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PRINCIPLES OF AUSTRALIAN EQUITY AND TRUSTS Entire agreement clauses and equitable estoppel 12.56 A question with respect to equitable estoppel is whether a clause in a contract which denies any legal effect to previous negotiations and representations can prevent a relying party from pleading a case based upon equitable estoppel. In relation to such entire agreement clauses, in Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603 at 734; 264 ALR 15 at 141, Campbell JA, speaking for the Court of Appeal on this point, said: I would accept that an entire agreement clause … that … specifically denies efficacy to all previous negotiations and representations, could not overcome an equitable estoppel, once established. An ‘entire agreement clause’ might create a factual difficulty in the way of proof of the elements of equitable estoppel, most obviously, proof of inducement or reliance, and I would not want to rule out the possibility that it might be relevant to any precise remedy granted (though I cannot at present think of an example of when that might occur). However, it does not create an insuperable obstacle of principle. Consistently with the equitable principle that it will not allow a contract to be an instrument of fraud, equity would not permit an entire agreement clause to stultify the operation of its doctrines. RELIEF BASED UPON EQUITABLE ESTOPPEL 12.57 Establishing the elements of equitable estoppel gives rise to an equity in favour of the relying party. This means that the relying party is entitled to some equitable relief. The relief is not based upon there being a promise or representation, but rather upon the expectation that the promise or representation generated: Giumelli v Giumelli at CLR 121; ALR 482. 12.58 It has often be said that there needs to be proportionality between the relief ordered and the detriment suffered, or that the court will, in making its orders, determine the minimum equity required to do justice to the relying party: Waltons Stores v Maher at CLR 419; ALR 535; Commonwealth v Verwayen at CLR 417, 429–30, 441–2; ALR 336, 345–6, 354. However, this is no longer the case. In Walsh v Walsh at [31], Meagher JA stated the current position as follows: There is no governing principle that requires that the relief granted be that which is the minimum necessary to do justice. To the extent that there is a prima facie entitlement to relief on the basis that the adopted expectation is to be made good, that entitlement must be weighed against any injustice to the estopped party in doing so and the detriment suffered by the party who has acted upon the induced expectation. Consideration should also be given to whether the proposed relief has any adverse effects on the interests of third parties. 12.59 In exercising its discretion to make an order in favour of the relying party, in promissory estoppel cases the courts have made it clear that the orders to be granted are generally reliance based in the sense that they are designed to prevent the relying party from suffering detriment: Waltons Stores v Maher at CLR 427; ALR 540; Commonwealth v Verwayen at CLR 411–12, 429, 501; ALR 331–2, 345, 397–8. This is because, satisfying the relying party’s equity will not usually require going beyond preventing that party from suffering detriment. 12.60 Thus, in Mobil Oil v Lyndel Nominees at 238, the court concluded that relief in such cases ‘is intended to relieve against detriment suffered and not to make good an expectation’. Similarly, in ACN 074 971 109 v The National Mutual Life Association of Australasia at 394, Dodds-Streeton JA said: Copyright LexisNexis. Sample only, not for classroom use or distribution. 282 Spi-Radan & Stewart - Principles of Australian Equity and Trusts 2nd ed. Ch.12.indd 282 10/10/2012 05:22:31 200595
283 CHAPTER 12: EQUITABLE ESTOPPEL [The] doctrine [of equitable estoppel] … permits the court to do what is required in order to avoid detriment to the party who has been induced to act upon an assumed state of affairs … [T]hus … according to the circumstances of any given case, the relief required may be less than making good the assumption on the basis of which the plaintiff was encouraged to deal … [W]hat is required to satisfy the equity which arises against an estopped party depends on the circumstances. 12.61 However, it is clear that, in proprietary estoppel cases, a court will usually frame an expectation based order in the sense of making good the assumption or expectation relied upon by the relying party, rather than on the avoidance of detriment: Delaforce v Simpson-Cook at 492–7. In Ramsden v Dyson, at 170, Lord Kingsdown said: If a man … under an expectation created or encouraged by the landlord that he shall have a certain interest [acts to his detriment] upon the faith of such expectation … a Court of equity will compel the landlord to give effect to such … expectation. 12.62 Similarly, in Donis v Donis (2007) 19 VR 577 at 582–3, Nettle JA said the following: As the … decision in Giumelli v Giumelli shows … there is no such restriction in cases where the expectation which is encouraged is the acquisition of an interest in property. In such cases the remedy relates to the understanding of the parties and the expectation that has been encouraged. Prima facie the estopped party can only fulfil his or her equitable obligation by making good the expectation which he or she has encouraged. The estopped party, having promised to confer a proprietary interest on the party entitled to the benefit of the estoppel, and the latter having acted upon the promise to his or her detriment, is bound in conscience to make good the expectation … The prima facie position will yield to individual circumstances. Principle and authority compel the view that where a plaintiff’s expectation or assumption is uncertain or extravagant or out of all proportion to the detriment which the plaintiff has suffered, the court should recognise that the claimant’s equity may be better satisfied in another and possibly more limited way … [B]efore granting relief the court is required to consider all of the circumstances of the case, including the possible effects on third parties, and to avoid going beyond what is required for conscientious conduct or would do injustice to others. But that does not mean that the court is required to be ‘constitutionally parsimonious’ or that it is necessary for there to be substantial correspondence between expectation and the monetary value of the detriment suffered, or which but for the relief to be accorded would be suffered. 12.63 In Giumelli v Giumelli the High Court said there was nothing in earlier cases that precluded a court from granting relief in equitable estoppel cases on the basis of making good the relying party’s assumption or expectation. In Giumelli v Giumelli at CLR 123; ALR 484, Gleeson CJ, McHugh, Gummow and Callinan JJ cited with approval a statement by Deane J in Commonwealth v Verwayen at CLR 445; ALR 356, where his Honour said: [T]he question whether departure from the assumption would be unconscionable must be resolved not by reference to some preconceived formula framed to serve as a universal yardstick but by reference to all the circumstances of the case, including the reasonableness of the conduct of the [relying] party in acting upon the assumption and the nature and extent of the detriment which he would sustain by acting upon the assumption if departure from the assumed state of affairs were permitted. The types of orders that can be made in fulfilling the expectation include ordering a transfer of the property to the relying party, the imposition of a trust, or granting a charge or lien over the Copyright LexisNexis. Sample only, not for classroom use or distribution. Spi-Radan & Stewart - Principles of Australian Equity and Trusts 2nd ed. Ch.12.indd 283 10/10/2012 05:22:31 200595
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