Estoppel is an equitable remedy whereby a court can estop someone from reneging on certain promises. In the absence of a legal contract, there is still recourse through common law. In the past, there were distinct types of estoppel that served as either a cause of action (a sword) or a defence against an action (a shield). In more recent decades, the courts have begun to embrace a more unified doctrine of equitable estoppel. This article explains equitable estoppel as a broad legal concept, with further elaboration on examples of promissory and proprietary estoppel.
Types of Equitable Estoppel
Historically, the courts have recognised promissory and proprietary estoppel as separate doctrines, with disparate establishing elements and remedies.
Promissory estoppel provides a remedy when a person has relied upon another person’s promise to their own detriment. This form of estoppel can only arise when there is a preexisting legal relationship between the parties. For instance, there is an established legal relationship between an employer and an employee, or between a building contractor and a client.
When someone makes a claim on the basis of promissory estoppel, they need to prove five elements in order to establish a legal interest. Specifically, there must be:
- A legal relationship between the parties, most commonly established through a contractual agreement;
- A promise or assurance that was reasonably believable in the circumstances;
- Reliance on the promise that was justifiable in the circumstances;
- Detriment as a result of the person relying on the promise; and
- It would be unconscionable for the person to be allowed to get away with reneging on their promise.
Proprietary estoppel, on the other hand, occurs in more narrow circumstances. It arises when someone asserts a proprietary interest in a property on the basis of a promise. Proprietary estoppel requires that the party seeking a remedy has relied on the promise to their detriment. It is also necessary for it to be unconscionable for the property owner to renege on the representation. Unlike promissory estoppel, proprietary estoppel is capable of being a cause of action in its own right: it is thus both a sword and a shield.
The basic principle in both estoppel doctrines is that a person cannot go back on a promise if the person to whom the promise was made has relied upon it to their detriment. In recent years the courts have recognised that both doctrines serve a single purpose in protecting against inequity. As such, some recent case law has seen a greater acceptance of a general merged doctrine of equitable estoppel.
The leading case on equitable estoppel in Australia is Waltons Stores (Interstate) Ltd v Maher (1988). In this case, a builder (Maher) agreed to commence work on a property on the understanding that the newly built premises would be leased to Waltons Stores (Waltons). Maher relied on Waltons representations, but once Maher demolished the old building and commenced the new building, Waltons reneged on the agreement. While there was no written contract, the High Court of Australia held that Maher had suffered detriment because of his reliance on Waltons’ representation and subsequent unconscionable conduct. Waltons was therefore estopped from denying the existence of the contract. This case set a precedent in Australia over the right of a plaintiff to claim equitable estoppel.
Following Waltons and subsequent estoppel cases, the courts were less concerned with the distinction between proprietary and promissory estoppel. In Evans v Evans , for instance, the NSW Court of Appeal found no necessity to distinguish between the application of proprietary and promissory estoppel.
However, there does remain some practical differences between the two types of equitable estoppel. Notably, proprietary estoppel only relates to claims against land interests. Also, a claimant may rely upon proprietary estoppel even without clear evidence that the defendant made an explicit promise. On the other hand, relying on proprietary estoppel does require a plaintiff to prove that their reliance on the promise was detrimental to their interests.
The courts can order a range of remedies on the basis of equitable estoppel. Typically, the relief is either a fulfilment of the plaintiff’s expectation or sufficient damages to compensate for any loss incurred as a result of the expectation. The courts may be particularly inclined to fulfil the plaintiff’s expectations if it is exceptionally difficult to calculate the plaintiff’s loss.
Establishing equitable estoppel is more complicated than proving that someone has broken their promise. It is necessary to demonstrate that it would be unconscionable to allow the person to get away with breaking their promise.
The team at Armstrong Legal can help you to assess if these doctrines apply to your circumstances. The team can provide assistance if you have questions about any aspect of equity or contract law. Please contact or call 1300 038 223 today for any legal advice.