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PRINCIPLES OF AUSTRALIAN EQUITY AND TRUSTS 12.43 In relation to the types of conduct by the representor that could be said to induce the assumption, in Commonwealth v Verwayen, at CLR 444; ALR 356, Deane J said the following: The cases indicate four main, but not exhaustive, categories in which an affirmative answer to that question may be justified, namely, where that party: (a) has induced the assumption by express or implied representation; (b) has entered into contractual or other material relations with the other party on the conventional basis of the assumption; (c) has exercised against the other party rights which would exist only if the assumption were correct; (d) knew that the other party laboured under the assumption and refrained from correcting him when it was his duty in conscience to do so. Reliance 12.44 The relying party must act, or refrain from acting, in reliance on the assumption. A causal link between the assumption and the action or conduct by the relying party must be established. It is not necessary that the assumption be the only reason that the relying party acted or refrained from acting. It is sufficient if it was a reason: Flinn v Flinn [1999] 3 VR 712 at 749. The action or conduct undertaken must be reasonable in all the circumstances: Waltons Stores v Maher at CLR 406; ALR 525. In Commonwealth Bank of Australia v Carotino (Australia) Pty Ltd [2011] SASC 42 at [145], Kelly J said: [R]eliance on the assumption must be reasonable in two ways. First, it must be reasonable for the [relying party] to adopt the assumption in question on the strength of the representation made. Secondly, the action taken by the [relying party] in reliance upon the representation must be itself reasonable. 12.45 An important factor in assessing reasonableness here will be the characteristics of the relying party, including whether he or she is advised by lawyers, and whether he or she is well resourced and used to dealing in commercial transactions. In cases of substantial commercial enterprises that are legally represented, the court will carefully scrutinise whether the relying party’s actions are reasonable. If not, an estoppel claim will be denied: Austotel Pty Ltd v Franklins Selfserve Pty Ltd at 585. In Waltons Stores v Maher, although the Mahers were legally represented, the facts were such that both the Mahers and their solicitors were encouraged and induced to make the same mistake, thereby not precluding the finding of an estoppel. Knowledge or intention 12.46 According to Brennan J in Waltons Stores v Maher, the representor must actually know, or intend, that the relying party will act or refrain from acting in reliance on the assumption or expectation. In cases of assumptions based upon a promise or representation, knowledge is ‘easily inferred’. In cases where the assumption arises outside the context of a promise or representation, the requirement of knowledge or intention is more difficult to establish: Waltons Stores v Maher at CLR 423; ALR 538. However, it can be established, as was the case in Waltons Stores v Maher, in cases where ‘the defendant encourages a plaintiff to adhere to an assumption or expectation already formed, or acquiesces in an assumption or expectation when, in conscience, objection ought to be stated’: Pazta Company Pty Ltd v Idelake Pty Ltd [2008] NSWSC 941 at [26]. Copyright LexisNexis. Sample only, not for classroom use or distribution. 278 Spi-Radan & Stewart - Principles of Australian Equity and Trusts 2nd ed. Ch.12.indd 278 10/10/2012 05:22:31 200595
279 CHAPTER 12: EQUITABLE ESTOPPEL 12.47 Furthermore, according to Brennan J, it is not enough that the representor ought to have known that the relying party would act or refrain from acting in reliance on the assumption or expectation. A contrary view was suggested by Deane J in Commonwealth v Verwayen at CLR 445; ALR at 356. In relation to the difference of views between Brennan J and Deane J, in New Zealand Pelt Export Company Limited v Trade Indemnity New Zealand Limited [2004] VSCA 163 at [99], Nettle JA, speaking for a unanimous Court of Appeal in Victoria, said: [I]f it were necessary to make a choice, there are at least three reasons to prefer Deane J’s formulation. In the first place, it is more consistent with the observations of Mason CJ and Wilson J in Waltons Stores v Maher, that the principle which underlies High Trees estoppel is that the courts will grant relief to a plaintiff who has acted to his detriment on the basis of a basic assumption in relation to which the other party has played such a part in the adoption of the assumption that it would be unfair or unjust if left free to ignore it. That view accords with the broad general ground of estoppel that where one of two innocent parties must suffer, the loss should fall on him by whose indiscretion it was occasioned. Secondly, as the joint judgment of Mason CJ and Wilson J in Waltons Stores v Maher demonstrates, the principle which underlies High Trees estoppel is the same principle as underlies the kind of estoppel exemplified in Ramsden v Dyson; and the better view is that in such a case the party to be estopped need not know of the full extent of his or her legal rights — it is sufficient that he or she ought to have appreciated what they were. Parity of reasoning suggests that it may be sufficient in a case of High Trees estoppel that the party to be estopped ought to have known that the other party would be induced by the estopped party’s conduct to adopt and act on the basis of an assumption or expectation. Thirdly, the source of the idea that actual knowledge is an essential requirement seems to be the judgment of Lord Denning in Crabb v Arun District Council [[1976] Ch 179 at 188], and while his Lordship did say in that case that it was necessary that the party to be estopped know and intend that the other party act on the basis of the relevant assumption, his Lordship based his judgment on the speech of Lord Cairns in Hughes v Metropolitan Railway Co [(1877) 2 App Cas 439 at 448], and Lord Cairns did not speak in terms of knowledge or intent. The crucial passage of his speech was as follows: … if parties who have entered into definite and distinct terms involving certain legal results — certain penalties or legal forfeiture — afterwards by their own act or with their own consent enter upon a course of negotiation which has the effect of leading one of the parties to suppose that the strict rights arising under the contract will not be enforced, or will be kept in suspense, or held in abeyance, the person who otherwise might have enforced those rights will not be allowed to enforce them where it would be inequitable having regard to the dealings which have thus taken place between the parties. My Lords, I repeat that I attribute to the Appellant no intention here to take advantage of, to lay a trap, but it appears to me that both parties by entering upon the negotiation which they entered upon, made it an inequitable thing that the exact period of six months dating from the month of October should afterwards be measured out as against the Respondent as the period during which the repairs must be executed. The approach of Nettle JA was endorsed by Macaulay J in Leading Synthetics Pty Ltd v Adroit Insurance Group Pty Ltd [2011] VSC 467 at [69]. Detriment 12.48 The relying party must suffer, or stand to suffer, detriment if the assumption made by it is not fulfilled. In Grundt v Great Boulder Pty Gold Mines Ltd at 674–5, Dixon J said: Copyright LexisNexis. Sample only, not for classroom use or distribution. Spi-Radan & Stewart - Principles of Australian Equity and Trusts 2nd ed. Ch.12.indd 279 10/10/2012 05:22:31 200595
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