Detrimental Reliance and Unjust Enrichment PDF

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Lecturer: Dr Matthew Stewart...

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Detrimental Reliance & Unjust enrichment

Detrimental Reliance- estoppel  

Estoppel by representation 2. Also known as estoppel in pai or common law estoppel 3. Arises where A (the representor) leads B (the relying party) to adopt an assumption of existing fact and B relies on the assumption in such a way that s/he will suffer detriment if A subsequently denies that it is true. 4. In equity, estoppel may arise in relation to a promise or representation as to future conduct. ■ Examples: 1. A will enter into a contract with B, if B does particular things 2. A will transfer land, pay money or provide some other benefit, if B does particular things 3. A will not enforces contractual rights, if B does particular things 1.

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I n equity there are two forms of estoppel: 1. Proprietary estoppel – where A (a landowner) induces B to act to his/her detriment, on the basis that B will be granted an interest in the land. ■ Detriment: if you work on the farm for free, we'll give it to you 2. Promissory estoppel – where A induces B to act to his/her detriment, on the basis that A has promised that s/he will do or abstain from doing something. ■ ●

O  riginally, promissory estoppel operated where A and B were parties to a contract and A induced B to act to his/her detriment on the basis that A would not enforce certain contractual rights. H  owever, over time equitable estoppel (particularly promissory estoppel) has developed so that courts accept that it can arise in a wide variety of instances. W  e will now follow those developments.

C  entral London Property Trust v High Trees House Ltd 1947 P  offered D 99year leasee for 2500 pounds. In 1940, D found that course of the war they were unable to sublet many of the flats. P agree to reduce rent to $1050 a year. In 1945 war over, flats back t being full. Receiver of P company sued D, claiming full original rent, due in future, but also for the last 2 quarters of 1945. Action succeeded 2. 'temporary expedient while the block of flats was not fully, or substantially fully let,owing to the conditions prevailing.... That situation has ceased by the early months of 1945... When the flats became fully let, early in 1945, the reduction ceased to apply. 3. Had P sued for full rent, they would have been estopped to strict legal right to receive original sum. 4. 'If the case had been one of estoppel, it might be said that in any event the estoppel would cease when the conditions to which the representation applied came to an end, or it also might be said that it would only come to an end on notice. In either case it is only a way of ascertaining what is the scope of the representation. I 1.

prefer to apply the principle that a promise intended to be binding, intended to be acted on and in fact acted on, is binding so far as its terms properly apply. Here it was binding as covering the period down to the early part of 1945, and as from that time full rent is payable.' ●

J e Maintiendrai Pty Ltd v Quaglia (1980) 26 SASR 101 (Paterson, pp 231 – 236) Q  operated hairdressing business in shopping centre owned by JM. JM had difficulty in finding and keeping tenants. JM and Q signed lease for rent for a shop at $278/month. Later, JM agreed to reduce rent to $240/month for an indefinite period. JM accepted the reduced rent, until Q sought to vacate the shop. JM then sought payment of the difference between the rent in the lease and that subsequently agreed. Was JM entitled to the extra rent?

Why wasn’t JM’s agreement to reduce the rent enforceable as a contract? 2. Why did Q rely on promissory estoppel? 3. What detriment did Q suffer? 1.

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L egione v Hateley (1983) 152 CLR 406 (Paterson, pp 236 -7) H  igh Court accepted that promissory estoppel could prevent a representor exercising a contractual right to terminate which the relying party believed would not be enforced. W  hat was the detriment of the relying party? W  hy did the estoppel fail in this case? Legione v Hateley 

 HC accepted that promissory estoppel could prevent a representor exercising a contractual right to terminate which the relying party believed would not be enforced 2. Clear and unequivocal 1.

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Waltons Stores Ltd v Maher ■ M in negotiations for lease by W of premises to be built by the following year. M had to demolish building on land and ■ W sent new document with number of amendments. Says if doesnt hear from in 4 days consider good for W ■ M doesnt hear anything for 4 days, solicitor returns docs signed, from Maher's perspective sounds like contract is in place and proceeds with demolition work ■ W was aware that demolition was taking place. Told solicitors to "go slow" ■ 18 Jan W pulls out of contract and Mahers sued for specific performance. ■ HC held Waltons liable even though no contract, essence of agreement was doctrine of promissory estoppel. By remaining silent when it knew Mahers acting on assumption they had a contract, W clearly induced to M that there was a contract. Unconscionable for W , with knowledge of M's detriment by acting on false assumption, to adopt a course of inaction. Appellant is estopped from retreating from its implied promise to contract ■ Brennan J: to establish an equitable estoppel, it is necessary for P to prove that 1. P assumed that a particular legal relationship then between P and D or expected a particular legal relationship would exist between them 2. D has induced P to adopt that assumption or expectation 3. P acts or abstains from acting in reliance on the assumption or expectation 1.

4. D knew or intended him to do so 5. P's actions or inaction will occasion detriment if the assumption or expectation is not fulfilled; and 6. D has failed to act to avoid that detriment whether by fulfilling the assumption or expectation ■ Legione v Hately- p  romise must be clear and unequivocal ●

Priestly JA, Silovi Pty Ltd v Barbaro ( 1988) 13 NSWLR 466, 472: 

1. Common law and equitable estoppel are separate categories, although they have many ideas in common. ●

1. Common law estoppel operated upon a representation of existing fact, and when certain conditions are fulfilled, establishes a state of affairs by reference to which thelegal relation between the parties is to be decided. This estoppel does not itself create a right against the party estopped. The right flows from the court’s decision on the state of affairs established by the estoppel. ●

1. Equitable estoppel operates upon representations or promises as to future conduct, including promises about legal

relations. When certain conditions are fulfilled, this kind of estoppel is itself an equity, a source of legal obligation. ●

1. Cases described as estoppel by encouragement, acquiescence, proprietary, promissory. ●

1. For equitable estoppel to operate in circumstances such as those of the present case, there must be the creation or encouragement by the defendant in the plaintiff of an assumption that a contract will come into existence or a promise be performance, and reliance on that by the plaintiff in circumstances where departure from the assumption by the defendant would be unconscionable. ●

1. Equitable estoppel may lead to the plaintiff acquiring an estate or interest in land; that is, in the common metaphor, it may be a sword. ●

1. The remedy granted to satisfy the equity will be what is necessary to prevent detriment resulting from the unconscionable conduct. ●

 ommonwealth v Verwayen (1990) 170 CLR 394 (Paterson, pp C

249 – 263) V  was injured in 1964 while serving on board HMAS Voyager, when it collided with HMAS Melbourne. In 1984, he sued the Cth in negligence. Both before and after it lodged its defence, the Cth said it had adopted a policy of not contesting liability (i.e. not denying it owed a duty of care – the so called Groves defence) and of not pleading the limitations defence. In 1986, the Cth reversed this policy and then applied to amend its defence to raise both defences. V argued that the Cth was estopped from amending. The Full Court agreed. 1. The appeal was dismissed 4:3 2. Gaudron and Toohey JJ – Cth waived its right to plead defences 3. Dawson and Deane JJ – Cth estopped from pleading defences 4. Mason CJ and Brennan – Estoppel made out but Cth should only be ordered to pay V’s costs of the amendment 5. McHugh J – neither waiver nor estoppel made out. 6. Mason CJ and Deane J – unified doctrine of estoppel (pg 251 and pg 257, respectively) 7. Deane J usefully set out eight points on equitable estoppel (pp 258 – 259) 8. See also Dawson at pp 260 – 261. ●

G  iumelli v Giumelli (1999) 196 CLR 101 (Paterson, pp 264 – 270) S on, R, worked on parents orchard in a partnership without receiving wages. He received pocket money and keep. His parents owned the orchard land. They made three promises: 1. In 1974, he would be given part of the property to compensate him for working without wages and for developing the property. 2. In 1980, he could build a house on the property and the “house” would be his. (R substantially bore the costs of building.) 3. If he rejected the offer of work from his father-in-law and continued to work on the orchard, he would be given part of the orchard land. (R continued to work on orchard.) ● In 1985, falling out between R and parents. R left orchard. R’s brother, S, moved onto orchard, carrying out substantial improvements to lot. T he Full Court ordered that the parents convey a portion of the orchard property to R. Was this appropriate relief?

L esbian couple decide to have children. The plaintiff gave birth to two children through artificial insemination in which the

defendant assisted. The plaintiff and defendant later separated. The plaintiff sued the defendant seek child support. 1. 2.

Does an equitable estoppel arise? What is appropriate compensation?

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P  laintiffs entered into witness protection with NCA on the promise that it would make good any financial disadvantage they suffered from doing so. NCA later terminated arrangements without compensating plaintiffs for all financial losses. U  seful summary of the principles.

B  roadly speaking, where a defendant has been unjustly enriched, a plaintiff is entitled to restitution, i.e. recover the gains made by the defendant. B  UT claims for restitution must fall within particular categories of case. A  common category is a claim for money had and received, i.e. a claim to recover money paid to another party. A  nother common category is claim to recover reasonable

remuneration for services performed (quantum meruit) or a reasonable price for goods delivered (quantum valebat)

R  estitutionary claims were claims once known as “quasi-contractual”. The courts would adopt a faction that the parties had entered into an implied contract. B  UT this is no longer the basis on which the courts operate. Nowadays, restitutionary claims are based on an obligation imposed by the law to prevent unjust enrichment.

A  party may confer a benefit on another party which is not recoverable or compensable under the law of contract: 1. Benefits conferred in anticipation of a contract that is not formed; 2. Benefits conferred in anticipation of a contract that is unenforceable or void: ■ Unenforceable because of statutory requirement for written contract; ■ Void because one party lacks capacity; ■ Void for uncertainty/incompleteness; or

■ Void or unenforceable for illegality 3. Benefits conferred under a contract that has been terminated for breach or for frustration; 4. Benefits for a contractual purpose that totally fails, although the contract itself remains valid. ●

I n order to be recoverable at law, the plaintiff must have paid the money to the defendant in the following circumstances: 1. 2. 3.

Payment made under a mistake as to law or fact; Payment in return for consideration that has totally failed; Payment made under compulsion or duress.

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R  easonable remuneration for services can be recovered, where defendant sought services and plaintiff provided them. P  ERHAPS A  lso where work was freely accepted. BUT this is not so clear. 1. Court may refuse to grant relief, if claim arises out of illegal transaction. 2. Where plaintiff seeks to recover money paid under mistake, defendant might resist claim on basis that s/he changed position on the faith of receipt of the payment.

3. Where the plaintiff seeks to recover money paid under a mistake, it is a defence that the payment was made in voluntary settlement of an honest claims

P  avey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 (Paterson, pp 284 - 292) B  uilder orally agreed to do building works for owner on basis that owner would pay a “reasonable remuneration” for that work. Under s 45 of the Builders Licensing Act 1971 (NSW) an oral building contract was unenforceable. It had to be in writing. Owner paid $36,000 but this was some $27,000 less than what the builder thought the works were worth. C  ould the builder sue for restitution?

B  renner v First Artists’ Management Pty Ltd [1993] 2 VR 221 (Paterson, pp 292-297) B  was engaged to provide management services to Daryl Braithwaite, a former pop star, who was seeking to revive his career. The trial judge held that the arrangement was too uncertain to give rise to an enforceable contract. B provided

the services for some months to the production of a record album. The arrangement was terminated. Subsequently, the album was released. B sought remuneration on the basis of a quantum meruit. Was B entitled to restitution?

L umbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635 (Paterson, 297 – 305) C  o A, builder, entered into oral building contract with L. During the course of the contract, the building works were moved over to Co B, a company related to Co A. L continued to pay Co A, when Co B requested payments. Co A transferred the moneys to Co B. Co B went into liquidation, the liquidators discovered Co had under charged L. The liquidators sought restitution against L. W  as Co B entitled to restitution?

M  istaken payment D  avid Securities Pty Ltd v Commonwealth Bank of Australia Ltd (1991) 175 CLR 353 (Paterson, 305 – 313)

T otal failure of consideration R  oxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 (Paterson, 324 – 331) C  ompulsion T A Sundel & Sons v Emm Yannoulatos (Overseas) Pty Ltd (1956) 56 SR(NSW) 323 (Paterson, 332 – 333)...