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Proprietary Estoppel

Proprietary estoppel is an equitable doctrine. It applies when the owner of a property induces another person to believe that they have an interest in that property and the promisee then acts on that assumption to their own detriment. When someone makes a representation designed to create an expectation in another person, a court can order that the aggrieved party receive recompense for any loss they incur as a result. This article explains the principle of proprietary estoppel through several case studies.

What Is Proprietary Estoppel?

Under common law, a contract only comes into existence in specific circumstances. There must be an offer, an acceptance, and consideration, as well as the intention to create legal relations. This stops many informal promises from rising to the level of a contractual agreement. The courts are typically reluctant to enforce an agreement that does not meet these requirements to form a contract.

However, even in the absence of the elements essential to the creation of a contract, a claimant can assert a proprietary interest in a piece of property. They can do this if they were led to believe that they had a right to the property and subsequently depended on this belief to their own disadvantage. Under the principle of proprietary estoppel, the aggrieved party acquires the interest in the property at the point when it was promised to them. In those circumstances, the court can stop (“estop”) the property owner from unconscionably reneging on their promise.

Proving Proprietary Estoppel

In a claim of proprietary estoppel, the onus is on the claimant to prove that they were made the promise, and relied on this expectation in their subsequent actions. Specifically, a claimant must prove the following elements:

  • There was a promise;
  • There was a reasonable belief in and reliance on the promise; and
  • The promisee suffered loss because they relied on the promise.

Proprietary Estoppel in Sidhu and Van Dyke

In the case of Sidhu and Van Dyke [2014], the High Court of Australia underscored this evidentiary principle. The claimant in this case lived in a cottage with her husband on a larger homestead station owned in joint tenancy by a married couple. The claimant began an intimate relationship with the owner of the homestead, and he promised that when the homestead was subdivided, he would give her the title to the cottage where she lived. When the claimant’s husband discovered the affair, they divorced, and the wife did not seek a property settlement from her husband due to her assumption that she would receive the cottage.

The council approved the subdivision, but the owner made no move to transfer ownership of the cottage to the claimant. The cottage itself was destroyed in a fire, and the owners received insurance compensation. The claimant brought an action to the Supreme Court of New South Wales for compensation for the detriment she suffered because of her reliance on the defendant’s promise. Her detriment included the foregone property settlement from her former husband, non-payment of wages for work she performed at the station, as well as lost employment opportunities. The Supreme Court dismissed the claim on the basis that it was not reasonable for the claimant to rely on a promise that required the subdivision of the land and the consent of the other joint tenant of the property.

The claimant appealed. The New South Wales Court of Appeal, and subsequently the High Court of Australia, both found that the claimant’s reliance on the promise was objectively reasonable. The claimant was entitled to equitable compensation at an amount relative to the value of the cottage.

Proprietary Estoppel in McNab v Graham

The Victorian Court of Appeal heard a claim of proprietary estoppel in McNab v Graham [2017]. A testator in Victoria left a life interest in a certain property to the plaintiff. After fifteen years of residing in the property, the plaintiff brought a claim against the deceased estate for proprietary estoppel. He claimed that the testator had promised him the property outright in return for caring services. In the first hearing of this case, the Supreme Court of Victoria found for the plaintiff and ordered that the title for the property be transferred to the plaintiff.

On appeal, the Court of Appeal upheld the decision, as:

  • The deceased had reiterated his promise several times;
  • The plaintiff reasonably relied upon the deceased’s promise and suffered loss as a result; and
  • The plaintiff had followed through on his own promise to care for the deceased because of his expectations.

The solicitors at Armstrong Legal can talk you through the particulars of your case to see if you have a claim of proprietary estoppel. The team can represent you before the court in order to enforce your rightful interest in a property. For more information, please contact Armstrong Legal to schedule an appointment on 1300 038 223.

Dr Nicola Bowes

This article was written by Dr Nicola Bowes

Dr Nicola Bowes holds a Bachelor of Arts with first class honours from the University of Tasmania, a Bachelor of Laws with first class honours from the Queensland University of Technology, and a PhD from The University of Queensland. After a decade working in higher education, Nicola joined Armstrong Legal in 2020.

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