TOPIC 1 ESTOPPEL

What is it?
Estoppel stops a person from going back on their word when they make a promise to another
party and the other party relies on the promise and suffers a loss as they trusted the promise.
Estoppel prevents the first party to go back on their promise.
Used as a shield/defense

Promissory Estoppel
A promises B they will not enforce or suspend a right
A then suspends that right
B relies on the promise and alters his position, causing loss for B
A then seeks to enforce the right they promised not to enforce
B can shield themselves from liability by using A’s promise.

A promises B to paint his house

B says thanks but instead of buying tickets, he buys football tickets, altering his position
On Wednesday, A has not painted the house, saying he changed his mind
Can B sue A for breaching the promise?
Estoppel is a shield so no.
If it was a shield, B could.
Naked promises are not enforceable. If a contract was enforced in the absence of
consideration, this would be a direct conflict with contract law.

Central London Property Trust

Facts – High Trees leased a block of flats from Central London Property Trust. Due to WW2
occupancy fell so parties agreed to reduce rent by half but not agreed how long for. When war
ended, Property Trust sued for the full rent from 1945 and backpayments covering the
difference during war
Issue – Could the claimant inssit on paying full rent?
Were they entitled to back-payments?
Outcome - Defendants were liable for the full rent going forward but not back-payment. The
claimant made a statement the defendant relied on. The claimant was estopped from claiming
the full rent for the duration of the war.
Key – Establishes the defence of promissory estoppel against contract claims. Requirements
are:
1. Claimant makes a promist that they will not rely on their legal rights
2. Claimant intends to be legally bound by this promise
3. The defendant changes their position in reliance on this promise.

Combe v Combe
Facts - During divorce, husband promised to pay wife a tax free sum of £100 each year to
represent maintenance payment. The wife did not apply for a maintenance order from the
Divorce Court. Husband never made the payments and she brought an action to claim the
arrears owed.
Issue – Was the wife’s decision not to apply for maintenance good consideration?
Could the wife rely on estoppel to enforce the husband’s promise?
Outcome – Ruled in favour of the husband. The wife’s decision to not apply for maintenance
was not request by the husband or made in exchange for his promise. No consideration.
Promissory estoppel inapplicable as it does not grant a cause of action.

Key – Conditions of promissory estoppel.

1. A promise made by one party to another with the intention that the other party will rely on
it.
2. The promise is intended to affect legal relations
3. The other party relies on the promise and acts on it.
Effect of promissory estoppel
Prevents the promisor from insisting on their legal rights when the promise has relied on the
promise. There is no need for consideration from the promiseee
Limitations
Promissory estoppel can only be used as a ‘shield’, not a cause of action (sword).

State Bank of Standish v Curry

Curry and Bank of Standish would meet every year for 10 years to discuss a loan for spring
planting.
By 1985, Curry had a lot of debt, prompting the bank to change the terms of repayment
In 1986, Curry sought advice from the bank about a federal buyout that could eliminate the
debt. The bank reassured him that they would continue supporting him but did not promise to
renew the loan.
Later that year the bank turned down Currys loan application, which was too late for them to
arrange the federal buyout.
Held
Bank tried to sue to collect the debt
Damages awarded to curry on promissory estoppel as he sufficiently relied on their assurance
that they would continue to receive support.
Proprietary Estoppel

Dispute over land/property promises or family disputes.

Arises in order to prevent a person from strictly insisting on their legal rights where doing so
would be inequitable.

3 Elements of Proprietary Estoppel

1. Assurance given
2. Reliance has to be placed by the other party on that assurance
3. Detriment must be suffered as a result

Unconscionable not to enforce the promise

There must actually be a promise or at least some kind of clear representation of some kind.

Once there has been conduct by the Plaintiff of such a nature that inducement may be inferred
then the burden of proof shifts to the defendant to establish that the plaintiff did not rely on
the promise.

The detriment must be substantial to be enforced.

INSTANCES WHERE PROPERIETARY ESTOPPEL CAN ARISE

Imperfect gifts
Equity will not complete an imperfect gift but will permit the perfection of a gift in favour of
a volunteer.

Smyth v Halpin (1997)

Facts – Extension built to family home by son on the expectation of fee simple. Son spent
money on the house on assurance made by dad.
Issue – House not given
Outcome – Expenditure on foot of a promise allowed a fee simple to be conveyed to the son.

Common Expectation

Where parties have dealt with each other in a certain manner to give a common assumption
that one party would acquire rights in the other’s lands.
Ramsden v Dyson (1866) – Verbal agreement with landlord for interest in land (under an
expectation created by landlord) he shall take possession of the land with consent of landlord
and spends money on it as a result.

McMahon v Kerry County Council

Facts – McMahon bought land from Council in 1965 to build a school but abandoned this
later.
No indication that this was a promsie
He did not mark or fence of the land and in 1968 he discovered workers planning to build on
the land for the defendant. He complained and the work stopped.
In 1972 the County Council built 2 houses on the site for local authority tenants
Plaintiff attempted to claim trespass and possession of the properties and defendant claimed
entitlement by estoppel, arguing that by not fencing off the land the defendant was led to
believe he had entitlement.
Held – McMahon secured possession of the site for the purpose of building a school, but was
never done.
McMahon never secured the site or kept surveyance of it
No intrinsic value in the site so far as the plaintiffs are concerned
Defendant’s mistake was excusable.
If given possession the plaintiffs would realise a large profit without expanding any effort or
money
It would be unconscionable and unjust that the plaintiff should recover possession but
they are entitled to the market value of the site without houses and to damages.

Richard v Richard
Plaintiff (Gregory and Jenifer Richards) entered oral agreement with Gregory’s father
(Norman Richards) to purchase a house from him.
Gregory claims the purchase price was $70000.
At the time of the agreement, they were already renting the property
Following the oral agreement, Gregory began making payments to Norman in excess of their
rent payments to buy the house
Norman recorded these additional payments in a separate ledger and deducted the payments
from a balance of $70,000. Gregory made improvements to the property that were permanent.

When Gregory and Jenifer got divorced, family court ordered Norman to convey the
residence to Gregory and Jenifer.
Norman appealed.

Held – Norman had to convey the property for the balance due on the purchase price.

Unilateral Mistake
Mistake on part of one party as regards to the extent of their legal right to land, can invoke
proprietary estoppel
Important that there exists some degree of detriment (like spending money) to the party who
innocently relies on the mistaken assumption

Ramsey v Dyson (1866) – If a stranger begins to build on my land supposing it to be his own
and if, perceiving his mistake, abstain from setting him right, and leave him to persevere in
his error, a court of equity will not allow me afterwards to assert my title to the land on which
had expended money on the supposition that the land was his own.

Willmott v Barber (1880) – laid down requirements for this:

1. The plaintiff must have made a mistake to his legal right
2. The plaintiff must have expended money or done an act of mistaken belief
3. The possessor of the legal right must know of the existence of his own right and that it is
inconsistent with the right as claimed by the plaintiff.
4. The legal possessor must know of the plaintiff’s mistaken belief to his rights
5. The possessor of the legal right must have encouraged the plaintiff in his expenditure of
monies on the property.

Recently not as strict. They are a useful test for unconscionable behaviour but not be applied
strictly to every case.