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PRINCIPLES OF AUSTRALIAN EQUITY AND TRUSTS modern doctrine of equitable estoppel can provide relief in various other areas where contractual remedies are unavailable. Some of these areas include: • where, during negotiations to enter into a contract, an offeree, believing that the offer will not be revoked proceeds to act to his or her detriment upon that belief; • where there has been non-compliance with the statutory requirement of writing with respect to a contract involving land; • where the rule in Hoyt’s Pty Ltd v Spencer (1919) 27 CLR 133 precludes the finding of a collateral contract: Wright v Hamilton Island Enterprises Ltd [2003] QCA 36; • 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; 80 ALR 574 at 601. 12.14 The principles which underlie promissory estoppel were present in nineteenth century case law, but they were given a more contemporary formulation by Denning J in the case of Central London Property Trust Ltd v High Trees House Ltd [1947] 1 KB 130. In that case Central London Property Trust (CLPT) leased a block of flats to High Trees House (HTH) for a period of 99 years. In 1940, CLPT agreed to accept a reduced rent, which was paid for the next five years by HTH. CLPT accepted the reduction because of the low occupancy rate for the flats during World War II. In 1945, with the flats all fully let, CLPT asserted a claim for the full rent thereafter. Denning J said that CLPT was entitled to the full rent as claimed, on the basis that the agreement for a reduced rent was only for as long as the flats were not fully let. The critical aspect of the case was the statement by Denning J that, if CLPT had claimed the full rent for the years 1940–45, it would have failed. Even though the promise to accept a reduced rent was not supported by consideration, the principle of promissory estoppel would have been raised against CLPT, preventing recovery of the forgone rent. 12.15 For many years the operation of promissory estoppel principles was subject to two important limitations: 1. The promise had to be in the context of one intended to affect a pre-existing legal relationship between the parties: Combe v Combe [1951] 2 KB 215 at 220. In High Trees, this was satisfied in that the parties were in a lease relationship and the promise was in relation to terms agreed under that lease. 2. Promissory estoppel could only be used as a defence to an action brought by the promisor against the promisee. It was said that it could only be used as a ‘shield’ and not as a ‘sword’: Combe v Combe at 220. In High Trees, this was satisfied as it was HTH, the defendant/promisee, that would have used promissory estoppel as a defence to a claim for the forgone rent by CLPT, the plaintiff/promisor. 12.16 In Australia, the doctrine of promissory estoppel was first authoritatively accepted by the High Court in Legione v Hateley (1983) 152 CLR 406; 46 ALR 1. Proprietary estoppel 12.17 In relation to proprietary estoppel, it always was able to act as a sword as well as a shield and it is this feature that it has brought to equitable estoppel generally. Proprietary estoppel’s other major difference from promissory estoppel is its operation in the realm of real property law. This estoppel operates to restrict the legal rights of landowners if they have encouraged the belief in another, or at least acquiesced in that other’s belief, that he or she has some entitlement over the property and that belief has been acted upon; for example, by some alteration or improvement having been made Copyright LexisNexis. Sample only, not for classroom use or distribution. 270 Spi-Radan & Stewart - Principles of Australian Equity and Trusts 2nd ed. Ch.12.indd 270 10/10/2012 05:22:31 200595
CHAPTER 12: EQUITABLE ESTOPPEL to the land. However, no proprietary estoppel claim is available if the plaintiff and defendant have a legally enforceable contract relating to the property: Giumelli v Giumelli (1999) 196 CLR 101 at 121; 161 ALR 473 at 482; Riches v Hogben [1985] 2 Qd R 292 at 301. As Young CJ in Eq observed in Barnes v Alderton [2008] NSWSC 107 at [55], ‘contract and proprietary estoppel are mutually exclusive’. 12.18 Due to the two methods by which the assumption of an interest could arise, proprietary estoppel was recognised as comprising two streams. The first is estoppel by encouragement, which was described by Handley JA in Delaforce v Simpson-Cook (2010) 78 NSWLR 483 at 488, as follows: Such an estoppel comes into existence when an owner of property has encouraged another to alter his or her position in the expectation of obtaining a proprietary interest and that other, in reliance on the expectation created or encouraged by the property owner, has changed his or her position to their detriment. If these matters are established equity may compel the owner to give effect to that expectation in whole or in part. 12.19 Dillwyn v Llewelyn [1862] All ER 384 is the classic example of estoppel by encouragement. In that case a father put his son into possession of land which he purported to voluntarily convey to his son. The conveyance was ineffective. With his father’s assent and approval, the son built and occupied a house on the land. After the father’s death, the son sought a declaration that he was the owner of the land in equity and that the trustees of the land be ordered to convey the land to him absolutely. The House of Lords made these orders. 12.20 The other stream of proprietary estoppel is estoppel by acquiescence, which was succinctly explained by Cranworth LJ in Ramsden v Dyson (1866) LR 1 HL 129 at 140–1, as follows: If a stranger begins to build on my land supposing it to be his own, and I, perceiving his mistake, abstain from setting him right, and leave him to persevere in his error, a Court of equity will not allow me afterwards to assert my title to the land on which he had expended money on the supposition that the land was his own. It considers that, when I saw the mistake into which he had fallen, it was my duty to be active and to state my adverse title; and that it would be dishonest in me to remain wilfully passive on such an occasion, in order afterwards to profit by the mistake which I might have prevented. But it will be observed that to raise such an equity two things are required, first, that the person expending the money supposes himself to be building on his own land; and, secondly, that the real owner at the time of the expenditure knows that the land belongs to him and not to the person expending the money in the belief that he is the owner. For if a stranger builds on my land knowing it to be mine, there is no principle of equity which would prevent my claiming the land with the benefit of all the expenditure made on it. There would be nothing in my conduct, active or passive, making it inequitable in me to assert my legal rights. 12.21 For a proprietary estoppel claim to be successful, the plaintiff must have suffered some detriment. In Barnes v Alderton at [42], Young CJ in Eq put it as follows: No equity arises to raise a proprietary estoppel unless the person in whose favour it is being raised, has acted to their prejudice or detriment in some way whether in terms of direct expenditure or on some other basis. However, the detriment may not necessarily be expenditure of money, commonly a claimant leaves her job, moves in with the promisor and does his housekeeping for many years … However, … minor expenditure such as day to day living expenses or minor repairs will not qualify. 271 Copyright LexisNexis. Sample only, not for classroom use or distribution. Spi-Radan & Stewart - Principles of Australian Equity and Trusts 2nd ed. Ch.12.indd 271 10/10/2012 05:22:31 200595
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