When Gardiner seized to carry on the tea tree business due to a reason which was

covered under the agreement, the scheme collapsed ARF wanted its loan backsued 216

borrowers. Gardiner tried to defend himself in the NSW Supreme Court but the chief judge rejected

all of his defences and dismissed cross claims. In other words they got judgement for all of its

amounts in principle and interest. In NSW Court of Appeal the ARF obtained judgement of the fourth

loan but not the other 3so the ARF appealed to the HC for the first 2. ARF wonthe mainconsideration was whether the borrower could rely on the indemnity agreements for the first and

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the second loan.

**This had 2 issues1) if the borrower had made due and punctual re-payments under the loan

agreements and secondly whether the lender and the indemnifier had waived the need for

compliance by accepting late paymentsthe HC allowed the appeal unanimously.

Gardiner didnt pay punctuallyindemnities for the first and second loan were therefore not

effectively enforceable and there had been no waiver by ARF or OAL. Punctual had its ordinary

meetingdidnt depend on ARFs attitude to late payments and none of the waivers that Gardener

considered to apply did apply in this case.

What we are really concerned about here:

-The idea of waivernot estoppel (Gardener couldnt show detrimental reliance on a representation

in this casebeing able to pay late isnt detrimental reliance).

-A waiver is a cognate (similar) concept to an estoppel. The court held in this case there is no waiver

and they elaborated upon the relationship between waiver, variation of contract, election between

inconsistent rights and an estoppel (it is in paragraph 95).

there was no election between inconsistent rights, there was no variation of the contract, and

there was no detrimental reliance upon the representation, no reason is given for holding the party

concerned to its earlier expressed attitude beyond the fact that the representation was made.

(Therefore estoppel is clearly not applicable).

MP Investments Nominees Pty Ltd v Bank of Western Australia Ltd[2012] VSC 43

*Have a look at if you want to.

What are the Elements of Estoppel in Australia?

This has been worked out in the basis that there is this developing unified theory of estoppel:

An assumption which is induced relianceit is questionable whether reliance has to be

reasonable whereby the promisor departed from the represented positionthe detrimental

reliance occurred and overall there is a degree of unconscionability.

The first element

An assumption

The relying party must have adopted an assumption either that a particular fact is true or

that the representor will act in a certain way in the futurethere must be a presumption

about fact or law--present or future

Must be clear and unambiguous, but can be in quite general terms

The assumption must relate to:

an existing or future legal relationship between the two parties in question: Mobil v

Wellcome;

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a promise expected to be performed in the future: W v G (1996); or

an interest to be granted to the relying party:Austotel.

e.g. in W v GW v G lived together in a lesbian relationship for several yearsthey conceived two

children through artificial insemination and G assisted. W and G later separated and W introducedproceedings seek child support (then it wasnt a legal entitlement for lesbians).

Where is the assumption? W assumed G would support the children and this was reinforced in

comments made during their relationship and she participated in the act during insemination. It was

a case where the unreasonableness of the Ps conduct was at issue because the D claimed that the

reliance of the P was unreasonable because it was unlikely that the relationship would last.

*Thus an estoppel operated to make one partner in a relationship liable for the maintenance of two

children whom both had agreed to raise.

b) The second element is Inducement

The assumption adopted by the relying party must have been induced by the representor.

Justice priestly said that:

(Per Priestley JA with whom Kirby P agreed) For an equitable estoppel to operate there must be the

creation or encouragement by the defendant in the plaintiff of an assumption that a contract will

come into existence or a promise be performed or an interest granted to the plaintiff by the

defendant, and reliance on that by the plaintiff, in circumstances where departure from the

assumption by the defendant would be unconscionable.

In other words the assumption has to be induced by the representor. It is usually done by an express

promise or representationbut it doesnt have to be.

generally by an express promise or representation, but need not be.

Silence or inaction may constitute inducement, but must show that the representor either

induced (encouraged) or intended or knew or should reasonably have known that the

relying party would rely on that silence or inaction: Waltons Stores

The assumption adopted by the relying party must have been induced by the representor.

A representation that is insufficiently precise to give rise to a contract may still be adequate

inducement if it is reasonable for the relying party to interpret and rely on thatrepresentation in the manner that they do.

The question of reasonableness is arguably an element:

Whether the party acted reasonable in adopting the relevant assumption

or whether the relying party acted reasonable in taking the relevant detrimental action on the

faith of the assumption

This is an area that has not been fixed by the courttherefore bring it up on argument.

c) The next element is:

Detrimental Reliance

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Detriment (disadvantage)the relying party has to have acted on the induced assumption in such a

way that they would suffer detriment if the representor went back on their word. It is not sufficient

(in Waltons) that the party arguing estoppel has merely relied on a promise or representation:

per Mason CJ and Wilson J:

as failure to fulfill a promise does not of itself amount to unconscionable conduct, mere reliance on

an executory promise to do something, resulting in the promise changing his position or suffering

detriment, does not bring promissory estoppel into play. Something more would be required at

406textbook page 74.

Simply to change ones mind or to break a promise is not of itself unconscionable in the eyes of the

law. It is more so that reliance has been placed on the promisor NOT changing his or her mind and

the greater the consequential detriment that will be suffered by the promisee.

Whether the court will allow the breaking of the promise depends upon the circumstances at that

time in the light of the dealings that have taken place between the parties. It appears that the

potential for detriment is sufficient.

Types of detrimental reliance include:

wasted money on the representors land or in preparation for a contract with the

representor: Waltons Stores;

entry into a contract with the representor where the representor does not perform in the

manner that they represented;

performance of services for the representor:

inactivity leading to a loss of an opportunity to gain a benefit or avoid a loss: Giumelli vGiumelli(1999);

consenting to the adjournment of litigation, or commencing litigation Commonwealth v

Verwayen; --lost their right to sue and

giving up of legal rights

These are all forms of detrimental relianceit doesnt necessarily require that the party has

changed their legal position as a result of relying on the assumptionit merely means that if the

representor was allowed to go back on their word that they would suffer a detriment.

Reliance must relate to legal relations:

-must relate to existing or potential legal relations or facts that affect legal relations (though not

necessarily commercial relations). This is the same as the doctrine of intention to create legal

relations in contracts.

Encouraged or induced reliance:

If the promisees or representees reliance has been encouraged or induced by the other party, then

there is unconscionable conduct if the latter reneges.

Reliance with knowledge of party estopped:if inducement was not actively pursued, the person estopped must have knowledge of the reliance

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by the other party. The defendant must have known or intended him to do sothis is

Unconscionability. On the other hand, there can be no relevant reliance if the other party has done

nothing to foster reliance or has positively indicated that there should not be reliance(State Rail

Authority of NSW v Heath Outdoor Pty Ltd (1986).

It is not a defence to say that we didnt realise..we didnt knowthe answer to such claim is that you

ought to have realised. An estoppel therefore will not arise on the basis of an unforeseen and

unforeseeable detriment but nor is it necessary that the precise detriment relied upon be foreseen

or foreseeable (Mortgage Acceptance Nominees Ltd v Australia Thoroughbred Finance Pty Ltd

1996).

Reasonableness of reliance:

It is not enough that the promise has a hope or unjustified expectation that the promise will be kept.

If the acts in reliance are either unreasonable because the promisor specifically warned the other

party not to rely, or because common sense dictates that it would be unreasonable to rely, or areacts that could never have been foreseen by the promisor, then the estoppel argument will not be

successful. The reasonableness of reliance also looks at the persons state of mindfor example it

would be unreasonable of a person who had been told one thing to rely on it when he or she knew

that it was unreliable. It appears that a person who is told something is not required to investigate

therefore you cant argue that the person receiving the information had constructive knowledge

that it was incorrect and therefore could not be said to have relied on it.

The level of reliance is crucial to establish whether estoppel is made out (liability) and if it is, what is

the appropriate remedy.

d) Unconscionability

Unconscionability is the underlying principle of equitable estoppel.

This is the most important thingit shapes the remedy.

It will commonly involve the use of or insistence upon legal entitlement to take advantage of

anothers special vulnerability or misadventure in a way that is unreasonable and oppressive to an

extent that affronts ordinary minimum standards of fair dealing. It involves a real process of

consideration and judgement in which the ordinary processes of legal reasoning by induction and

deduction from settled rules and decided cases are applicable but are likely to be inadequate toexclude an element of value judgement in a borderline case(Commonwealth v Verwayen).

It needs to be determined by looking at both the promisees detrimental reliance and the conduct of

the promisor. You also need to look at the conduct of the promisee.

Whether reneging on a promise or assurance or denying represented facts or acting inconsistently

with an assumption is unconscionable depends on the level of reasonable reliance by the other party

and the practical and material effect that the inconsistent behaviour will have on the party who has

relied.

It basically means conduct which is against conscience. There is possible support for it to be a

separate element (and therefore proved separately) but basically what you are looking at is that the

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representor has acted unconscionably when in the circumstances of the caseperhaps the way they

induced the assumption particularly if they were deliberately intending to induce the other party to

rely on it and knowledge of the other partys assumption.

There is a residual issuenot settled in law yet.

The question is: is departure from a represented position unconscionable?

The way we determine this is that we assess it by reference to all of the circumstances including:

--reasonableness

--the nature or the extent of the detriment

--the knowledge that the other party would be induced by the conduct to adopt and act on the

assumption

In Waltons Stores v MaherMason CJ and Wilson J formulated the legal requirements of an

equitable estoppel in terms of unconscionability:

As failure to fulfil a promise does not of itself amount to unconscionable conduct, mere relianceon an executory promise does not bring promissory estoppel into play. Something more would be

required. This may be found, if at all, in the creation or encouragement by the party estopped in

the other party of an assumption that a contract will come into existence or a promise will be

performed and that the other party relied on that assumption to his detriment to the knowledge

of the first party.

If you have all of these requirementsremember the overarching idea of unconscionability or

unfairness has to be there, then what will the court do?

The judiciary has debated somewhat what the outcomes will be over an estoppel claim.

What is the appropriate measure of damage?

damages in the nature of contract (damages to compensate up to the expected position post

contract)

and tort (damages to compensate only any reliance losses).

CL estoppel takes an all or nothing approach, it precludes the representor from denying or departing

from the assumption that they themselves have inducedso a CL estoppel could in fact result in a

gainmeaning that the representee might recover more than their actual loss. They actually require

the person to make good the expectation or assumption of the party.

Equitable estoppel takes a different view:

It wont necessarily compel the representor to fulfil the assumption or expectationit only does

what is necessary to avoid the detriment.

It was accepted that since the object of equitable estoppel is to redress unconscionable conduct, the

remedy granted should be limited to the minimum equity necessary to make good the detriment .

WaltonsStores (Mason CJ and Wilson J and Deane JJ)

***The remedy therefore wont necessary uphold or enforce the full contractit wont always dowhat the P expectedbut the court may also say that the only way to address the reliance might be

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to enforce the full scope of the assumption or representation. E.g. to be able to sue outside the

statutory period.

At the moment it isnt clear whether we have this unified theory of estoppelthe closest idea of the

outcomes that we will get is that we will get the minimum equity to address an equitable estoppel

and the CL estoppel might involve an all or nothing approachslightly different view depending on

whether we have adopted this unified theory of estoppel.

The most important things to remember:

-the places at which an estoppel might be pleaded

-the elements of an estoppel

-be wary about bringing in an estoppel claim (although somebody may have gone back on their

promisedoesnt mean it is an estoppelneed the element of unconscionability).

Estoppel and consideration:

Generally, a contract can only be legally binding if it is supported by considerationthe promise

must be part of a mutual exchange. They said on the matter:

Generally speaking, a P cannot enforce a voluntary promise because the promise may reasonably

be expected to appreciate that, to render it binding, it must form part of a binding contract

Waltons case. Just note that there is a big difference between estoppel in contract and an

equitable estoppel. Estoppel used in contract is to be regarded as exceptional, rather than simply as

another way to enforce promises. The measure of a contractual obligation depends on the terms of

the contract and the circumstances to which it applies; the measure of an equity created by estoppel

varies according to what is necessary to prevent detriment resulting from unconscionable conduct.

(Waltons case again).

Relief

Variable remedy:

The remedy is said to be limited to eliminating the detriment---the minimum equity to do justice

(Crabb v Arun District Council 1976). However, the minimum equity may or may not be achieved by

enforcing a promise or making good a representation. It is not correct to see estoppel as necessarily

enforcing promises (though it was in Waltons)the equity may be achieved by an award ofcompensation or by an injunction or by granting a lien or charge over property. The remedy needs to

be proportional to the detrimental conduct or a balance needs to be achieved between the

disadvantage that would affect the party estopped and the detriment that would be suffered by the

other party (Commonwealth v Verwayen 1990). However there can be a great deal of disagreement

about the appropriate remedial responsein this case Mason, Brennan and McHugh thought the

minimum equity was to allow him wasted legal costs (a reliance-based remedy). Dawson and Deane

JJ said that it was to prevent the CTH from going back on its word and arguing the defence (an

expectation-based remedy). Gaudron and Toohey JJ argued on the basis of a waiver and came to the

conclusion that the P was able to proceed with his claim.

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Despite this, it is true to say that estoppel is often used to fulfil the expectation interest. This means

in practical terms that the person who has made a promise or representation must keep the promise

or make the representation good.

Corporation estoppel

There is the possibility that the range of remedies available under the Trade Practices Act 1974 (Cth)

may be available in a suitable case involving estoppel against a corporation that has acted

unconscionably in trade or commerceas s51AA extends the operation of the Act to conduct that is

unconscionable within the meaning of the unwritten law, from time to time, of the States and

Territories and this could be interpreted to include all general law doctrines in which

Unconscionability is an ingredient.

What is the effect of an estoppel?

--it may act to set the scene for a cause of action or it may be a cause of action itself. An estoppel

may be permanent from the outsetit depends on what assurance, promise or representation was

made by the party estopped. If the estoppel operates it may have other consequencesthe right to

the balance of a debt would be extinguished where a promise is made to accept a lesser sum in

satisfaction of a debt. In principle and on the authorities, promissory estoppel can operate either to

suspend or cancel rights depending on the nature of the assurance or assumption that is basis for

the estoppel.

The implication of estoppel in contract law:

there are many examples of cases where estoppel has been treated as a cause of action in its own

right. It opens up new ways of pursuing traditional contractual arguments and new ways to argue for

obligation where traditionally the law of contract denied liability or the law of contract simply had

nothing to say.

Negotiations and the formation of contract:

It has been said that estoppel can be used to establish a contract in the absence of the usual process

of offer, acceptance and considerationdemonstrated in Waltons. It is also possible for a estoppel

to operate when a contract is void for uncertainty. It is difficult to say the limits of estoppelother

than there must be the elements of detrimental reliance and Unconscionability.

Austotel v Franklins (1989) 16 NSWLR 582

Decision reversed on appeal because Kirby stressed that the use of estoppel was inappropriate

because the parties were well-advised, substantial commercial enterprises. He pointed out that the

parties actions typically depend on self-interest and profit-making not conscience or fairness. See

page 86 of textbook.

A particular course of negotiation leading to an alleged contract may be seen as acceptance by

conduct, as simply contract by conduct, as estoppel, as misleading conduct, as part performance or

as a case of restitution. It is common in commercial litigation to use these various approaches in

combination.

Irrevocable offer:

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If an offer is made and promised to remain open for a certain timewe will see that this is not

binding unless it is an optionan option is when you have given consideration for it to remain

open. HOWEVER>if the promisee incurred expense in reliance on the promise to keep the offer

open, it would be arguable that the promisor would be estopped from breaking the promise even

though the offer was not in the form of an option. Similarly, in unilateral contracts, estoppel could

be used to prevent the offeror from withdrawing the offer before completion of the requested act

(so long as the offeree had started to perform).

Forbearance and compromise:

It is possible through an estoppel to hold a party to a promise in anticipation of, or in the actual

conduct of, litigation in the absence of consideration.

Contract variation:

Estoppel had an obvious role in dealing with the problem of contract variations, as do the concepts

of waiver and election. If the elements of estoppel are satisfied, a change to the contract will be

binding, even though the rules of the doctrine of consideration have not been met, and, in an

appropriate case, even where the change has not been made in accordance with a formal procedure

for change included in the contract.

Note differences between waiver and estoppel:

as with an promise, there are only three ways in which it can be legally enforceable: by contract,

deed or estoppel. Therefore it is incorrect to assert that, by itself, non-enforcement of a contractual

right, or even a positive promise not to enforce a right, amounts to a waiver in the sense of being

precluded from enforcing that right. Only if the limitation period has expired is it correct to say the

right has been given up (in the absence of contract, estoppel or deed) and then it is still substantively

in existence.

romissory estoppel

We now come to the type of estoppel which was most closely associated with contract - an estoppelabout future conduct. Where some representation is made about future conduct, then this is either apromise or something very close to a promise. The courts of equity said that in certain circumstancesa person could not depart from such a statement about the future. In other words it was binding,despite there being no consideration.Promissory estoppel was a concept which was recognised in a couple of 19th century cases but thenit lay dormant until the High Treescase in which Denning J, then at the beginning of his judicialcareer, revived the doctrine and thereafter plugged it very hard in a number of English cases. TheHigh Treescase became the best known case for many years.The two 19th century cases which recognised the idea were

Hughes v Metropolitan Railway Co and Birmingham & District Land Cov London and Northwestern Railway Co(HPH 211)

extracts from which appear in the case book. In each of these cases a contractual deadline was eitherextended or suspended with the result that the strict rights under the contract could not be enforced.

The more general statement appears in the extract from the Birminghamcase, the second of the twoextracts on p 211.

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These ideas were taken up in the High TreescaseCentral London Property Trust Ltd v High Trees House Ltd(HPH 212)

This was the famous case where Denning J as a young judge made his mark on the law of estoppel.The case represents the beginning of the modern revival of promissory estoppel. The facts weresimple enough. A landlord said to a tenant that, during the course of the war, the rent would bereduced. The landlord company went into receivership. The receiver noted that the reduced rent hadbeen paid for some 5 years and demanded the arrears. A test case was brought to see if thelandlord's promise to reduce the rent was legally enforceable.As a matter of consideration, of course, there was nothing moving from the tenant for the benefit ofthe landlord's promise (unless one accepts the recent Musumecianalysis - but this was quite out ofthe question at the time of High Trees). But Denning J relied on the Hughesand Birminghamcases tohold that the landlord was estopped from claiming the arrears of rent.Some important features of this use of estoppel should be noted.

It was used only in a limited sense. The landlord was estopped frominsisting on its strict legal rights. The estoppel only applied to a negativepromise ofthe sort "You need not perform the contract as written..." It has been said thatestoppel can only be used as a shield and not as a sword. See the short extract on p212 where Denning J says that "the courts have not gone so far as to give a cause ofaction" based on estoppel.The operation of promissory estoppel was also very limited in that it appliedonly to a suspension of existing contractual rights. It did not apply more generally.The promisee must have acted onthe promise. Here is the relianceelement. It is the element which has given most trouble over the years. In later cases

it has been said that the promisee must act to his or her detriment- detrimentalreliance. This is difficult to find when the promisee has apparently only received abenefit, such as a reduction in rent.The facts of the High Treescase itself show that the estoppel may only betemporary. It is quite in order for the landlord to re-establish the pre-existingcontractual relation, that is, full rent by giving notice.The doctrine is an equitable one. This is illustrated by the next caseD & C Builders Ltd v Rees(HPH 213)

I have mentioned this case already in the context of the rule in Pinnel's case. This was the casewhere a builder, in dire financial straits, agreed to accept a payment of a lesser sum in discharge of adebt owing to it. They accepted a cheque for 300 for a debt of 482. Could the buildersue for the outstanding 182?It was argued by the debtor that the builder, having accepted a chequefor the lesser amount, couldnot claim the difference. Remember I mentioned this theory as a possible way of getting around therule in Pinnel's case. Denning LJ rejected this theory, saying that the case law on which it was basedwas very shaky. So, this argument could not be used by the debtor.The debtor then argued that the builder was estopped from claiming the arrears. It is here that theequitable nature of estoppel is made clear. He who comes to equity must come with clean hands.Lord Denning makes it clear that the estoppel principle couldwork to get around the rule in Pinnel'scasebut not where the settlement has been procured by intimidation. Therefore, on the facts in this

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case, the debtor could not use estoppel with the result that the debtor was still caught by the rule inPinnel's case.

The Australian development of estoppel

The High Treescase met with some resistance in Australia. Very little happened for many years. Itwas not until 1980 that it was applied in a South Australian case and then the High Court finallyrecognised the doctrine of promissory estoppel in 1983 in

Legione v Hateley (HPH 214)

Although the High Court recognised the doctrine in this case it did not, in the end, actually apply it.This was because an essential element was missing on the facts. The case involved a contract for thepurchase and sale of land. The purchasers were permitted under the contract to pay a deposit andthen move on to the land immediately and pay off the balance a year later. They moved on to the landand built a house. When the year was up and the purchasers had to pay the balance, they foundthemselves in difficulties. They stood to lose both the deposit and the land (with the house on it) ifthey could not come up with the money. The deadline was July 1 but the vendors effectively extended

it to August 10 by sending a notice. On August 9 the purchaser's solicitor rang the vendor's solicitor'soffice and talked to a secretary. The purchaser's solicitor said that finance would be obtained but thatthere would be a further delay of 7 days. He asked whether that was acceptable to the vendor. Thesecretary replied, "I think that'll be all right but I'll have to get instructions." The vendor on August 14then terminated the contract pursuant to the clause which said that time was of the essence.The purchasers argued, amongst other things, that this conversation generated an estoppel so thatthe vendors were estopped from insisting on their strict legal rights, namely, the deadline. The HighCourt, by a majority, said that this conversation could not generate an estoppel. For an estoppel towork, there must be a clear and unequivocal statement, promise or representation. Here thestatement by the secretary was qualified and no-one knowing anything about conveyancing practicewould be entitled to rely on it.The significance of Legioneis simply that the High Court for the first time recognised the doctrine ofpromissoryestoppel, that is, an estoppel concerning future intention. Australian law had recognisedestoppel relating to a representation of existing fact but had not gone so far as recognising estoppelconcerning future intention or promises. The High Court limited the application of promissory estoppelto promises about existing contractual relations, such as "I promise not to insist on a contractualdeadline" or "I promise that you do not have to pay the full rent." In other words they limited it to thesame area of operation as applied in the High Treescase.Mason and Deane JJ went on to say that a statement which is the basis for an estoppel must be clearand unambiguous (pp 217-218). Of course, this was the problem on the facts of Legioneitself. Theconclusion that the statement by the secretary could not found an estoppel was reached by Masonand Deane JJ on p 219 "It follows that Miss Williams ...".They also mentioned another aspect of estoppel on p 218. There must be detrimental reliance("material disadvantage") by the person to whom the statement or representation was made. Thisaspect of estoppel has sometimes caused difficulties. It is sometimes not clear what constitutessufficient detrimental reliance. For example, if a landlord says to a tenant that the tenant does nothave to pay the full rent, what detrimental reliance is there by the tenant?Another important point mentioned by Mason and Deane JJ on p 218 2nd last para is that a promiseor representation may be impliedrather than express. However, it is obviously more difficult to arguefor an implied promise or representation to found an estoppel argument.In the end the purchasers did not lose their house and land because of a quite separate equitable

doctrine called relief against forfeiture. We need not be concerned about that aspect of the case.

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So, two points emerge from this case:to found an estoppel, the promise, representation, assurance, etc, whichmay be express or implied, must be clear; reliance by the other party must be reasonable.

We now come toWaltons Stores (Interstate) Ltd v Maher (HPH 219)

which is the case where the High Court made a big breakthrough in relation to the doctrine ofestoppel, particularly promissory estoppel. In Legione v Hateleypromissory estoppel was givenrecognition in terms of the High Treesprinciple. This was, as I have said, a limited doctrine. Itprevented someone in an already-existing contractual relationshipfrom insisting on his or her strictlegal rights under the contract if he or she had made a promise or representation that the other partywas relieved of a contractual obligation. It was confined to negative promises about contractualobligations. "You need notobserve clause 4..." It could only be used as a shield and not as a sword.Typically, High Treespromissory estoppel would be used when the person who made the promise orrepresentation tried to insist on contractual performance and the other party said "But you assured methat I did not have to..." It was used as a defence.

The breakthrough in the Waltonscase was two-fold:it allowed promissory estoppel to be used as a sword; andit recognised promissory estoppel as a generalprinciplewhich could operate in anycircumstances of legal relations, not justexisting contractual relations.

The High Court also attempted to draw together the various strands of estoppel into one overarchingdoctrine.The facts of the case are set out on pp 219-220. Waltons, the erstwhile retailer owned by Mr Bond,wanted to build a store in Nowra on the South Coast of NSW. They found a suitable site owned byMaher. It already had some buildings on it. They negotiated a deal whereby Maher would demolishthe existing buildings and then erect a store to Waltons' specifications and would then lease theproperty to Waltons. Waltons was in a hurry; they wanted the store erected by mid January 1984. Thecontract was pretty well settled by early November 1983. On 7 November, some minor amendmentswere made to the contract. Waltons' solicitors in Sydney indicated that the final amendments lookedOK to them but that they would have to clear them with the client, i.e. Waltons. They said "We shall letyou know to-morrow if any amendments are not agreed to." Maher's solicitor, having heard nothing

further, then got Maher to execute the contract and sent two counter-part contracts off to Sydney "byway of exchange". (The way in which contracts involving an interest in land are executed is by anexchange of identical parts. Maher had done his bit and the appropriate response from Waltons wouldhave been that one part, duly executed by Waltons, should have been sent back.)Maher started to demolish the buildings on the site. Remember, Waltons was keen to have thebuilding erected very quickly. Meanwhile Waltons had a change of heart and asked their solicitorswhether they had a contract with Maher yet. When told that there had not yet been a completedexchange, Waltons instructed their solicitors to go slow on the deal. Maher heard nothing fromWaltons for some 9 or 10 weeks. He had demolished the buildings on the site, had completed about70% of the brickwork and approximately two-fifths of the concrete work. Waltons had a representativein Nowra and knew what was going on. Around about 20th January, Waltons' solicitors sent a letter toMaher saying that Waltons had decided not to go ahead with the deal.

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If we pause there and analyse the legal situation as it was perceived to be in 1984, the answer wasvery simple. Everyone knows that deals of this kind are finalised by the exchange of contracts. Thathad not happened. Maher started work at his own risk. The doctrine of estoppel did not meet the casebecause it applied to existing contractual relations where one party had promised the other that he orshe need notdo something. If estoppel could be used here it would be transforming it entirelybecause it would apply outside an existing contract and it would be using it as a cause of action, that

is, it would be giving Mr Maher a positive remedy in the absence of contract.Maher brought an action seeking a declaration that there was an existing contract, specificperformance of that contract or, alternatively, damages. He won his case all the way to the High Courtwith not a single dissenting judge. The basis on which he won was estoppel.The various judges differed in their interpretation of the facts. This meant that the historically differenttypes of estoppel were called in aid, depending on the interpretation of the facts. If Waltons made arepresentation about an existing factthen common law estoppel would be appropriate; if futureintention, then promissory estoppel. By the time it reached the High Court, the basis on which somejudges proceeded was that Maher believed that Waltons had said that exchange of contracts wouldtake place. In other words, on one interpretation of the facts, they had in effect promisedthatexchange would go ahead. This, of course, tested the limits of promissory estoppel.Mason CJ and Wilson J put it on the basis that Maher believed that exchange would take place as amatter of course. This belief had, of course, been fostered by Waltons, through their solicitors, whenthey said that they would communicate only if there was a problem with the last minute amend