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PRINCIPLES OF AUSTRALIAN EQUITY AND TRUSTS<br />

12.43 In relation to the types of conduct by the represent<strong>or</strong> that could be said to induce the<br />

assumption, in Commonwealth v Verwayen, at CLR 444; ALR 356, Deane J said the following:<br />

The cases indicate four main, but <strong>not</strong> exhaustive, categ<strong>or</strong>ies in which an affirmative answer to that<br />

question may be justified, namely, where that party:<br />

(a) has induced the assumption by express <strong>or</strong> implied representation;<br />

(b) has entered into contractual <strong>or</strong> other material relations with the other party on the<br />

conventional basis of the assumption;<br />

(c) has exercised against the other party rights which would exist <strong>only</strong> if the assumption were<br />

c<strong>or</strong>rect;<br />

(d) knew that the other party laboured under the assumption and refrained from c<strong>or</strong>recting him<br />

when it was his duty in conscience to do so.<br />

Reliance<br />

12.44 The relying party must act, <strong>or</strong> refrain from acting, in reliance on the assumption. A causal<br />

link between the assumption and the action <strong>or</strong> conduct by the relying party must be established. It is<br />

<strong>not</strong> necessary that the assumption be the <strong>only</strong> reason that the relying party acted <strong>or</strong> refrained from<br />

acting. It is sufficient if it was a reason: Flinn v Flinn [1999] 3 VR 712 at 749. The action <strong>or</strong> conduct<br />

undertaken must be reasonable in all the circumstances: Waltons St<strong>or</strong>es v Maher at CLR 406; ALR<br />

525. In Commonwealth Bank of Australia v Carotino (Australia) Pty Ltd [2011] SASC 42 at [145],<br />

Kelly J said:<br />

[R]eliance on the assumption must be reasonable in two ways. First, it must be reasonable <strong>f<strong>or</strong></strong> the<br />

[relying party] to adopt the assumption in question on the strength of the representation made.<br />

Secondly, the action taken by the [relying party] in reliance upon the representation must be itself<br />

reasonable.<br />

12.45 An imp<strong>or</strong>tant fact<strong>or</strong> in assessing reasonableness here will be the characteristics of the relying<br />

party, including whether he <strong>or</strong> she is advised by lawyers, and whether he <strong>or</strong> she is well resourced<br />

and <strong>use</strong>d to dealing in commercial transactions. In cases of substantial commercial enterprises that<br />

are legally represented, the court will carefully scrutinise whether the relying party’s actions are<br />

reasonable. If <strong>not</strong>, an estoppel claim will be denied: Austotel Pty Ltd v Franklins Selfserve Pty Ltd at<br />

585. In Waltons St<strong>or</strong>es v Maher, although the Mahers were legally represented, the facts were such<br />

that both the Mahers and their solicit<strong>or</strong>s were encouraged and induced to make the same mistake,<br />

thereby <strong>not</strong> precluding the finding of an estoppel.<br />

Knowledge <strong>or</strong> intention<br />

12.46 Acc<strong>or</strong>ding to Brennan J in Waltons St<strong>or</strong>es v Maher, the represent<strong>or</strong> must actually know,<br />

<strong>or</strong> intend, that the relying party will act <strong>or</strong> refrain from acting in reliance on the assumption <strong>or</strong><br />

expectation. In cases of assumptions based upon a promise <strong>or</strong> representation, knowledge is ‘easily<br />

inferred’. In cases where the assumption arises outside the context of a promise <strong>or</strong> representation,<br />

the requirement of knowledge <strong>or</strong> intention is m<strong>or</strong>e difficult to establish: Waltons St<strong>or</strong>es v Maher<br />

at CLR 423; ALR 538. However, it can be established, as was the case in Waltons St<strong>or</strong>es v Maher, in<br />

cases where ‘the defendant encourages a plaintiff to adhere to an assumption <strong>or</strong> expectation already<br />

<strong>f<strong>or</strong></strong>med, <strong>or</strong> acquiesces in an assumption <strong>or</strong> expectation when, in conscience, objection ought to be<br />

stated’: Pazta Company Pty Ltd v Idelake Pty Ltd [2008] NSWSC 941 at [26].<br />

<strong>Copyright</strong> <strong>LexisNexis</strong>. <strong>Sample</strong> <strong>only</strong>, <strong>not</strong> <strong>f<strong>or</strong></strong> <strong>classroom</strong> <strong>use</strong> <strong>or</strong> distribution.<br />

278<br />

Spi-Radan & Stewart - Principles of Australian Equity and Trusts 2nd ed. Ch.12.indd 278 10/10/2012 05:22:31<br />

200595

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