Topic 2(d): Promissory Estoppel Background:  Deficiency of consideration: fails to recognise detrimental reliance on a promise as a basis for enforcing the promise. (eg. fails to protect B against harm suffered as a result of reliance on A’s promise).

Development of Estoppel:  Forerunner: o Principle of estoppel by representation by fact. o Originated in the Court of Chancery, later applied in common law courts.  Up to mid 19th C: COC ordered representor to “make good” a representation as to future conduct if a failure to fulfil would cause harm to relying party as a result of reliance.  Mid 19th C: Above ended due to concern of sanctity of bargains and promote ideals of self-reliance. o Jorden v Money: majority of HOL – a promise or representation as to future conduct could only be binding by way of contract. o Thus, limited to representations of existing fact.  Two exceptions developed: o Proprietary estoppel: where owner of land led relying party to assume they had/would be granted interest in that land. o Promissory estoppel: where representor led relying party to believe certain contractual rights would not be enforced.  Central London Property Trust Ltd v High Trees House Ltd: o Denning J: promissory estoppel broadened: where person made a promise intended to affect legal relations between the parties o Promissory estoppel only arise where parties in pre-existing legal relationship. o Only as defence preventing enforcement of rights which representor had promised not to enforce.  Legion v Hateley: o HC recognised promissory estoppel (future conduct). o Representation must be clear and unambiguous.  Waltons Stores (Interstate) Ltd v Maher: W neg to lease land from M on terms that M would demolish old building on land and construct new building. M signed contract and sent to W, who went slow on transaction pending review of retailing strategy. 40% of building done, W not signed and did not want lease. o W estopped from denying signing of lease. o Deane and Gaudron JJ: M acted on assumption that exchange HAD taken place and binding agreement for lease had been made. o Mason CJ, Wilson and Brennan J: M acted on assumption that W WOULD complete transaction. o Mason CJ and Wilson J: promissory estoppel could arise between parties involved in pre- contractual neg. o Divide between estoppel arising from fact (Jorden v Money) and that of future conduct – drawn various strands of estoppel into one doctrine. o Used aggressively. o Recognised promissory estoppel as a general principle which could operate in any circumstances of legal relations, not just existing contractual relations.  Commonwealth v Verwayen: In 1964 Verwayen suffered injuries including psychiatric harm as result of collision of two naval vessels engaged in combat exercises. Did not take action for 20 years because he assumed he was not owed duty of care in this case. A HC in 1982 cast doubt on this assumption. V took action in 1984 for damages for negligence. C did not plead defence available to it and did not deny that duty of care was owed. Representations were made that C had made policy decision not to plead those defences. In reliance of those reps, V continued actions until 1986 when C changed policy and sought to plead defence. V claimed that C should be prevented from using those defences. o Trial judge found for C, but on appeal FC of SC of Vic: C estopped from its promise not to please its defense. HC dismissed appeal by 4-3 maj. o Gaudron and Toohey JJ: C had waived its defences. Other members: waiver did not prevent C from pleading defences. Other two members found for Verwayen on estoppel. o Deane and Dawson JJ: estoppel arose. V continued action on faith of C’s rep and suffered increased stress, anxiety and inconvenience that extended beyond legal costs. o Mason CJ, Brennan and McHugh JJ dissented. o Mason Cj: detriment to emotional condition (stress of continuing proceedings) – no evidence. Only detriment for estoppel was financial cost of litigation. Estoppel against C would satisfy V with money for that cost but did not require C to be held by its rep. Brennan and McHugh JJ: equity could be raised without holding C to its promise. Brennan J: V’s ill health was expectation loss from breach of promise and not relevant.

Estoppel:  Definition: an equitable claim that prevents a party from denying the existence of an assumption as to a state of affairs (which assumption the other party has acted upon), in circumstances where the denial would be unconscionable.  Distinguished from misrepresentation or misleading/deceptive conduct: o Estoppel concerned only with INCONSISTENT CONDUCT – saying one thing and doing another. Not saying something false.  Arises when inconsistent conduct by one party causes harm to another as a result of second party’s reliance. Either: o Provides enforceable rights where none are provided by law of contract. o Prevent one party from enforcing contractual rights against another.  Elements: o Founded on assumptions induced by conduct of another person. o Prevent harm resulting from action taken on faith of assumption, if assumption is not adhered to. o Operate only where it is unjust/unconscionable to depart from assumption.

Common law estoppel:  Representor induces relying party to believe that the representor HAS signed contract.  Assumption of some existing or past fact.  Prevents representor from denying the truth of the assumption.

Equitable estoppel:  Representor induces relying party to believe that the representor WILL sign contract.  Assumption of future conduct.  Prevents representor from acting inconsistently with the assumption without taking steps to ensure relying party is not harmed (eg. compensation, reasonable notice).  Includes: o Proprietary estoppel: assumption that relying party has or will be granted interest in land. o Promissory: any application that does not relate to interest in land.

Elements of Estoppel:  Assumption: relying party must have adopted assumption. o Nature of assumption leads to either common law or equitable. o Must relate to a existing or expected legal relationship?  Yes. Waltons Stores v Maher. Cannot arise where one person assumes another person to behave in a particular way in future outside of context of legal relationship.  Yes. Mobil v Wellcome. “it is a necessary element of the principle that the defendant has created or encouraged an assumption that “a particular legal relationship” or “an interest” would arise or be granted. M’s generalised commitment of “find a way” to implement a “tenure for achievement” did not give rise as “elements and details of the legal relationship” were said to be lacking.  Yes - broadened. Austotel Pty Ltd v Franklins Selfserve Pty Ltd. Priestly JA – “an assumption that a contract will come into existence of a promise be performed or an interest granted to the plaintiff by the defendant”.  Inducement: assumption must have been induced by conduct of representor o Clear/unequivocal “promise” or “representation” must be made by representor? o Legione v Hateley: contract for land. Purchasers failed to pay by due date 10th Aug. P told Miss Williams (secretary) that they could pay by 17th Aug. W said she thought it would be alright but would have to get instructions. P attempted to pay on 15th Aug, but rejected.  Gibbs CJ and Murphy J: estoppel arises from W’s conduct.  Mason and Deane JJ: W’s conduct was NOT clear.  Clear etc not majority support, inconsistent with later decisions. o “Induced assumption” rather than clear etc to establish estoppel. o Nature of inducing conduct to determine reasonableness still important.  Galaxidis v Galaxidis: NSW Court of Appeal: insufficiently precise representation could give rise to estoppel if it was reasonable for relying party to interpret and rely upon.  Detrimental reliance: relying party must have acted on assumption in way that he will suffer detriment should representor not adhere to assumption. o Expectation loss: loss of benefit relying party assumed they expected to receive.  Waltons Stores v Maher: rent they expected W to pay during term of lease. o Reliance loss: loss suffered as result of relying party’s reliance on relevant assumption.  Waltons Stores v Maher: wasted expense on demolishing existing building. o Dependant on relying party’s situation  Je Maintiendrai Pty Ltd v Quaglia: landlord offered reduced rent from tenants. Tenants sought to leave, landlord demanded unpaid amount.  FC of SA Supreme Court: landlord prevented from claim.  King CJ and White J: detriment to tenants to be forced to pay lump sum.  Such decision would not have been made if the tenants were wealthy. o Non-financial detriment:  Need not be financial: Commonwealth v Verwayen – detriment of stress, anxiety and inconvenience. o Material detriment:  Detriment suffered must be material (Thompson v Palmer), significant (Verwayen) or substantial (Maintiendrai Pty Ltd v Quaglia).  Hawker Pacific Pty Ltd v Helicopter Charter Pty Ltd: belief that representor would pay a certain sum of money in settlement of disputed claim. Employees of relying party made number of trip to representor’s premises to collect a cheque in payment of the sum. NSW COA did not find these “fruitless visits” “constitute a material or significant disadvantage or detriment sufficient to support an estoppel.  Reasonableness: o Must act reasonably in adopting the assumption o Must act reasonably in taking the detrimental action on faith of that assumption o Murphy v Overton Investments Pty Ltd: operator of retirement village gave prospective tenants an estimate of maintenance expenses for which they would be liable for on “present budget figures”. Full Fed Court maj held that it was not reasonable for tenants to assume that this estimate took into account all expenditure likely to incur in future budget periods – new types of expenditure would arise as building age and different requirements/management practices change.  Unconscionable conduct: o Essential element, held by Santow J in Forbes v Australian Yachting Federation Inc and Priestly JA in Silovi Pty Ltd v Barbaro.  Additional elements: o Departure/threatened departure: representor must depart or threaten to depart from assumption adopted/acted by relying party.

Effect of Estoppel:  Reliance-based relief: relief for loss suffered as a result of reliance on promise.  Expectation-based relief: relief which puts claimant in position they would have occupied had relevant promise been fulfilled.

Estoppel As Cause of Action:  Question: does estoppel create independently enforceable rights or can it just be relied upon to support another cause of action (eg. in contract/tort)?  Does NOT constitute an independent cause of action. Simply preclude denial of assumed state of affairs by reference to which rights of parties are determined. Verwayen (Deane J).  Does provide cause of action. Equitable doctrines create rights, which are enforceable against the estopped party Verwayen (Brennan J, Mc Hugh J). o Many cases, equitable estoppel has been accepted as cause of action eg. proprietary estoppel where plaintiff able to claim interests in land solely on basis of assumption etc. o EE for assumptions of future conduct does not have preclusionary operation. Assumption to future conduct, cannot (by logic) preclude denial of assumed state of affairs. It must CREATE rights. o Remedial flexibility: discretion by court to granting relief (Verwayen and Giumelli)  court is giving estoppel, itself, effect. Does not just provide remedies for breach of contract (Waltons Stores v Maher).

Estoppel and Contract:  Issue: equitable estoppel undermines doctrine of consideration by directly enforcing non-contractual promises (Giumelli v Giumelli).  High Court argues that EE does not undermine law of contract: o Court exercises discretion in granting relief. o EE is concerned with assumption of relying party, rather than promise of representor. o EE concerned with relying party’s detrimental reliance, rather than unperformed promise.  Formation: EE may arise where person believes that the offer will NOT be revoked and acts to their detriment (recognised in Vienna Convention). Waltons: believed contract WOULD be signed.  Privity: EE may rise in contractual claims barred by privity rule, where person (not party to contract) led to believe that they would receive benefit and acted on it to their detriment. Trident.  Formalities: EE may rise where contract is unenforceable because it fails formal requirements laid down by statue, where person acted to detriment on expected written contract.  Pre-contractual variations: parties enter into written contract on understanding that particular term will be interpreted particular way or not be strictly enforced. o Estoppel by convention (form of common law): parties to agreement adopted a particular state of affairs as the basis of their agreement/relations. Must be based on assumption of fact, and not assumption as to legal effect of parties conduct (Con-Stan Industries Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd). This rule not necessarily held, recent cases differ eg. Whittet v State Bank of New South Wales. o Parol evidence rule: prevents admission consideration of evidence that subtracts/adds/varies/contradicts terms of written document. Does it prevent estoppel from being established? Courts still divided. o Entire agreement clauses: states written document is entire agreement, invoke parol evidence rule. Accepted in various cases that estoppel by convention prevents relying party from claiming benefit of estoppel.  Post-contractual variations: one-sided agreement varying terms of existing contract (eg. extra obligation on one side, eg. reduced rent). Party cannot claim detriment of continuing contract (with reduced rent) and losing opportunity to breach contract/pay damages (Coulls v Bagot’s Executor & Trustee Co Ltd).  Estoppel as alternative to contract: plaintiff choose to sue in estoppel rather than contract, where there IS consideration. Lyndel Nominees Pty Ltd v Mobil Oil Australia Ltd: trial judge considered whether estoppel was there, then when it wasn’t looked for contract, found it. However, if there is contract, there can be NO estoppel. If plaintiff has enforceable contractual rights, they suffer no detriment. And equity acts only to supplement common law.  Termination of contracts: assumption that A will not terminate contract, EE applies.