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PRINCIPLES OF AUSTRALIAN EQUITY AND TRUSTS expectation generated by somewhat oblique remarks was sufficiently clear and certain to establish a proprietary estoppel claim. 12.35 For the sufficiently clear and unambiguous promise or representation to lead to a claim based upon equitable estoppel, in Waltons Stores v Maher at CLR 428–9; ALR 542, Brennan J set out what he saw as the elements that had to be satisfied, as follows: In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff’s action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise. 12.36 Although Brennan J’s statement has not been approved by the High Court as a whole, it has been the formulation of principle most commonly cited and applied by lower courts in Australia and has been described as the ‘seminal description’ of the elements of equitable estoppel: The Bell Group Ltd v Westpac Banking Corporation at 409. A closer examination of the six elements is therefore warranted. In this discussion, for convenience, the party making the promise or representation will be referred to as ‘the representor’ and the party to whom the promise or representation is made will be referred to as ‘the relying party’. Assumption or expectation 12.37 In relation to the first element Brennan J said that the relying party must have ‘assumed that a particular legal relationship then existed between the [relying party] and the [representor] or expected that a particular legal relationship would exist between them and, in the latter case, that the [representor] would not be free to withdraw from the expected legal relationship’. However, there is some doubt as to the need for the requirement that the representor would not be free to withdraw from the expected legal relationship: EK Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC 1172 at [259]; Alstom Ltd v Yokogawa Australia Pty Ltd (No 7) [2012] SASC 49 at [1526]. In the subsequent High Court decision of Commonwealth v Verwayen (1990) 170 CLR 394; 95 ALR 321, no mention of this requirement is made in any of the judgments of Mason CJ, Deane, Dawson or McHugh JJ when dealing with the general principles of estoppel. 12.38 The nature of the relying party’s assumption is important in relation to the type of estoppel that arises. If the assumption is one of an existing fact, a case of common law estoppel arises. (In Waltons Stores v Maher the minority found for the Mahers on this basis, viewing the evidence as establishing that the Mahers believed that Waltons had completed the exchange of the lease.) Equitable estoppel will arise if the assumption is that the representor will act in a particular way in the future. According to Brennan J, the relying party needs to show that he or she assumed that a particular legal relationship existed or would exist between the parties. According to the majority in Waltons Stores v Maher, this was established on the facts of that case. A similar approach is detected in Mobil Oil Australia Ltd v Lyndel Nominees Pty Ltd (1998) 153 ALR 198 at 235, where the Full Court of the Federal Court said that ‘it is a necessary element of the principle that the [representor] Copyright LexisNexis. Sample only, not for classroom use or distribution. 276 Spi-Radan & Stewart - Principles of Australian Equity and Trusts 2nd ed. Ch.12.indd 276 10/10/2012 05:22:31 200595
277 CHAPTER 12: EQUITABLE ESTOPPEL has created or encouraged an assumption that “a particular legal relationship” or “interest” would arise or be granted’. 12.39 However, Brennan J’s requirement of a legal relationship would exclude equitable estoppel from a promise or representation made where the relying party assumes that the representor will behave in a manner outside the context of a legal relationship. A broader view was taken by Priestley JA in Austotel Pty Ltd v Franklins Selfserve Pty Ltd at 610, where his Honour indicated that it was enough if the relying party assumed that ‘a promise [would] be performed’. An example where the representor’s behaviour is outside any existing or expected legal relationship, and which might come within Priestley JA’s formulation, is where A promises to pay B $200 within 10 days. The approach of Priestley JA was seemingly approved by Meagher JA (Macfarlan JA agreeing) in the New South Wales Court of Appeal in DHJPM Pty Limited v Blackthorn Resources Limited at 324–5. 12.40 It also appears to be the case that, in all the circumstances, the relying party’s assumption must be reasonable. A claim based upon equitable estoppel can fail if it is not reasonable for the relying party to have adopted the assumption. In Salienta Pty Ltd v Clancy [1999] NSWSC 916, a proposed purchaser of land had been in possession of the property and had had a contract to purchase it that was subsequently terminated by the vendor following the purchaser’s breach. The purchaser had spent money on improvements to the property on the assumption that the expenditure would be credited to the purchase price in a contract to be entered into at a price lower than that which had been set out in the earlier contract. Bryson J held that the assumption was unreasonable given that, at all relevant times, the terms upon which the vendor would sell the land had clearly been made out in writing. Thus, it was not unconscientious for the vendor to assert its title to, and possession of, the land. Inducement 12.41 Initially, it needs to be stressed that it is the assumption that is induced by the promise or representation, rather than the promise or representation itself, that forms the basis for a claim based upon equitable estoppel: Waltons Stores v Maher at CLR 413–14, 428–9, 458–9; ALR 531, 542, 564–5; Commonwealth v Verwayen at CLR 412–13, 444–5, 453–6, 500–2; at ALR 332–3, 356–7, 363–4, 396–8. 12.42 The assumption adopted by the relying party must have been induced by the conduct of the representor. In most cases the conduct will be the making of the promise or representation. As already noted (see 12.31), the promise or representation can be express or implied. Silence can give rise to an implication of a promise, as is illustrated by Waltons Stores v Maher, where the silence and acquiescence on the part of Waltons gave rise to an implication that it had promised to complete its transaction with the Mahers. In this context, in Waltons Stores v Maher at CLR 429; ALR 542, Brennan J said: For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will nevertheless be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant’s property, a diminution of his rights or an increase in his obligations and he, knowing that the plaintiff’s reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs. Copyright LexisNexis. Sample only, not for classroom use or distribution. Spi-Radan & Stewart - Principles of Australian Equity and Trusts 2nd ed. Ch.12.indd 277 10/10/2012 05:22:31 200595
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