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PRINCIPLES OF AUSTRALIAN EQUITY AND TRUSTS 12.22 It is to be noted that there is not a great difference between the two streams of proprietary estoppel. Rather, they simply reflect differing levels of passivity on the part of the landowner. The actions of the landowner, in either encouraging expenditure or acquiescing in expenditure, constitute fraud in equity. In Ward v Kirkland [1967] Ch 194 at 239, Ungoed-Thomas J observed as follows: It was suggested before me that there was a distinction between an act which is acquiescing or encouraging a person in such circumstances to expend money and merely standing aside with the knowledge that such money was being expended in reliance on having the right which is claimed. I, for my part, fail to see any substance in this distinction. The fundamental principle of the equity is unconscionable behaviour, and unconscionable behaviour can arise where there is knowledge by the legal owner of the circumstances in which the claimant is incurring the expenditure as much as if he himself were requesting or inciting that expenditure. It seems to me that abstention as well as request or incitement can fall within the principle from which the recognition of the claimant’s equity arises. 12.23 A commonly cited statement of the relevant elements of proprietary estoppel is that of Fry J in Willmott v Barber (1880) 15 Ch D 96 at 105–6, where his Honour said: A man is not to be deprived of his legal rights unless he has acted in such a way as would make it fraudulent for him to set up those rights. What, then, are the elements or requisites necessary to constitute fraud of that description? In the first place the plaintiff must have made a mistake as to his legal rights. Secondly, the plaintiff must have expended some money or must have done some act (not necessarily upon the defendant’s land) on the faith of his mistaken belief. Thirdly, the defendant, the possessor of the legal right, must know of the existence of his own right which is inconsistent with the right claimed by the plaintiff. If he does not know of it he is in the same position as the plaintiff, and the doctrine of acquiescence is founded upon conduct with a knowledge of your legal rights. Fourthly, the defendant, the possessor of the legal right, must know of the plaintiff’s mistaken belief of his rights. If he does not, there is nothing which calls upon him to assert his own rights. Lastly, the defendant, the possessor of the legal right, must have encouraged the plaintiff in his expenditure of money or in the other acts which he has done, either directly or by abstaining from asserting his legal right. 12.24 Later cases indicated that one did not have to establish all these elements to succeed in a proprietary estoppel claim, with the ‘real test’ being, as Buckley LJ said in Shaw v Applegate [1978] 1 All ER 123 at 131, ‘whether on the facts of the particular case the situation has become such that it would be dishonest, or unconscionable, for the plaintiff, or for the person having the right sought to be enforced, to continue to seek to enforce it’. More recently, in Thorner v Major (2009) 3 All ER 945 at 957, Lord Walker of Gestingthorpe said that ‘the doctrine [of proprietary estoppel] is based on three main elements: … a representation or assurance made to the claimant; reliance on it by the claimant; and detriment to the claimant in consequence of his (reasonable) reliance’. The consolidation of promissory and proprietary estoppels 12.25 In Waltons Stores v Maher, the High Court handed down its most significant decision on the topic of estoppel. The significance of this case was that it consolidated promissory and proprietary estoppels into the single, and broader, principle of equitable estoppel. Copyright LexisNexis. Sample only, not for classroom use or distribution. 272 Spi-Radan & Stewart - Principles of Australian Equity and Trusts 2nd ed. Ch.12.indd 272 10/10/2012 05:22:31 200595
273 CHAPTER 12: EQUITABLE ESTOPPEL 12.26 In Waltons Stores v Maher, the Mahers owned commercial premises in Nowra which Waltons was interested in leasing. Waltons wanted to relocate its business in Nowra to new premises and the Mahers’ site was available. The agreement that was reached was that the Mahers would demolish the existing premises and erect a new building to meet the specifications of Waltons. A draft agreement for lease was sent to the solicitors for the Mahers. Some amendments were discussed. Waltons’ solicitors indicated that they expected their client’s agreement to the alterations and said they would let the Mahers know if the amendments were not acceptable. The Mahers’ solicitors sent the amended lease, duly executed by the Mahers, to Waltons’ solicitors ‘by way of exchange’. The letter was not acknowledged by Waltons’ solicitors until two months later. The Mahers began to demolish the existing premises, as time was critical if they were to complete the demolition and rebuilding in time for the start of the lease agreement. Waltons was found to know what the Mahers were doing. However, after receiving the letter and executed lease, Waltons reconsidered its position and a few months later wrote to the Mahers’ solicitors saying that the lease had not been executed by Waltons and that Waltons was not proceeding with it. The Mahers sued Waltons for damages for breach of contract on the basis that Waltons was estopped from denying the existence of the lease. 12.27 The majority of the High Court (Mason CJ, Wilson and Brennan JJ) found for the Mahers on the basis of equitable estoppel. (The minority of Deane and Gaudron JJ found for the Mahers on the basis of common law estoppel.) In finding in favour of the Mahers on the basis of equitable estoppel, the majority did so in circumstances where there was no pre-existing contract between the parties and on the basis that the Mahers used estoppel as the basis for a cause of action and not merely as a defensive mechanism. In so doing, the High majority removed the already noted (see 12.15) limitations on the operation of promissory estoppel. In coming to their decision, the majority made it clear that promissory estoppel was but a species of the broader principle of equitable estoppel — the other major species being proprietary estoppel. The underlying rationale for equitable estoppel was firmly based in the notion of unconscionability or unconscientiousness: see 2.4–2.5. Mason CJ and Wilson J, at CLR 404; ALR 524, said: One may therefore discern in the cases a common thread which links them together, namely, the principle that equity will come to the relief of a plaintiff who has acted to his detriment on the basis of a basic assumption in relation to which the other party to the transaction has ‘played such a part in the adoption of the assumption that it would be unfair or unjust if he were left free to ignore it’: per Dixon J in Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641 at 675 … Equity comes to the relief of such a plaintiff on the footing that it would be unconscionable conduct on the part of the other party to ignore the assumption. ELEMENTS OF EQUITABLE ESTOPPEL 12.28 The essence of the principle of equitable estoppel is equity’s concern with circumstances in which a plaintiff has acted to its detriment on the basis of a fundamental assumption where the defendant’s role in the adoption of that assumption by the plaintiff is such that it would be unconscientious to deny the plaintiff equitable relief. It is the defendant’s failure, having induced or acquiesced in the adoption or maintenance of the assumption, with knowledge that it would be relied upon, to fulfil the assumption or otherwise permit the plaintiff to avoid the detriment to which he or she has been exposed that makes the conduct of the defendant unconscientious and which attracts the intervention of equity. Copyright LexisNexis. Sample only, not for classroom use or distribution. Spi-Radan & Stewart - Principles of Australian Equity and Trusts 2nd ed. Ch.12.indd 273 10/10/2012 05:22:31 200595
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