Commonwealth v Verwayen PDF

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Commonwealth v Verwayen 170 CLR 394 Introduction  

A leading case involving estoppel in Australia Case most frequently referred to in relation to its influence on the doctrine of estoppel.

Facts   

Bernard Verwayen sued the Australian government for damages caused by a collision between two ships of the Australian navy. A representative of the Government initially indicated to Bernard Verwayen that the Government would not raise the statute of limitations as a defence to their negligence. In court however, the Government relied on this defence.

Outcome 

While the decision of the High Court was split, a majority of judges found that the Government could not rely on this statement as a defence.

Reasons for Deciding  

Justices Toohey and Gaudron came to this conclusion on the basis that the Government had waived their right to rely on this defence. However Justices Deane and Dawson came to this conclusion under the doctrine of estoppel, which provides that a defendant can not contradict a previous representation or promise made that has established an assumed state of legal affairs.

Rules / Gems / Quotable Quotes 

Dixon J: the object of estoppel in pais is to prevent an unjust departure by one person from an assumption adopted by another as the basis of some act or omission which, unless the assumption be adhered to, would operate to that other’s detriment. Whether a departure by a party from the assumption should be considered unjust and inadmissible depends on the part taken by him in occasioning its adoption by the other party.

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The result of an estoppel at common law was to preclude the party estopped from denying the assumption on which the other part acted to his detriment. The party who acted to his detriment was, in effect, given the benefit of the assumption.

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The equity is “not to compel the party bound to fulfil the assumption or expectation; it is to avoid the detriment which, if the assumption or expectation goes unfulfilled, will be suffered by the party who has been induced to act or to abstain from acting thereon”.

Commonwealth v Verwayen 170 CLR 394 

A promissory estoppel does not, of itself, give rise to any right to equitable relief at all. Promissory estoppel does not create new causes of action where none existed before.

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The equity is an entitlement in equity proceedings to preclude departure by the other party from the assumed state of affairs if departure would, in all circumstances, be unconscionable.

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Where a party to litigation amends a pleading to raise a new defence or to assert a new claim, questions of estoppel do not arise.

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To support an estoppel by conduct, the representation (or assumption) must be a representation of an existing fact, a promise or representation of intention being insufficient.

Operation of the doctrine of estoppel by conduct: 1. While the ordinary operation of estoppel by conduct is between parties to litigation, the persons who may be bound by or take the benefit of such an estoppel extend beyond the immediate parties to it, to their privies, whether by blood, estate or contract. That being so, an estoppel by conduct can be the origin of primary rights of property and contract. 2. The central principle is that the law will not permit an unconscionable – or unconscientious – departure by one party from an assumption adopted by the other as the basis of some relationship, course of conduct, act or omission which would operate to that other party’s detriment if the assumption be not adhered to. 3. An estoppel will not arise unless the party claiming the benefit of it has adopted the assumption as the basis of action or inaction and thereby placed himself in a position of significant disadvantage if departure from the assumption be permitted. 4. The question whether such a departure would be unconscionable relates to the conduct of the allegedly estopped party. That party must have played such a part in the adoption of, or persistence in, the assumption that he would be guilty of unjust and oppressive conduct if he were now to depart from it. The cases indicate four main, but not exhaustive, categories, namely, where that party: (a) Has induced the assumption by express or implied representation (b) Has entered into contractual or other relations with the other party on the conventional basis of the assumption (c) Has exercised against the other party rights which would exist only if the assumption were correct (d) Knew that the other party rights which would exist only if the assumption ere correct; knew that the other party laboured under the assumption and refrained from correcting him when it was his duty in conscience to do so. 5. The assumption may be of fact or law, present or future 6. The doctrine operates consistently in law and equity. “Equitable estoppel” should not be seen as a separate or distinct doctrine which operates only in equity or as restricted to certain defined categories (eg acquiescence, encouragement, promissory estoppel or proprietary estoppel). 7. Estoppel by conduct does not constitute an independent cause of action

Commonwealth v Verwayen 170 CLR 394 8. The prima facie entitlement to relief based on the assumed state of affairs will be qualified where such relief would exceed the requirements of good conscience and be unjust to the estopped party....