Estoppel Doctrine With Regard to the Australian Jurisdiction - Research Paper Example

Promissory Estoppel Introduction This essay discusses the promissory estoppel doctrine with regard to the Australian jurisdiction. The will begin by defining estoppel in general. Several divisions of estoppel will also be discussed. In addition, types of promissory estoppel will be explained. An outline of the historical origin of the doctrine will also be provided. In defining and categorizing estoppel, the author intends to make use of case law from common law jurisdictions. The preceding will form a basis for understanding the context in Australia. The Australian precedents on promissory estoppel will be scrutinized for conformity and variance with other jurisdictions. Of importance, landmark decisions will be central to the essay construction. The author will wrap up with a conclusion of the major findings. Definition According to Stone1, consideration is mandatory in contract law to make agreements legally binding. It forms the test for enforceability of contracts. Its absence makes an agreement gratuitous and non enforceable as a contract. Estoppel is a claim in equity precluding someone from denying existence of a state of affairs if it would be unconscionable2 and the doctrine deals with pre-contractual waste by preventing adoption of positions at odds with previously relied upon positions by others3. Such denial might affect a person’s legal rights. Owen J. in The Bell Group Ltd v Westpac Banking Corporation4 defined estoppel as a: “… doctrine designed to protect a party from the detriment that would flow from that party’s change of position if the assumption or expectation that led to it were to be rendered groundless by another.”1 Justice Dixon in Grundt v Great Boulder Pty Gold Mines limited2 opined that law does not permit a party’s departure from an assumption of fact which he has caused another party to adopt or accept.3 History In common law, the claimant had to prove existence of a contractual relationship in defense against a claim of non performance of contract. The requirement of consideration led to injustices which promissory estoppel sought to address. By preventing a promisor from reneging on promises without consideration, Handley AJA in Equititrust Ltd (formerly Equitiloan Ltd) v Franks4 noted that promissory estoppel dealt with equitably binding assurances restraining promisors from enforcing his legal rights. Estoppel can be traced to Denning J’s reasoning in Central London Property Trust Ltd v High Trees House Ltd5 which described estoppel ensuring justice and equity6 in holding a landlord to his undertaking to accept reduced rent. The defendant was estopped from demanding rent arrears for the period of the war due to scarcity of tenants7. Professor Atiyah8 states that consideration was classically a reason for enforcement that became rigidly entrenched in common law contractual rules such as benefits and detriments, past consideration being measured in terms of commercial value. These rigid rules are actually not strictly followed in English courts and in promissory estoppel as exemplified by the High Trees case on enforceability of a statement of intention. Stone1 argues for a return to the original idea of consideration as just a reason for enforcement of promises and advocates for adoption of reliance as alternative to consideration as currently defined by common law. When a promisee relies on a promise, it is unfair to allow the promisor to escape responsibility due to absence of binding contract. In Australia, promissory estoppel can be used as both sword and shield to provide a promisee with a cause of action.2 Types of Estoppel The Lords in Jorden v Money3 stated that common law estoppel was confined to assumptions and representations of existing fact. The presence of consideration was deemed necessary for representations of future intentions or promises creating assumptions of fact arising from judicial decisions and parties’ agreement.4 Evidence was required to prove the facts establishing legal rights. Basically, this limitation made common law estoppel a defense. Contrawise, estoppel in equity was not so limited, meaning that promises could not later be denied when reasonably relied upon by others. This lack of restriction meant that estoppel could function as a defense and back claims. Equitable estoppel is divided into promissory for general promises, and proprietary estoppel on dealings or transactions in land, but basically the two address actions that are inconsistent with prior promises. They both require a clear promise, assurance made by a person affecting another’s position, and hold that the promisor cannot go back on his promise or act inconsistently with it. Promissory estoppel remedies the problem of informally made promises as a partial solution5 while proprietary estoppel6 was historically used as both a defense and a cause of action. Proprietary estoppel was restricted to real property law such as land rights in absence of a legally enforceable contract as found in Giumelli v Giumelli1. In the UK, equitable estoppel is limited to preexisting legal relationships between parties but this is not the case in other common law jurisdictions such as Australia. Modern equitable estoppel has a broadened scope in addition to its contractual relationships such as pre-contractual negotiations, unwritten land agreements and in situations where claimants are prevented from suing by privity of contract. Australian Case The Australian estoppel regards the dissection of equitable estoppel into promissory and proprietary as non important, but rather focuses on prevention of inconsistent conduct causing loss to parties in pre-contractual negotiations. Validity of the promisor’s reason for not fulfilling expectations is immaterial as the New South Wales Court of Appeal found in Sabemo v North Sydney Municipal Council2. In this case the plaintiff worked on the defendant’s land before the defendant broke off negotiations and abandoned the project. The court ordered restitution for pre-contractual expenditure as the defendant’s reason for abandoning the transaction was not related to disagreement with contractual terms but were in line with own interests. The Australian approach differs from the English approach in equity3. The High Court in Legione v Hateley4 adopted promissory estoppel in the country. Waltons Stores (Intestate) Limited v Maher5 consolidated6 promissory and proprietary estoppels into equitable estoppel. Waltons’ was a dispute about an intended lease of land for a development project1. The owner of the land believed that he would enter into contractual relations with the lessee and hence developed the land for the lessee. Meanwhile, the defendant had doubts about the project and subsequently refused to proceed with the transaction without informing the land owner. The plaintiff’s claim against the defendant to enforce the lease agreement was allowed to proceed on grounds that the lessee had acted unconscionably to cause detriment by his non-communication of change of intent and cancellation. The court felt that it was unconscionable, having regard to the promisors conduct, for the promisor to ignore the promise with regard to the urgency and circumstances of the transaction.2 The remedy granted should go no further than preventing the inconsistent positioning3 to prevent the detriment to a claimant. The High Court set out the following requirements for promissory estoppel4 in Waltons. To succeed in a claim the plaintiff has to prove a legal relationship with the defendant or expect that such relationship would exist in the future; that this expectations was knowingly or intentionally induced by the defendant with a view to make the plaintiff change position; that in reliance on this inducement the plaintiff acted to his detriment and that losses were caused by the defendant’s failure to fulfill his promises or the expectations induced in the plaintiff. In this ruling, Waltons interpreted the doctrine of promissory estoppel as having ability to create liability. ‘Australian’ estoppel is judicial interpretation of the duty to ensure reliability of induced expectations as illustrated in Commonwealth of Australia v Verwayen5. Verwayen was injured as a result of collision between two Royal Australian Navy vessels, as he served aboard one, and sued for negligence6. The Commonwealth admitted liability, contested damages but left out the limitation of action defense in defense, confirming these in writing to the claimant. Later, defendant pled the defense of limitation. The High Court found that the defendant was estopped from pleading the limitation of actions defense. The detriment in this case was the problems caused to the claimant due to the Commonwealth’s inducement and attempts to depart from the assumption. The factors1 affecting estoppel application include nature of dealings and the relationships between the parties2. Estoppel is distinguished from duty not to lie and to keep promises3 and limited to the promisor ability to prevent harm.4 The Australian approach focuses more on present inducements, the relying party’s interests5, the relationship nature and realtive strenngth of parties and the historical context as in Fill v AWJ Moore and Co Pty Limited on expectation to use a private road as usual.6 The expectation alleged by litigant must be clear and unambiguous7 and reasonable.8 Groves opines that inducement is not restricted to a state of affairs, but also includes facts and law9. To induce an assumption, making promises expressly or impliedly, silence and acquiescence is enough10. The courts require a causal link between the expectation of the relying party and position change11. Promisor knowledge or intention of the reliance on assumption is required, and so is detriment on acting or failing to act12that makes the party worse1. By giving notice or avoiding causing the detriment before loss is incurred, a promisor can escape liability under this estoppel2. In Guimelli v Guimelli3, a son was promised by his parents that he would be given part of his parents’ property when he attained age 18 for working without pay, developing the property and creating a partnership with his parents. He went ahead to built on the property, refused work offer from his father in law but after a disagreement with his parents on his remarriage, he moved away and sued his parents for his part of the property. The court found that he had suffered detriment by relying on his parents’ promise. The High Trees case required no detriment but Australian law requires proof of detriment to the plaintiff evidenced by a positive act or omission in reliance which must be material. Detriment can also be referred to as change of position4. In Australian Broadcasting Commisions v XIVth Commonwealth Games, the parties had been negotiating for television broadcasting rights for the 1990 games, with the understanding that sighing of the contract wa necesarry. Such arrangements can make parties avoid liability under estoppel. The remedies meant to prevent detriment from unconcionable conduct should put the plainftiff in the position in which he or she would have been had the defendant fulfilled his expectations and not to compel performance of such assumptions. Spence urges judicial caution in awards based on the tortious concept of causation5. The promisee is entitled to relief in proportion to damage incurred. Meagher JA6 disputes the minimum justice principle in Waltons by basing relief against the injustice suffered, but agrees that effect of this relief on third parties ought to be considered. Conclusion The preceding analysis of Australian case law on estoppel establishes that equitable estoppel in this combines both promissory and proprietary aspects. This combination differs from English law separation of the two. Australian estoppel also does away with the requirement of contractual relationship, and consideration moving from the claimant as requirements for enforceability. The doctrine is still in the processes of being delineated in the law of the country. Bibliography Clarke, J. "Waltons Stores (Interstate) Ltd v Maher." Australian Contract Law. 2010. Accessed April 5, 2015. http://www.australiancontractlaw.com/cases/walton.html. Groves, M. Law and Government in Australia. Sydney: Federation Press, 2005. Heraghty, M. "Revisiting Detriment in Promissory Estoppel." 1, 2014. Accessed April 5, 2015. http://www.mheraghty.com.au/sites/default/files/imce/publications/pub11promissoryestoppel.pdf. Hogg, M. Promises and Contract Law: Comparative Perspectives. Cambridge: Cambridge University Press, 2011. Randan, P., and C. Stewart. "Equitable Estoppel." In Principles of Australian Equity and Trusts, 267 286. Chatswood, N.S.W.: LexisNexis Butterworths, 2009. Spence, M. "Australian Estoppel and the Protection of Reliance." Journal of Contract Law 11 (1997): 203 221. Stone, R. The Modern Law of Contract. 7th Ed. London: Routledge-Cavendish, 2008. Read More