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Question Despite the landmark decision of the High Court in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, there continues to be considerable uncertainty in relation to both promissory and proprietary estoppel in Australia, including:



The nature of the representation required to found each form of estoppel;

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Whether promissory estoppel can, like proprietary estoppel, be used as a ‘sword’ to enforce newly-created rights arising for the first time from a representation as to future conduct (with New South Wales courts suggesting it may not be possible for promissory estoppel to be used as a sword); and



The remedial principles to be applied if a proprietary or promissory estoppel is made out (with divergence between a ‘minimum equity’ approach and an ‘enforcement of the expectation’ approach).

Discuss each of these areas of uncertainty in detail with reference to all relevant Australian court decisions, as well as secondary legal materials such as articles and legal texts.

Equitable Estoppel: Equitable estoppel provides protection against unconscionable dealings, which comprises of two types of estoppel, promissory and proprietary. Proprietary estoppel is a doctrine whereby the legal titleholder of a real property induces another person to rely to an assumption or expectation that he has/will have an interest on that land, and in reliance he suffered a detriment ( Dillwyn v Llewelyn).1 On the other hand, promissory estoppel, a doctrine reaffirmed in the English case of High trees 2, occurs when parties are in a pre-existing contractual relationship; and one party makes an express/implied representation, which is clear and unambiguous; and the other party has acted in reliance on the representation and is now at detriment (adopted into Australian law in Legione V Hately).3 Even tough both these doctrines attempt to serve a common purpose of protecting against unconscionable dealings, there seems to remain certain differences and uncertainity. Significance of Waltons Stores (Interstate) Ltd v Maher: The doctrine of promissory estoppel was given a new direction in Walton Stores,4 where the issue was whether Maher was entitled to rely on Waltons Store’s representations that they would enter into a future lease of his land, in order to enforce an agreement between them, even though there was no written contract, and the representation was not of existing facts. The High court, extending the existing principle, held that Maher could rely on promissory estoppel, even though there was no completed formal agreement, but Maher was allowed to believe that the contract would be completed as a matter of course. The court also mentioned that in cases where there is no pre-existing legal relationship between the parties, the promissory estoppel could be used as a "sword", and not just as a "shield". 5 An equitable estoppel could form the basis for an independent cause of action. It was also held that it is possible to infer equitable estoppel/promise from silence or inaction. Post Waltons Stores the elements of promissory estoppel are: 1) plaintiff assumed legal relationship existed/would exist; 2) defendant induced plaintiff to adopt that assumption/expectation; 3) plaintiff acts in reliance of this promise; 4) defendant knew plaintiff was acting in reliance of the promise; 5) plaintiff’s actions would cause detriment if assumption/expectation not fulfilled; and 6) defendant fails to act to avoid the detriment, whether by keeping the promise or otherwise. 6 Walton Stores makes it clear that unconscionability is the unifying principle, which forms the basis of the different heads of equity incorporated under equitable estoppel. 7 If estoppel is proven, then the plaintiff may get protection under equity, and the court will do the minimum equity that is just in the circumstances.

1 Dillwyn v Llewelyn [1862] EWHC Ch J67; 45 ER 1285. 2 Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130. 3 Legione v Hateley (1983) 152 CLR 406. 4 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387. 5 Ibid. 6 Ibid. 7 Ibid.

The nature of the representation required to found each form of estoppel: In proprietary estoppel representation deals with interest in land, and in promissory estoppel it deals with all other equitable estoppel that does not relate to land. The onus of proof in proprietary estoppel has traditionally been on the party relying on the assumption or expectation but in Sidhu and Van Dyke the High Court rejected the notion that the onus of proof in relation to detrimental reliance can shift to the party said to be estopped.8 The nature of the representation required to found a promissory estoppel is such as to be capable of creating in the mind of a reasonable person the assumption or expectation that was acted upon, though it may be open to different constructions. 9 There seems to be some uncertainty as to the status of estoppel by representation of fact in Australia. It appears that the courts attempted to fuse common law and equitable estoppels into a single unified doctrine, 10 but the New South Wales Court of Appeal continues to treat estoppel by representation distinct from equitable estoppel. 11 When considering estoppel by representation of fact, the Australian courts needs to take into account whether unconscionability is an element. This element is satisfied if one party encourages the other party to create assumptions that lead to reliance. 12 In Legione, Mason and Deane JJ had declined to reconcile the cases in which estoppel could only succeed on the basis of a factual representation with those in which estoppels were allowed on the basis of representations as to the future and simply decided to follow the latter.13

Can promissory estoppel, like proprietary estoppel, be used as a ‘sword’? Proprietary estoppel can function as a ‘sword’ (cause of action) as well as a ‘shield’ (defence). But promissory estoppel could only act as a defence, i.e. a shield and not as a sword, as enforcing voluntary promises of future conduct without consideration would undermine the doctrine of consideration and as a result the law of contract. However, in Waltons Stores it was suggested that promissory estoppel could also be used as a sword like proprietary estoppel to enforce newly created rights arising for the first time from a representation as to future conduct. Like in this case, Maher had no cause of action based on contract, as there wasn’t any, but he brought an action in equity by using the doctrine of promissory estoppel as a sword. Nonetheless, the NSW courts have suggested in many cases that it may not be possible for promissory estoppel to be used as a sword, and the reasoning in Waltons Stores and Verwayen14 has been criticised. ‘The ability to claim a cause of action in estoppel has been stated to be available where it is a step in the case of a plaintiff or counterclaim by a 8 Sidhu v Van Dyke (2014) 251 CLR 505. 9 "Equitable Estoppel – What Must Be Shown To Establish The Equity? | Commbar Matters", Commbarmatters.Com.Au . 10 Commonwealth v Verwayen (1990) 170 CLR 394. 11 Byron Shire Council v Vaughan [2002] NSWCA 158. 12 Thompson v Palmer [1933] HCA 61. 13 As above n3. 14 As above n7.

defendant to ask the court to suspend pre-existing contractual rights or preclude the defendant from denying the existence of facts which, if they existed, would give rise to legally enforceable rights between the parties. On the other hand, the shield-sword metaphor has been stated to be apt for the purpose of stating that the doctrine creates no legal relationship or cause of action where none previously could arise between the parties.’15 Allison Silink has suggested in his article, that jurisdictions like Victoria and South Australia have accepted the Waltons Stores as an authority for promissory estoppel as a source of positive rights.16 In New South Wales as well, the Court of Appeal had previously accepted promissory estoppel to be a source of right but in Saleh v Romanous, the court restated the principle as operating as a restraint on the exercise of rights only, not an independent source of rights. The court held that the defendants were estopped from going back on their promise to repay the advance money to the plaintiff, and from enforcing the contract and suing them for its breach. The defendant’s obligation was to repay, which is a positive relief, as it required them to do something. But estopping the defendants from enforcing the contract or suing for its breach was a negative relief, as it was restraining them from exercising contractual rights. On appeal, the court rejected the principal of law that a promissory estoppel could give rise to positive relief. Handley AJA stated that, ‘A promissory estoppel is a restraint on the enforcement of rights, and thus, unlike a proprietary estoppel, it must be negative in substance.’ 17 The Court of Appeal made no reference to Waltons Stores, even though the trial judge had expressly relied on it, as it sets out the relevant principle for promissory estoppel in Australia. He gave no reasons as to why the New South Wales Court of Appeal restated the principle of promissory estoppel in its traditional scope without addressing the status of Waltons Stores. 18 He went on to state that the decision in Waltons Stores is an example of a hard case making bad law; he also mentioned that expanding the scope of promissory estoppel was contrary to the principle and unnecessary. 19 Subsequently, in DHJPM Pty Ltd v Blackthorn Resources Ltd, the court’s discussion of the basis for the estoppel claim conformed to the scope of the doctrine expressed in Saleh, Meagher JA stated that in the context of the case, a promissory estoppel operates as an equitable restraint on the exercise or enforcement of contractual rights and is negative in substance. 20 His honour refereed to Waltsons Stores as an application of equitable estoppel to enforce proprietary rights. The court noted that the appellant in this case had relied upon proprietary estoppel, particularly an estoppel by encouragement. His Honour described Waltons Stores as one of only two cases to his knowledge where, ‘an estoppel by encouragement has been held to create an executory contract.’21 This re-characterisation of Waltons Stores as a proprietary estoppel case is inconsistent with the judgement, as there was no express suggestion that the application of an orthodox proprietary estoppel could dispose of the case. Considering the express reasons of the majority in favour of expanding promissory 15 Meagher, Gummow and Lehane, Equity: Doctrines and Remedies (J D Heydon, M J Leeming, P G Turner eds, 5th edn, LexisNexis Butterworths 2015) para 17-270. 16 Allison Silink, "Can Promissory Estoppel Be An Independent Source Of Rights?" [2015] UTSLRS 11; (2015) 40(1)" The University of Western Australia Law Review 39. 17 Saleh v Romanous [2010] NSWCA 274. 18 As above n16. 19 Ibid. 20 DHJPM Pty Ltd v Blackthorn Resources Ltd (2011) 83 NSWLR 728. 21 Ibid.

estoppel as obiter dicta, or ignoring those reasons altogether, fundamentally undermines the authority of the decision. 22 The expansion of promissory estoppel was a ratio of Waltons Stores and it cannot be ignored. In Ashton v Pratt, the court noted that the claim was put on the basis of equitable estoppel, and was not a claim in proprietary estoppel and referred to Waltons Stores principle, but did not express any view at to the ratio of the case. He considered various cases that maintained the distinction between the scope of promissory and proprietary estoppel, and mentions that promissory estoppel only acts as a restrain on the enforcement of legal rights whilst proprietary estoppel can be a source of obligation.23 In both, DHJPM and Ashton, the courts did not find it necessary to resolve the estoppel question. Neither did they discuss whether this ‘seriously considered dicta’ by the High Court in Waltons Stores ought to be binding or not, or the reasons for not following it.24 There seems to be various views as to whether promissory estoppel can be used as a sword or not, to which the higher judiciary must provide further clarification.

The remedial principles: In Waltons Stores, the ‘minimum equity to do justice’, as well as a reliance-based measure of relief to compensate a claimant for their detrimental reliance, was mentioned. Later, in Verwayen, the issue of relief to be awarded in estoppel cases again came up when the court had to decide on the nature of relief to be given. The court eventually held that fulfilling the respondent’s expectation was the most appropriate way to compensate the respondent for his loss. It was also mentioned that an equitable estoppel would allow a court to do what is required to avoid detriment, but no more.25 In Giumelli v Giumelli, it was mentioned that the court must look at the circumstances in each case to decide in what way the equity can be satisfied. 26 This view was supported by the NSW Court of Appeal in Delaforce v Simpson-Cook, where it was stated that ‘the Court’s natural response is to fulfil the claimant’s expectations and only if those expectations are uncertain, or extravagant, or out of all proportion to the detriment which the claimant has suffered then a more limited remedy may be appropriate’.27 In proprietary estoppel case the main issue in exercising the remedial discretion ‘concerns the relationship between the protection of the relying party’s expectations and his or her actual or potential reliance loss’. 28 It is well established that the starting 22 Aa above n16. 23 Ashton v Pratt [2015] NSWCA 12, [138]. 24 As above n16. 25 As above n10. 26 Giumelli v Giumelli (1999) 196 CLR 101. 27 Delaforce v Simpson-Cook (2010) 78 NSWLR 483. 28 Andrew Robertson, "Unconscionability And Proprietary Estoppel Remedies" [2010] Cambridge: Cambridge University Press.

point in determining relief when proprietary estoppel is established, is the fulfilment of the relying party's expectations, unless doing so would be impractical or unjust to the other party. Then the minimum remedy necessary to achieve that must be determined. On the contrary, the minimum equity principle requires the court to grant the minimum remedy necessary to satisfy the relying party’s equity, which means the minimum necessary to protect against reliance-based harm. The proportionality principle plays an important role in shaping proprietary estoppel relief in Australia. 29 Conclusion: In Australia there seems to be an array of judgements from the High Court and the Court of Appeal, which undermined the principle of Waltons Stores as a binding principle; and does not provide a clear and certain view of the law regarding promissory and proprietary estoppel.

Bibliography: Heydon, John Dyson et al, Meagher, Gummow And Lehane's Equity Doctrines And Remedies (Lexis Nexis Butterworths, 5th ed, 2015) Robertson, Andrew, "Unconscionability And Proprietary Estoppel Remedies" [2010] Cambridge: Cambridge University Press Silink, Allison, ""Can Promissory Estoppel Be An Independent Source Of Rights?" [2015] UTSLRS 11; (2015) 40(1)" [2015] The University of Western Australia Law Review 39 Ashton v Pratt [2015] NSWCA 12, [138] Byron Shire Council v Vaughan [2002] NSWCA 158 Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130 Commonwealth v Verwayen (1990) 170 CLR 394 Delaforce v Simpson-Cook (2010) 78 NSWLR 483 DHJPM Pty Ltd v Blackthorn Resources Ltd (2011) 83 NSWLR 728 Dillwyn v Llewelyn [1862] EWHC Ch J67; 45 ER 1285

29 As above n27.

Giumelli v Giumelli (1999) 196 CLR 101 Legione v Hateley (1983) 152 CLR 406 Saleh v Romanous [2010] NSWCA 274 Sidhu v Van Dyke (2014) 251 CLR 505 Thompson v Palmer [1933] HCA 61; Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 "Equitable Estoppel – What Must Be Shown To Establish The Equity? | Commbar Matters", Commbarmatters.Com.Au...