Robertson, Andrew --- "Reasonable Reliance in Estoppel by Conduct" [2000] UNSWLawJl 27; (2000) 23(2) UNSW Law Journal 87
[*] LLB (QIT), LLM (Hons) (QUT), PhD (ANU), Senior Lecturer, Faculty of Law, The University of Melbourne.
[1] M Pratt, “Defeating Reasonable Reliance” [1999] UTasLawRw 12; (2000) 18 University of Tasmania Law Review 181.
[2] M Spence, Protecting Reliance, Hart (1999).
[3] These elements emerge from the judgments in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 384 (“Waltons Stores”) and Commonwealth v Verwayen (1990) 170 CLR 394 (“Verwayen”).
[4] An assumption as to the legal rights of the representee can give rise to either form of estoppel by conduct, but is more likely to give rise to an equitable estoppel; see A Robertson, “Estoppel by Conduct: Unresolved Issues at Common Law And in Equity” [1999] National Law Review 7 at [46]-[49].
[5] See March v E & M H Stramere Pty Ltd [1991] HCA 12; (1991) 171 CLR 506 at 515, per Mason J.
[6] A Robertson, “Knowledge and Unconscionability in a Unified Estoppel” [1998] MonashULawRw 6; (1998) 24 Monash University Law Review 115.
[7] Sarat Chunder Dey v Gopal Chunder Laha (1892) 19 LR Ind App 203 at 215.
[8] Greenwood v Martins Bank Ltd [1933] AC 51 at 57, per Lord Tomlin.
[9] Thompson v Palmer [1933] HCA 61; (1933) 49 CLR 507 at 547, per Dixon J; Newbon v City Mutual Life Assurance Society Ltd [1935] HCA 33; (1935) 52 CLR 723 at 734-5, per Rich, Dixon and Evatt JJ; Grundt v Great Boulder Pty Gold Mines Ltd [1937] HCA 58; (1937) 59 CLR 641. Compare the approach of Starke J in Newbon [1935] HCA 33; (1935) 52 CLR 723 at 738.
[10] See, for example, Legione v Hateley [1983] HCA 11; (1983) 152 CLR 406 at 438-9; Foran v Wight [1989] HCA 51; (1989) 168 CLR 385 at 411-2, per Mason CJ; at 435-6, per Deane J; at 449, per Dawson J; Commonwealth v Verwayen note 3 supra at 423, 429-30, per Brennan J.
[11] Waltons Stores, note 3 supra at 458-63, per Gaudron J; at 397-9, per Mason CJ and Wilson J; at 413, per Brennan J.
[12] Ibid at 444-52, per Deane J.
[13] Ibid at 407, per Mason CJ and Wilson J; at 428-9, per Brennan J.
[14] Verwayen, note 3 supra at 413-7, per Mason CJ; at 444-9, per Deane J; at 453-60, per Dawson J; at 500-2, per McHugh J. Justice Brennan, at 423-30, discussed equitable estoppel exclusively in terms of representations, in contrast to the approach he adopted in Waltons Stores.
[15] K Lindgren, “Estoppel in Contract” [1989] UNSWLawJl 8; (1989) 12 UNSWLJ 153 at 156.
[16] The position may be different in England. In Sledmore v Dalby [1996] EWCA Civ 1305; (1996) 72 P & CR 196 at 207, Hobhouse LJ suggested that the emphasis in estoppel by representation is on the representation, which must be clear and unequivocal, and “provided there is reliance, the detriment element may be limited”. In proprietary estoppel, he suggested, the emphasis is the other way around, and while the detriment “must be distinct and substantial”, the conduct of the representor “may be no more than acquiescence”.
[17] Note 10 supra at 421, per Gibbs CJ and Murphy J.
[18] Ibid at 421.
[19] Ibid at 422.
[20] Ibid at 423, Gibbs CJ and Murphy J did not name the type of estoppel which arose, but referred to the principles articulated by Lord Cairns LC in Hughes v Metropolitan Railway Co [1876] UKLawRpCP 15; (1877) 2 App Cas 439 at 448 and Bowen LJ in Birmingham and District Land Co v London and North Western Railway Co [1888] UKLawRpCh 197; (1888) 40 Ch D 268 at 286, as developed in Central London Property Trust Ltd v High Trees House Ltd [1946] EWHC KB 1; [1947] KB 130 and affirmed by the House of Lords in Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd [1955] UKHL 5; [1955] 2 All ER 657 and by the Privy Council in Ajayi v RT Briscoe (Nigeria) Ltd [1964] 3 All ER 556 at 559.
[21] Legione v Hateley, note 10 supra at 438.
[22] Ibid at 440.
[23] Ibid at 438.
[24] Ibid at 453-5.
[25] Although Brennan J did not discuss the requirements of an estoppel, the relevant inquiry he made was whether a promise or representation could be inferred, ibid at 454.
[26] This is similar to Lord Denning’s conception of promissory estoppel as an essentially contractual source of obligation which is based on promise, rather than reliance: see AT Denning, “Recent Developments in the Doctrine of Consideration” (1952) 15 Modern Law Review 1.
[27] D Greig and J Davis, The Law of Contract , Law Book Company (1987) pp 149-57.
[28] Ibid, p 149.
[29] Ibid, p 155.
[30] See notes 11-16 supra and accompanying text.
[31] M Pratt, “Identifying the Harm Done: A Critique of the Reliance Theory of Estoppel” (1999) 21 Adelaide Law Review 209 at 218.
[32] On the nature of the unconscionability requirement, and the role of the ‘reasonable expectation of reliance’ question in establishing an estoppel, see A Robertson, note 6 supra.
[33] Note 1 supra.
[34] This connection between reasonableness and the threshold requirement is implicit in the argument made by D Greig and J Davis, note 27 supra, pp 149-55 that the alternative to a restrictive threshold requirement, requiring an unequivocal promise or representation, is an objective approach, “based upon the overriding concept of reasonable reliance”. A restrictive threshold requirement is unnecessary in a doctrine that requires a representee to act reasonably in adopting and acting upon the relevant assumption.
[35] M Pratt, note 1 supra at 187.
[36] M Spence, note 2 supra 55.
[37] Assistance can also be derived from the reasonable person standard in the rule in Hadley v Baxendale (1854) 9 Ex 341; 156 ER 145. LL Fuller and W Perdue, “The Reliance Interest in Contract Damages: 1” (1936) 46 Yale Law Journal 52 at 86 suggest that stating the remoteness of damage problem in terms of the reasonable person “creates a bias in favour of exempting normal or average conduct from legal penalties”. Similarly, it could be said that restricting the availability of estoppel by reference to reasonableness creates a bias in favour of protecting those who engage in normal or average conduct from the particular harm with which estoppel is concerned. For a detailed examination of the use of the reasonable person standard in contract law and its ecclesiastic and philosophical foundations, see L DiMatteo, “The Counterpoise of Contracts: The Reasonable Person Standard and the Subjectivity of Judgment” (1997) 48 University of Southern California Law Review 293.
[38] MA Millner, “Tort: Cases and Materials by BA Hample” (1976) 92 Law Quarterly Review 131 at 133.
[39] Neill v NSW Fresh Food and Ice Pty Ltd [1963] HCA 4; (1963) 108 CLR 362 at 368, per Taylor and Owen JJ.
[40] Mercer v Commissioner for Road Transport and Tramways (NSW) [1936] HCA 71; (1936) 56 CLR 580, especially at 589, per Latham CJ. In F v R (1983) 33 SASR 189 at 194, King CJ said that the ultimate question is whether the defendant’s conduct conforms to the standard of care required by the law, not whether it accords with the practice of the defendant’s profession.
[41] F Trindade and P Cane, The Law of Torts in Australia, Oxford University Press (2nd ed, 1993) p 428.
[42] P Cane, The Anatomy of Tort Law, Hart (1997) p 42.
[43] J Coleman, “The Practice of Corrective Justice” in David Owen (ed), Philosophical Foundations of Tort Law (1995) 53 at 69-72.
[44] The plaintiff’s failure to take care to protect his own interests was one of the reasons for the failure of the plea of estoppel by acquiescence in Dann v Spurier [1802] EngR 233; (1802) 7 Ves 231; 32 ER 94. The plaintiff expended a considerable sum of money in repairing demised premises after he had been told by the landlord that his acceptance as a tenant was not assured. Lord Chancellor Eldon held that “the plaintiff has not used the degree of circumspection and caution, that the Court can act upon the latter part of the prayer of this bill, consistently with the reasonable security of the affairs of mankind”, at 95.
[45] PS Atiyah, Promises, Morals and Law, Clarendon Press (1981) p 68.
[46] Ibid.
[47] D Kennedy, “Form and Substance in Private Law Adjudication” (1976) 89 Harvard Law Review 1685 at 1688 describes reasonableness as a standard, the application of which “requires the judge both to discover the facts of a particular situation and to assess them in terms of the purposes or social values embodied in the standard”.
[48] P Finn, “Commerce, the Common Law and Morality” [1989] MelbULawRw 5; (1989) 17 MULR 87 at 97-8.
[49] M Spence, note 2 supra, p 55.
[50] See A Robertson, note 6 supra and “Reliance, Conscience and the New Equitable Estoppel” [2000] MelbULawRw 7; (2000) 24 MULR 218 at 225-8.
[51] See Austotel v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582 at 585-6, per Kirby P.
[52] M Spence, note 2 supra, p 63.
[53] Although there are situations where it is reasonable to do so, such as in Waltons Stores, note 3 supra.
[54] See A Robertson, “Towards a Unifying Purpose for Estoppel” [1996] MonashULawRw 1; (1996) 22 Monash University Law Review 1; “Situating Equitable Estoppel Within the Law of Obligations” [1997] SydLawRw 2; (1997) 19 Sydney Law Review 32.
[55] An example of this is provided by Coffs Harbour City Council v Kelly (Unreported, Supreme Court of New South Wales, Hidden J, 10 April 1997). In order to protect local residents from the noise of proposed building work, the Council offered to provide air conditioning and asked them to obtain quotations. Hidden J held that it was unreasonable for the residents to assume that the council would pay for expensive and sophisticated systems. He said that: “it does not appear to me that the initial dealings between the Council and the respondents could reasonably have led them to believe any more than that the Council was prepared to pay for air conditioning to cater for the restriction on ventilation necessitated by the work, that it would receive quotations for that purpose, and pay the amount of those quotations if it found them acceptable”.
[56] M Pratt, note 1 supra at 185.
[57] Ibid.
[58] Cf Amalgamated Investment & Property Co Ltd v Texas Commerce International Bank Ltd [1982] QB 84 at 106-7, per Robert Goff J.
[59] On the reliance-based approach to relief, see A Robertson, “Satisfying the Minimum Equity: Equitable Estoppel Remedies after Verwayen” [1996] MelbULawRw 5; (1996) 20 MULR 805; “Reliance and Expectation in Estoppel Remedies” (1998) 18 Legal Studies 360.
[60] See, for example, the discussion of Dann v Spurier, note 44 supra.
[61] [1848] EngR 506; (1848) 2 Ex 352; 154 ER 652.
[62] [1837] EngR 195; (1837) 6 A & E 469; 112 ER 179 at 181.
[63] [1848] EngR 506; (1848) 2 Ex 352; 154 ER 652 at 663:
By the term “wilfully”, however, in that rule, we must understand, if not that the party represents that to be true which he knows to be untrue, at least, that he means his representation to be acted upon, and that it is acted upon accordingly; and if whatever a man’s real intention may be, he so conducts himself that a reasonable man would take the representation to be true, and believe that it was meant that he should act upon it as true, the party making the representation would be equally precluded from contesting its truth; and conduct by negligence or omission, where there is a duty cast upon a person, by usage of trade or otherwise to disclose the truth, may often have the same effect.
[64] Ibid at 657.
[66] Ibid at 972.
[67] Ibid at 973.
[68] M Cababé, The Principles of Estoppel, W Maxwell & Son (1888) pp 61-4.
[69] Ibid, p 65.
[70] G Spencer Bower and Sir A Turner, The Law Relating to Estoppel by Representation, Butterworths (3rd ed, 1977) pp 94-5.
[71] (1917) 86 LJ KB 969 at 972, per Lord Reading CJ; at 973, per Lush J: “that an intention to induce reliance may be inferred as a fact if the representation was such as would reasonably have the effect of inducing the representee to believe and act upon it as true”.
[72] [1887] UKLawRpKQB 83; (1887) 19 QBD 68 at 72.
[73] [1854] EngR 238; (1854) 4 HLC 1039; 10 ER 769. The representee in that case married in reliance on his uncle’s representation that “my county of Tipperary estate will come to you at my death, unless some unforeseen occurrence should taken place”. The House of Lords upheld the decision of the court below that, although the representee had acted on the faith of it, the representation was not capable of giving rise to an enforceable obligation.
[74] F Dawson, “Making Representations Good” (1982) 1 Canterbury Law Review 329 at 334-5.
[75] [1891] UKLawRpCh 106; [1891] 3 Ch 82.
[76] Ibid at 106.
[77] Ibid at 113.
[78] Ibid at 115.
[79] Ibid at 104.
[81] [1897] UKLawRpAC 6; [1897] AC 156 at 161-2, per Lord Halsbury LC; at 168, per Lord Herschell.
[82] [1914] UKLawRpCh 71; [1914] 2 Ch 219 at 228.
[83] [1924] HCA 58; (1924) 35 CLR 355 at 375-6, per Isaacs ACJ, with whom Gavan Duffy J agreed.
[84] [1897] UKLawRpAC 6; [1897] AC 156 at 161-2.
[85] [1891] UKLawRpCh 106; [1891] 3 Ch 82 at 113, quoted in Western Australian Insurance Co Ltd v Dayton, ibid at 375, per Isaacs ACJ.
[86] As Lord Hailsham LC said in Woodhouse AC Israel Cocoa Ltd SA v Nigerian Produce Marketing Co Ltd [1972] AC 741 at 756, the proposition for which Low v Bouverie is “rightly cited as authority” is that the language on which an estoppel is founded must be precise and unambiguous.
[87] In addition to the cases discussed in the text, the reasonableness question appeared to play a role in the rejection of a plea of equitable estoppel by the Full Court of the Supreme Court of Queensland in Valbairn Pty Ltd v Powprop Pty Ltd [1991] 1 Qd R 295 at 297. The Full Court upheld the finding of the trial judge that no equitable estoppel arose from the appellant’s assumption that a lease would be entered into between the parties. The decision appeared to be based in part on the conclusion that “neither party could reasonably have believed that a lease was likely” given the lack of agreement between the parties on certain crucial matters.
[88] (1991) 23 NSWLR 164 at 180.
[89] Ibid at 180-1. Justice Giles referred to questions of “the reasonableness of the conduct of the representee in adopting and acting upon the assumption”, ibid at 180 (emphasis added) and “whether the representee reasonably adopted and relied upon the representation”, ibid at 181 (emphasis added). Quite a different requirement was put forward by Jordan CJ in Franklin v Manufacturers Mutual Insurance Ltd [1935] NSWStRp 62; (1935) 36 SR NSW 76 at 82: “In order that [estoppel by representation] may arise, it is necessary that ... a representation of fact should be made ... in such circumstances that a reasonable man would regard himself as invited to act on it in a particular way”.
[90] The notion that the representee’s assumption must be reasonable is supported by the statement of Bowen LJ in Low v Bouverie [1891] UKLawRpCh 106; [1891] 3 Ch 82 at 106 that the representor’s language “must be such as will reasonably be understood in a particular sense by the person to whom it is addressed”. That statement was quoted with approval in George Whitechurch Ltd v Cavanagh & Co [1901] UKLawRpAC 41; [1902] AC 117 at 145, per Lord Brampton; Canada & Dominion Sugar Co Ltd v Canadian National (West Indies) Steamships Ltd [1947] AC 46 (PC). G Spencer Bower and Sir A Turner, note 70 supra, pp 83-4, observe that the dictum was subjected to searching re-examination, but ultimately left untouched, by the House of Lords in Woodhouse AC Israel Cocoa Ltd SA v Nigerian Produce Marketing Co Ltd [1972] 2 All ER 271. G Spencer Bower and Sir A Turner, note 70 supra, pp 82-3, suggest that the onus of proof is on a person seeking to set up an estoppel to show “that the representation was reasonably understood by the representee in a sense, whether primary or secondary, materially inconsistent with the allegation against which the estoppel is now set up”. The second requirement is supported by statements of principle in Freeman v Cooke [1848] EngR 506; (1848) 2 Ex 352; 154 ER 652 at 657; Pierson v Altrincham Urban Council (1917) 86 LJ KB 969 at 972 and 973; Seton, Laing, & Co v Lafone [1887] UKLawRpKQB 83; (1887) 19 QBD 68 at 72.
[91] Waltons Stores, note 3 supra at 397.
[92] Ibid.
[93] Ibid at 403.
[94] Verwayen, note 3 supra at 414.
[95] [1993] HCA 15; (1993) 177 CLR 485 at 506, per Mason CJ, Brennan, Dawson, Toohey and Gaudron JJ (“ASC v Marlborough Gold Mines”).
[96] Ibid at 506, per Mason CJ, Brennan, Dawson, Toohey and Gaudron JJ.
[97] [1933] HCA 61; (1933) 49 CLR 507 at 547.
[98] Note 3 supra at 410-1, per Mason CJ; at 429, per Brennan J; at 436 and 440-1, per Deane J; at 453-4, per Dawson J; at 500-1, per McHugh J.
[100] Cf Fleming v State Bank of New South Wales (Unreported, Supreme Court of New South Wales, Young J, 10 November 1997) at 8-11, where Young J suggested that it may be unconscionable to depart from an assumption which has unreasonably been adopted, where the representor knows that it has been relied upon to the representee’s detriment. It is difficult to imagine a situation in which it would be regarded as unreasonable to rely on an assumption, where the representor is aware of both the adoption of the assumption and the acts of reliance. The representor’s very act of standing by would surely lend sufficient weight to the assumption and the acts of reliance to make the representee’s reliance reasonable.
[101] Unreported, Supreme Court of New South Wales, Bryson J, 16 October 1997.
[102] Ibid at [15].
[103] Ibid at [16].
[105] Ibid at [79]-[90].
[106] Ibid at [87].
[107] (1996) 20 Fam LR 49 at 66.
[108] Verwayen, note 3 supra at 455, per Dawson J. The question whether promissory estoppel could apply outside a pre-existing contractual relationship had explicitly been left open in Legione v Hateley, note 10 supra at 435, per Mason and Deane JJ.
[109] A Leopold, “Estoppel: A Practical Appraisal of Recent Developments” (1991) 7 Australian Bar Review 47 at 65.
[110] Waltons Stores, note 3 supra at 399.
[111] The New Zealand Court of Appeal has gone a step closer to recognising that an equitable estoppel can arise between strangers. In Burbery Mortgage Finance & Savings Ltd v Hindsbank Holdings Ltd [1988] NZCA 220; [1989] 1 NZLR 356, the Court of Appeal held that an equitable estoppel arose between parties whose only relationship was that they had interests in the same subject matter. The representee refrained from taking possession of farm machinery over which it held security on the faith of an assurance, given by a receiver appointed by a mortgagee of the farm land on which it was situated, that the machinery would be used only to assist in the sale of the farm. The receiver subsequently discovered that he had a right of distress against the chattels for unpaid rent. The Court of Appeal held that an equitable estoppel arose which prevented the receiver from distraining against the chattels without first giving the representee the opportunity of resuming its former position. At common law, estoppels commonly arise between parties connected only by virtue of having an interest in the same subject matter: see, for example, Thomas Australia Wholesale Vehicle Trading Co Pty Ltd v Marac Finance Australia Ltd [1985] 3 NSWLR 452.
[112] Waltons Stores, note 3 supra at 426:
If it be unconscionable for an owner of property in certain circumstances to fail to fulfil a non-contractual promise that he will convey an interest in the property to another, is there any reason in principle why it is not unconscionable in similar circumstances to fail to fulfil a non-contractual promise that he will confer a non-proprietary legal right on another? It does not accord with principle to hold that equity, in seeking to avoid detriment occasioned by unconscionable conduct, can give relief in some cases but not in others.
[113] Verwayen, note 3 supra at 455.
[114] Ibid.
[115] Note 107 supra. The representee in W v G conceived and bore two children on the faith of an assumption that the representor would act with the representee as parent of the children, and would contribute to raising them for as long as was necessary. Hodgson J held that the representee was entitled to relief on the basis of equitable estoppel. For a discussion of the use of equitable estoppel as an independent cause of action see A Robertson, “Estoppel by Conduct: Unresolved Issues at Common Law And in Equity”, note 4 supra at [50]-[59].
[116] (1991) 23 NSWLR 571 (“Lee Gleeson”). In Lee Gleeson, Brownie J treated equitable estoppel as a proper basis on which to enforce a gratuitous promise made to a person with whom the promisor was not in a contractual or other legal relationship. The representee was a builder who completed certain building works for a property owner in financial difficulties on the faith of an assurance by the owner’s bank that the builder would be paid from the sale proceeds of the property. Justice Brownie held that it would be unconscionable in those circumstances for the bank to deny the existence or the binding quality of its representation to the builder.
[117] The reasonableness of the representee’s reliance was unsuccessfully challenged by the representor in W v G, note 107 supra at 66, on the basis that it was highly unlikely the relationship between the parties would endure.
[118] M Spence, “Australian Estoppel and the Protection of Reliance” (1997) 11 Journal of Contract Law 203 at 206-7 and 216-7 and note 2 supra, p 64, also sees the length of the relationship between the parties as relevant to the establishment of an estoppel, although he sees it as one of the criteria for determining whether it is unconscionable for the representor to depart from the relevant assumption.
[119] The example of an estoppel arising from reliance on a promise to fund an overseas trip was used by J Weinstein, “Promissory Estoppel in Washington” (1980) 55 Washington Law Review 795 at 810, who observed that the reasonableness of reliance will depend on the sincerity of the promise and the setting in which it was made, as well as the relationship between the parties.
[120] Note 1 supra at 187-9.
[121] M Hollis, Trust Within Reason, Cambridge University Press (1998) pp 10-14.
[122] Note 1 supra at 187.
[123] See A Robertson, “Situating Equitable Estoppel Within the Law of Obligations”, note 54 supra at 61-2 for criticism of a similar argument that reasonableness of reliance on a promise must depend on the enforceability of the promise.