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 reliance based 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 exists as 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 the facts are other than they really are, but if they have both agreed, then each is estopped from denying the state of facts as agreed. So, if someone says "Let us assume for present purposes that the A$1 is worth 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 explicit agreement.

Proprietary estoppel
The courts of equity developed a special branch of estoppel which was to do with land. We came across this briefly in Beaton McDivitt in which a possible basis for allowing the promisee in that case a remedy 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 the Property 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 that people do not always behave as the law would have it and they make informal arrangements concerning 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 the end in my will." On the basis of this, the newly married couple build a house on the land and live there. Some time later, there is a falling out between the daughter and her father. What rights has the couple over the land? We do not need to investigate the ins and outs of property law but, suffice it to say that there is no legal basis 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 commitment such as building a house and then to deny that the people who have acted on that encouragement have any rights. It is, in other words, unconscionable for the father to deny that his daughter has some rights over the land. That word - "unconscionable" - is one which is a very important one in any discourse about equity and its role. We will come across it time and again.

you will see from the extract from Chitty on pp 210-211 that proprietary estoppel can arise not just when the owner of land has encouraged another to use the land (as in the example I just gave) but also in a situation where the owner of the land has simply stood by and allowed someone to use the land - sometimes called acquiescence. An example might be where the owner knows that the other party has made a mistake (for example about where a boundary is) and says nothing while the other builds 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 may include being granted an interest in the land. We will see that proprietary estoppel played a major part in the breakthrough that occurred in the Waltons case even though Waltons was 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

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 the courts 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.

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, an estoppel 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. Estoppel per 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.

*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 of land) 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 all Where 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.

We will deal with this Where there has been a failure of considerationContract variation - Je Maintiendrai v Quaglia (1980) 26 SASR 101 c/f Agricultural 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

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

Estoppel in pais

Equitable estoppel

Common law estoppel

Proprietary estoppel

Waltons Stores

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 has assumed 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 it meant that if the representor then went back and attempted to sue the representeethe representee could go back and use that statement 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

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.

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 upon which 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

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 by and 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

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. The Landlord 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

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 didnt speak 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

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 sought specific performance of the lease and damages (if they 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, specific performance 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 invoking estoppel.

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 noncontractual promises which another party has relied on. It destroyed the notion that it could only be a shield Promissory 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.

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 to drop 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

Estoppel Cth can plead estoppel (but must pay P wasted expenditure) Deane, Dawson

Estoppel Cth 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 conduct but 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 property he 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 propertyhe left and the brother moved on to the land 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.

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 transfer of 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 least on 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 97 May 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 main consideration was whether the borrower could rely on the indemnity agreements for the first and

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 position the 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;

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 G W 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 introduced proceedings 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 that representation 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

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 v Giumelli (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 reliance it 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

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 are acts 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 to exclude 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

representor has acted unconscionably when in the circumstances of the case perhaps 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 Maher Mason 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 reliance on 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. Waltons Stores (Mason CJ and Wilson J and Deane JJ) ***The remedy therefore wont necessary uphold or enforce the full contractit wont always do what the P expectedbut the court may also say that the only way to address the reliance might be

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 of compensation 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.

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 consequences the 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:

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 estoppel about future conduct. Where some representation is made about future conduct, then this is either a promise or something very close to a promise. The courts of equity said that in certain circumstances a 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 then it lay dormant until the High Trees case in which Denning J, then at the beginning of his judicial career, revived the doctrine and thereafter plugged it very hard in a number of English cases. The High Trees case 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 Co v London and Northwestern Railway Co (HPH 211)
extracts from which appear in the case book. In each of these cases a contractual deadline was either extended 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 Birmingham case, the second of the two extracts on p 211.

These ideas were taken up in the High Trees case

Central 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 were simple enough. A landlord said to a tenant that, during the course of the war, the rent would be reduced. The landlord company went into receivership. The receiver noted that the reduced rent had been paid for some 5 years and demanded the arrears. A test case was brought to see if the landlord'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 of the landlord's promise (unless one accepts the recent Musumeci analysis - but this was quite out of the question at the time of High Trees). But Denning J relied on the Hughes and Birmingham cases to hold 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 from insisting on its strict legal rights. The estoppel only applied to a negative promise of the sort "You need not perform the contract as written..." It has been said that estoppel can only be used as a shield and not as a sword. See the short extract on p 212 where Denning J says that "the courts have not gone so far as to give a cause of action" based on estoppel. The operation of promissory estoppel was also very limited in that it applied only to a suspension of existing contractual rights. It did not apply more generally. The promisee must have acted on the promise. Here is the reliance element. 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 - detrimental reliance. This is difficult to find when the promisee has apparently only received a benefit, such as a reduction in rent. The facts of the High Trees case itself show that the estoppel may only be temporary. It is quite in order for the landlord to re-establish the pre-existing contractual relation, that is, full rent by giving notice. The doctrine is an equitable one. This is illustrated by the next case D & 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 case where a builder, in dire financial straits, agreed to accept a payment of a lesser sum in discharge of a debt owing to it. They accepted a cheque for £300 for a debt of £482. Could the builder sue for the outstanding £182? It was argued by the debtor that the builder, having accepted a cheque for the lesser amount, could not claim the difference. Remember I mentioned this theory as a possible way of getting around the rule in Pinnel's case. Denning LJ rejected this theory, saying that the case law on which it was based was 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 the equitable 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 could work to get around the rule in Pinnel's case but not where the settlement has been procured by intimidation. Therefore, on the facts in this

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

The Australian development of estoppel

The High Trees case met with some resistance in Australia. Very little happened for many years. It was not until 1980 that it was applied in a South Australian case and then the High Court finally recognised 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 the purchase and sale of land. The purchasers were permitted under the contract to pay a deposit and then move on to the land immediately and pay off the balance a year later. They moved on to the land and built a house. When the year was up and the purchasers had to pay the balance, they found themselves in difficulties. They stood to lose both the deposit and the land (with the house on it) if they 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's office and talked to a secretary. The purchaser's solicitor said that finance would be obtained but that there would be a further delay of 7 days. He asked whether that was acceptable to the vendor. The secretary replied, "I think that'll be all right but I'll have to get instructions." The vendor on August 14 then 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 that the vendors were estopped from insisting on their strict legal rights, namely, the deadline. The High Court, by a majority, said that this conversation could not generate an estoppel. For an estoppel to work, there must be a clear and unequivocal statement, promise or representation. Here the statement by the secretary was qualified and no-one knowing anything about conveyancing practice would be entitled to rely on it. The significance of Legione is simply that the High Court for the first time recognised the doctrine of promissory estoppel, that is, an estoppel concerning future intention. Australian law had recognised estoppel relating to a representation of existing fact but had not gone so far as recognising estoppel concerning future intention or promises. The High Court limited the application of promissory estoppel to promises about existing contractual relations, such as "I promise not to insist on a contractual deadline" or "I promise that you do not have to pay the full rent." In other words they limited it to the same area of operation as applied in the High Trees case. Mason and Deane JJ went on to say that a statement which is the basis for an estoppel must be clear and unambiguous (pp 217-218). Of course, this was the problem on the facts of Legione itself. The conclusion that the statement by the secretary could not found an estoppel was reached by Mason and 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. This aspect of estoppel has sometimes caused difficulties. It is sometimes not clear what constitutes sufficient detrimental reliance. For example, if a landlord says to a tenant that the tenant does not have 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 promise or representation may be implied rather than express. However, it is obviously more difficult to argue for 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.

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

Waltons Stores (Interstate) Ltd v Maher (HPH 219)

which is the case where the High Court made a big breakthrough in relation to the doctrine of estoppel, particularly promissory estoppel. In Legione v Hateley promissory estoppel was given recognition in terms of the High Trees principle. This was, as I have said, a limited doctrine. It prevented someone in an already-existing contractual relationship from insisting on his or her strict legal rights under the contract if he or she had made a promise or representation that the other party was relieved of a contractual obligation. It was confined to negative promises about contractual obligations. "You need not observe clause 4..." It could only be used as a shield and not as a sword. Typically, High Trees promissory estoppel would be used when the person who made the promise or representation tried to insist on contractual performance and the other party said "But you assured me that I did not have to..." It was used as a defence. The breakthrough in the Waltons case was two-fold: it allowed promissory estoppel to be used as a sword; and it recognised promissory estoppel as a general principle which could operate in any circumstances of legal relations, not just existing contractual relations. The High Court also attempted to draw together the various strands of estoppel into one overarching doctrine. 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 by Maher. It already had some buildings on it. They negotiated a deal whereby Maher would demolish the existing buildings and then erect a store to Waltons' specifications and would then lease the property to Waltons. Waltons was in a hurry; they wanted the store erected by mid January 1984. The contract was pretty well settled by early November 1983. On 7 November, some minor amendments were made to the contract. Waltons' solicitors in Sydney indicated that the final amendments looked OK to them but that they would have to clear them with the client, i.e. Waltons. They said "We shall let you 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 "by way of exchange". (The way in which contracts involving an interest in land are executed is by an exchange of identical parts. Maher had done his bit and the appropriate response from Waltons would have 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 the building erected very quickly. Meanwhile Waltons had a change of heart and asked their solicitors whether they had a contract with Maher yet. When told that there had not yet been a completed exchange, Waltons instructed their solicitors to go slow on the deal. Maher heard nothing from Waltons for some 9 or 10 weeks. He had demolished the buildings on the site, had completed about 70% of the brickwork and approximately two-fifths of the concrete work. Waltons had a representative in Nowra and knew what was going on. Around about 20th January, Waltons' solicitors sent a letter to Maher saying that Waltons had decided not to go ahead with the deal.

If we pause there and analyse the legal situation as it was perceived to be in 1984, the answer was very simple. Everyone knows that deals of this kind are finalised by the exchange of contracts. That had not happened. Maher started work at his own risk. The doctrine of estoppel did not meet the case because it applied to existing contractual relations where one party had promised the other that he or she need not do something. If estoppel could be used here it would be transforming it entirely because 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, specific performance of that contract or, alternatively, damages. He won his case all the way to the High Court with 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 different types of estoppel were called in aid, depending on the interpretation of the facts. If Waltons made a representation about an existing fact then common law estoppel would be appropriate; if future intention, then promissory estoppel. By the time it reached the High Court, the basis on which some judges proceeded was that Maher believed that Waltons had said that exchange of contracts would take place. In other words, on one interpretation of the facts, they had in effect promised that exchange 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 a matter of course. This belief had, of course, been fostered by Waltons, through their solicitors, when they said that they would communicate only if there was a problem with the last minute amendments to the contract. In their judgment they discuss on p 221 the sword/shield distinction and the fact that promissory estoppel had been confined to the modification of existing contractual rights. They express the concern that to allow estoppel to operate as a positive cause of action would undermine the doctrine of consideration. Mason and Wilson then draw on proprietary estoppel cases to show that estoppel has supported the enforcement of promises in the absence of consideration. Crabb v Arun District Council and Ramsden Dyson are such cases. They then say that there is a common thread running through the case which they bring together in the 2nd last para on p 222 "One may therefore discern..." On p 223 last para they go to some length to show what the necessary ingredients of an estoppel must be. It is based on unconscionability. They say quite explicitly that merely breaking a promise is not by itself unconscionable conduct so as to support an estoppel. But breaking a promise does become unconscionable conduct when the promisee has sufficiently relied on it to his or her detriment. It appears from this passage that mere reliance by the promisee is still not enough. It must be a reliance that has been encouraged or generated by the promisor. All of this was satisfied on the facts of this case. Mason and Wilson relied particularly on the background of urgency which had been generated by Waltons' desire to have the store built as quickly as possible. They also stressed that Maher had been encouraged to believe that exchange was a mere formality, that is, the failure of Waltons to get back to Maher meant that the last minute amendments were apparently OK and that the deal was going ahead. As Mason and Wilson put it (p 224): To express the point in the language of promissory estoppel the appellant is estopped in all the circumstances from retreating from its implied promise to complete the agreement. The judgment of Brennan J compared and contrasted common law and equitable estoppel. He considered the facts on the assumption that Waltons indicated that it would exchange on p 226. He, too, drew on proprietary estoppel cases to show that estoppel can support a positive cause of action. Much of Brennan's judgment is concerned to explain the place of a new estoppel, which allows estoppel to be used as a sword and not just as a shield, alongside contract. He stressed that the two doctrines come from different positions. See p 228 4th para where he talked about equity's role in preventing unconscionable conduct - or at least to redress or avoid the detriment caused by

unconscionable conduct. He then made a comparison between estoppel and contract on p 228 last para "But there are differences..." This analysis leads to a most important point about estoppel and that is the remedies which flow from a successful estoppel argument. The remedies are tailored to achieve one aim: to avoid the detriment generated by the person who has reneged on a promise or denied the truth of a representation. This means that the remedy is limited and is determined by the particular circumstances. It just happens that in the Waltons case the only way to remove the detriment suffered by Maher as a result of his reliance on the assumption generated and encouraged by Waltons was to enforce the assumed contract. Brennan turned to the particular issue raised by the facts of this case and that was: can an estoppel be built on someone remaining silent? He dealt with this on p 230. Silence can support an estoppel if the silence reinforces or generates an assumption which, if not adhered to, causes detriment to the other party. This is what happened here. Waltons had two choices: to warn Maher or to act consistently with the assumption made by Maher. They did neither. Brennan then helpfully set out a nice summary of the elements of estoppel on p 230 last para. The final point to note is that the formalities required for the making of contracts involving an interest in land - called the Statute of Frauds requirements - do not apply if the legal basis for the enforcement of rights is estoppel and not contract - see p 231. The Conveyancing Act 1919 (NSW) s 54A is the Statute of Frauds section in NSW and the judges made the point that it is simply irrelevant in an estoppel case. This point is of some importance and will be taken up again in the Property course. The most difficult and potentially troublesome element in the whole estoppel business is the element of detrimental reliance. It is sometimes unclear what this means. In some of the estoppel cases in which Lord Denning had a say he would argue that it is sufficient if the promisee has acted on the promise. He de-emphasised the requirement of detriment. It is probably safe to assume that in Australia the courts require detrimental reliance. The time for testing this is at the time when the promisor or representor decides to go back on the promise or representation. Reliance must be reasonable in the circumstances. So, if someone has relied on the other when they ought to have realised that it was not sensible to do so, then an estoppel may not work. One argument that is tried in this context is that it is never reasonable to rely on another's promise unless it is in a contract or in a deed. But this argument is no longer tenable now that there is a third way (estoppel) of enforcing promises. It is important to stress that after the Waltons case estoppel is a general principle which may apply to any legal relations between parties. In Cheshire & Fifoot (7th Aus ed 1997) paras [2.19]-[2.32] I have attempted to show what potential effect estoppel can have on the various areas of the law of contract, many of which we have not come across yet. But we need not be confined to contract. This is illustrated by

Commonwealth v Verwayen (HPH 232)

In this case the Commonwealth announced to sailors, who were seeking to claim compensation from the Commonwealth in respect of their injuries suffered when the HMAS Melbourne sank HMAS Voyager off Jervis Bay in 1964, that the Commonwealth would not use the Statute of Limitations defence in respect of these claims. The Commonwealth also said it would not rely on a common law defence which provided immunity to the government in relation to negligence actions arising out of active service, including in peace time, by military personnel. The reason why sailors were still attempting to seek compensation some 25 years after the accident is a long story but suffice it to say that the Commonwealth could kill any such claims dead if it pleaded the Statute of Limitations or the common law defence. Having said that it would not use these defences (in other words that it would deal with the claims on their merits), the Commonwealth then decided that it would use the defences. The case which went to the High Court was simply on the question: can the Commonwealth plead the

Statute of Limitations, having regard to what it had announced previously? The other defence was more dubious and there was a possibility that it in fact did not apply to the facts. The question for the High Court focused principally on the Statute of Limitations, though the other defence was also mentioned. The result of the High Court appeal was a mess. The Victorian Full Court had decided by a majority that the Commonwealth was precluded from relying on these defences. Estoppel was the basis of this holding. The Commonwealth appealed to the High Court. By a majority the High Court held that the Commonwealth could not plead the defences. However, the majority based their decisions on different grounds. Only Deane and Dawson JJ used estoppel. Toohey and Gaudron JJ relied on waiver. A word about the doctrines of estoppel, election and waiver. There is a lot of confusion about their boundaries and their operation. Election and waiver are discussed by Brennan J on pp 236-238. Election is reasonably clear. It is about making a choice between two inconsistent courses of action. We will come across examples of election when a party to a contract has a choice whether to rescind or terminate the contract or whether to continue on. The doctrine of election simply says that he or she must make the choice reasonably promptly and, once the choice is made, then he or she is bound by that decision. There is no element of reliance by the other party, as pointed out by Brennan on p 236 3rd last para. Waiver is far more obscure. We will again come across it later on. One example is where a person has waived a right to terminate a contract for serious breach. It is the giving up of a right which has already accrued. Once it has been given up, it cannot thereafter be asserted. But, it has to be said, waiver has been used in other senses and it may be that now, after the Waltons case, it is sensible to deal with most cases of waiver as estoppel cases. There are two distinctions between waiver and estoppel. One is that an estoppel looks to existing facts or to the future and "fixes" those facts or the future in the sense that the person estopped is not allowed to depart from them whereas waiver looks to a past right which has been given up. The second distinction is that waiver applies to what might be called "procedural" rights rather than substantive ones. To waive a substantive right like a right to performance under a contract, it is necessary to find a consideration or an estoppel. But to waive a procedural right, like the right to terminate a contract for breach, no consideration or estoppel is necessary. It is also possible to waive the mode or manner of performance of a particular obligation under a contract, such as the time of delivery. This is, again, a kind of "procedural" right rather than the substantive right to delivery as such. But the distinction is, it must be admitted, a troublesome one. Because the Commonwealth's right arising from the Statute of Limitations - that is, the right to defend the claim - was procedural in nature, at least some of the judges considered that it was more appropriately dealt with on the basis of waiver. But, the fact that there were widely varying views about whether waiver was appropriate indicates the uncertainties associated with waiver. Remember that there were three minority judges who allowed the Commonwealth's appeal. Mason CJ, Brennan and McHugh JJ all argued that the only way in which Verwayen could succeed was on the basis of estoppel but that the estoppel remedy should be limited to the "minimum equity" which was needed to avoid the detriment suffered by Verwayen as a result of the Commonwealth changing its mind. This was achieved by awarding costs to Verwayen in respect of wasted legal fees but allowing the Commonwealth to plead the defence. The other two estoppel judges, Dawson and Deane JJ, said that this would not suffice because the detriment suffered by Verwayen was more than just the legal costs incurred. He had built his life for some considerable time on the assumption that the only issue to be fought was assessment of damages. See p 245 last para of Deane's judgment "If the Commonwealth were now allowed..." and p 246 2nd last para in Dawson's judgment "But the real detriment to the respondent ..." The detriment issue was the real difficulty in this case. Mason CJ pointed out on p 235 that detriment could not be found simply in the disadvantage to Verwayen if the Commonwealth decided to argue a

good defence when it originally said that it would not. Reneging on the promise is not enough. There had to be some consequential detriment flowing from relying on the Commonwealth's promise or assurance. What does the Verwayen case tell us about how the doctrine of estoppel has developed in Australia since the Waltons case? One answer might be that it has become more confused, particularly in relation to what is the appropriate remedy. There is a discernible effort to find a single, overarching doctrine of estoppel which has unified the various strands. This is explicitly stated by Mason CJ middle p 233 culminating in the statement in the 3rd para of p 234 "The result is that..." I think that Deane J is trying to say the same thing in his elaborate judgment. But there is one particular element of his judgment which I find difficult to accept. He draws it all together on pp 243-4 in 8 points. Point number 7 is the unsatisfactory one where he says that estoppel is not a cause of action. Estoppel, according to Deane, sets the stage for some other cause of action to operate. For example, in the Waltons case the estoppel set the stage for contract to operate. But not all estoppels work this way. In particular proprietary estoppel, whose influence was so important in the Waltons case, provides a variety of remedies without recourse to some external cause of action. The correct view is that estoppel can itself be a cause of action. In a more recent decision, Giumelli v Giumelli [1999] HCA 10, (1999) 196 CLR 1011, (1999) 161 ALR 473, the High Court has re-affirmed that equitable estoppel may give rise to a remedy which makes good a party's expectations, that is, one which enforces the representations which induced the detrimentally reliant conduct. Such a remedy need not be in the form of specific relief, however, and may take the form of an award of a money equivalent sum.