LAWS1204 Study Guide - Final Guide: Indian Pacific, Itv Anglia, Stephen Gageler
ESTOPPEL
• One of the fundamental weaknesses of the doctrine of consideration is that it fails to recognise detrimental
reliance.
• The doctrine of consideration has often been seen as leading to injustices.
• The equitable doctrine of promissory estoppel evolved to overcome many of these injustices.
• Dixon J in Grundt v Great Boulder Mines Pty Ltd, where his Honour stated that ‘the basal purpose of the doctrine
… is to avoid or prevent a detriment to the party asserting the estoppel’ (1937) 59 CLR 641.
• With proprietary estoppel, if X, the owner of property, induced Y to believe that Y had or would have an interest in
that property, equity would recognise and enforce Y’s interest in that property.
Priestley v Priestley
[2017] NSWCA 155
[134] Emmett JA: “The purpose of the doctrine of estoppel is to avoid or prevent a detriment
to the party asserting the estoppel by compelling the opposite party to adhere to an
assumption upon which the former acted or abstained from acting.”
• Estoppel can arise under a variety of circumstances:
o 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;
o Where there has been non-compliance with the statutory requirement of writing with respect to a contract
involving land.
o Where 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.
o Where a contract is rendered illegal and thus unenforceable because a party to is not licensed as required
by legislation, but had stated to the other party that he or she was so licensed.
Grundt v Great
Boulder Pty Gold
Mines Ltd
Dixon J: “Before anyone can be estopped, he must have played such a part in the adoption of the
assumption that it would be unfair or unjust if he were left free to ignore it.”
Thompson v
Palmer (1933) 49
CLR
[547] ‘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.’
Structure of estoppel
• There are fundamentally two types of estoppel: (i) common law estoppel and (ii) equitable estoppel.
• The difference between the two types of estoppel is that common law estoppel eschews the concept of
unconscionable conduct, whereas in equitable estoppel it is a base concept.
• Within equitable estoppel there are two further primary types of estoppel. These are: (i) promissory estoppel
and (ii) proprietary estoppel.
• Equitable Estoppel: Equitable estoppel comprises both proprietary estoppel and promissory estoppel.
Priestley v
Priestley [2017]
NSWCA 155
[134] Emmett JA: “… the fundamental purpose of equitable estoppel is to protect a person who
acts to her or his detriment from the detriment that would flow from resiling from a promise or
representation. Accordingly, the relief granted may require the taking of active steps by the
representor or promisor, including the performance of the promise or representation ….”
• Proprietary estoppel occurs where the relying party acts to his detriment on the faith of an assumption that the
relying party will be granted an interest in land.
• Promissory estoppel is any equitable estoppel not relating to an interest in land – Walton Stores.
• A unified doctrine?
Cth v Verwayen
Mason CJ: “In conformity with the fundamental purpose of all estoppels to afford protection against
the detriment which would flow from a party’s change of position if the assumption that led to it were
deserted, these developments have brought a greater underlying unity to the various categories of
estoppel. Indeed, the consistent trend in the modern decisions points inexorably towards the
emergence of one overarching doctrine of estoppel rather than a series of independent rules.”
Dawson J: “…. an estoppel in equity may not entitle the party raising it to the full benefit of the
assumption upon which he relied. The equity is said ‘not to compel the party bound to fulfil the
assumption or expectation; it is to avoid the detriment which, if the assumption or expectation goes
unfulfilled, will be suffered by the party who has been induced to act or to abstain from acting
thereon.”
“… estoppel at common law and in equity may have had common origins, but there the
similarity stops.”
Facts: Verwayen suffered injuries including psychiatric harm as result of collision of two naval
vessels engaged in combat exercises. Did not take action for 20 years because he assumed he was not
owed duty of care in this case. A HC in 1982 cast doubt on this assumption. V took action in 1984
for damages for negligence. C did not plead defence available to it and did not deny that duty of care
was owed. Representations were made that C had made policy decision not to plead those defences.
In reliance of those reps, V continued actions until 1986 when C changed policy and sought to plead
defence. V claimed that C should be prevented from using those defences.
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Miller Heiman
Pty Ltd v Sales
Principles Pty
Ltd [2017]
[42], in relation to a unified doctrine, Macfarlan JA stated: “Whilst the law has not, at least thus far,
progressed to this point (see for example M K & J A Roach Pty Ltd v Metro Edgley Pty Ltd [2005]
NSWCA 39; [71] per Hodgson J; Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty
Ltd [2016] HCA 26 at [37]- [38] … the principles of equitable and common law estoppel are
undoubtedly closely related.”
Propriety estoppel
Giumelli v
Giumelli
Parents made promises to a son that if he gave up his career and moved onto their property that they
would give him some of the property at a later stage. The son later married a woman of whom his
parents disapproved. The parents retracted their promise. The son successfully sued.
Sidhu v Van
Dyke
A man made promises to his brother-in-law’s wife during their affair. Mrs Van Dyke had suffered
detriment in that she did not seek a property settlement in the divorce from her husband and, for about
eight-and-a-half years while she lived in the cottage, did not seek full-time employment thereby
forgoing the opportunity to earn wages that she might have earned. She relied on these promises to her
detriment and later successfully sued him.
“The respondent at all times bore the legal burden of proving that she had been induced to rely upon the
appellant's promises.”
Priestley v
Priestley
[2017]
NSWCA 155
Facts: Son is promised an interest in a property and he believes he will inherit it. Son lets his dad use his
property and he works on his dad’s family. Told he is in dads will by his lawyer to inherit property.
Father knows son has relied on this promise. Father then changes his will and divides amongst all
children. Several years after he tells son that he changed the will. Son sues the mother and wins and gets
the property.
Waaka v
Francois
[2017]
NSWSC 744
“The circumstances in which a proprietary estoppel will arise include those in which assurances
are given so as to create or encourage an assumption that “a particular legal relationship would be
established” or “an interest” would be granted (see Doueihi v Construction Technologies Australia
Pty Ltd (supra) at [154]). In any case where such an estoppel is sought to be established, it is
necessary to pay careful attention to the identification of the assumption or expectation which the
object of the estoppel is said to be estopped from denying or asserting (see DHJPM Pty Ltd v
Blackthorn Resources Ltd.”
Facts: Delay and delay payments. Cancels agreement / decides not to sell. She had done everything she
could do so plaintiffs could not make out proprietary estoppel argument.
Estoppel - plaintiffs resided at property owned by defendant - arrangement had been made involving
plaintiffs moving into property ‘with a view to subsequently purchasing it’ from defendant
(arrangement) - plaintiffs alleged defendant bound by equitable proprietary estoppel to enter contract to
sell property to plaintiffs - defendant denied plaintiffs’ allegations and denied shed had acted
unconscionably towards them - consideration of terms of arrangement between parties - elements of
equitable estoppel by encouragement - circumstances in which proprietary estoppel would arise - held:
plaintiffs did not establish equitable proprietary estoppel case against defendant - judgment for
defendant.
Behman v
Behman
[2016]
NSWCA 295
unconscionable conduct and equitable proprietary estoppel; father and son residing in family home;
respondent son made extensive financial contributions towards cost of holding and maintaining home;
contributions made on basis of shared understanding and intention that respondent had or was entitled to
an ownership interest in the home; appellant subsequently denied respondent had or was entitled to any
such interest; whether primary judge erred in finding as to shared understanding and intention; whether
primary erred in finding expectation in the respondent to same effect
Remedies of estoppel
• Specific performance: Possibly depending on the circumstances.
• Pay damages: Yes – most likely.
• Unconscionable conduct will lead to injustice
o Remedial approach: proportionality
▪ To avoid such injustice
▪ To hold the representor to his promise/representation
▪ To reverse the detriment caused
UNCONSCIONABLE CONDUCT
• Equity will intervene where one party to the contract has taken an unconscientious advantage of the special
disadvantage of another party.
• In this area of the law it is crucial that the party, who claims to have been taken advantage of, is in fact suffering
from a special disadvantage.
• Provided that such a special disadvantage exists the onus will then be on the other contracting party to prove that
the bargain was fair.
• Unconscionability does not exist simply because a bargain between two competent parties turns out to be
rather harsh on one of the parties.
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• Unconscionability can only exist where there has been some moral turpitude in taking advantage of the peculiar
disability of one of the parties.
• The main remedy for unconscionability under the common law is recission.
• There are other more comprehensive remedies than recission. --- damages, injunctions etc
• Unconscionability is related to the doctrines of undue influence, duress, mistake, misrepresentation and
estoppel.
• In each of these doctrines there is an element of wrong-doing on the part of one party that gives rise to an
actionable claim.
• The key difference is that unconscionability is a claim in its own right with its own elements.
• In particular the focus of unconscionability is upon a specific transaction rather than an ongoing relationship.
• Commercial Bank of Australia v Amadio, Mason J: “Relief on the ground of unconscionable conduct will be
granted when unconscientious advantage is taken of an innocent party whose will is overborne so that it is
not independent and voluntary, just as it will be granted when such advantage is taken of an innocent party who,
though not deprived of an independent and voluntary will, is unable to make a worthwhile judgment as to what is in
his best interest.”
Elements of unconscionable conduct
• Deane J in Amadio expressed the test as follows:
o (i) a party to a transaction was under a special disability in dealing with the other party with the
consequence that there was an absence of any reasonable degree of equality between them, and
o (ii) that disability was sufficiently evident to the stronger party to make it prima facie unfair or
"unconscientious" that he procure, or accept, the weaker party's assent to the impugned transaction in the
circumstances in which he procured or accepted it.
• There are three main elements of unconscionability.
• First, one party must be at a special disadvantage. Louth v Diprose (1992) 175 CLR 621; Bridgewater v Leahy
(1998) 194 CLR 457.
• Second, the other party must know that the special disadvantage exists. Commercial Bank of Australia v
Amadio (1983) 151 CLR 447.
• Third, the other party must have taken an unconscientious advantage of the party with the special disability.
Louth v Diprose; Virginia Nemeth (by her tutor) v Australian Litigation Funders Pty Ltd [2013] NSWSC 529; Gel
Custodians Pty Ltd v Dyer [2014] WASC 177.
• The primary defence to a claim of unconscionability is to show that the transaction was fair, just and
reasonable. See Commercial Bank of Australia v Amadio (1983) 151 CLR 447;
• (i) Special Disadvantage
• Blomley v Ryan (1956) 99 CLR 362
• In Permanent Mortgages Pty Ltd v Vandenbergh [2010] WASC 10, [234], Murphy JA suggested that, “advanced
age of itself does not constitute a special disadvantage but may, in combination with other factors, contribute to the
condition of being under a special disadvantage.”
• The existence of indicia which might otherwise suggest special disadvantage will not be sufficient if the
surrounding facts suggest that no real disadvantage existed. ---- Luong & Anor v Du [2013] VSC 723
• (ii) Knowledge
• The party whose conduct is impugned must knowingly have taken advantage of the other party.
• Knowing exploitation of a special disadvantage is crucial to unconscionability.
ACCC v Radio
Rentals Ltd
Knowledge cannot be aggregated
Prior to the High Court’s decision in Kakavas v Crown Melbourne Limited (2013) 298 ALR 35,
there was some doubt as to whether constructive knowledge might satisfy the knowledge
requirement.
Commercial
Bank of
Australia Ltd v
Amadio
Mason J stated with regard to the stronger party’s knowledge of the special disadvantage, “if, instead
of having actual knowledge of that situation, A is aware of the possibility that that situation may exist
or is aware of facts that would raise that possibility in the mind of any reasonable person, the result
will be the same.”
Kakavas v
Crown
Melbourne
Limited
The High Court stated that Mason J in Amadio, could not be taken to have been supporting importing
constructive knowledge into the doctrine of unconscionable conduct
“It is apparent from what Mason J said in relation to the transaction under consideration in
Amadio that his Honour was speaking of wilful ignorance, which, for the purposes of relieving
against equitable fraud, is not different from actual knowledge. In this regard, Mason J observed
that it must have been obvious to the appellant bank's officer that the transaction was an improvident
one from the respondents' point of view.”
Defence
• The key defence to unconscionability is for the party whose conduct is impugned to demonstrate that the
transaction is in fact fair just and reasonable.
• As such, the burden of proof regarding the defence falls upon the stronger party.
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Document Summary
Dixon j: before anyone can be estopped, he must have played such a part in the adoption of the assumption that it would be unfair or unjust if he were left free to ignore it. These are: (i) promissory estoppel and (ii) proprietary estoppel: equitable estoppel: equitable estoppel comprises both proprietary estoppel and promissory estoppel. [134] emmett ja: the fundamental purpose of equitable estoppel is to protect a person who acts to her or his detriment from the detriment that would flow from resiling from a promise or representation. Accordingly, the relief granted may require the taking of active steps by the representor or promisor, including the performance of the promise or representation . Proprietary estoppel occurs where the relying party acts to his detriment on the faith of an assumption that the relying party will be granted an interest in land.
