Equitable Estoppel
Unconscionable conduct is the touchstone for the operation of equitable estoppel but
requires more than a mere failure to fulfill a promise. It denotes a creation or
encouragement by the defendant in the other party of an assumption that a contract will
come into existence or a promise will be performed and for the other party to have relied
upon that assumption to his or her detriment to the knowledge of the first party (Waltons
Stores (Interstate) Ltd v Maher (1988)).
Elements of Estoppel
Assumption or Expectation
There must be a clear and unambiguous assumption or expectation by Party A that a
contract will come into existence or that a promise will be fulfilled (Waltons Stores
(Interstate) Ltd v Maher (1988)).
Encouraged or Induced
An aspect of unconscionable conduct is that the defendant played a part in the other party
adopting the assumption or expectation, often by way of a promise or representation on
the behalf of the defendant.
A clear and unambiguous representation may be implied from words used or be adduced
from a failure to speak, where there was a duty to speak, or from conduct (Thompson v
Palmer (1933), Waltons Stores (Interstate) Ltd v Maher (1988)).
If a party acts upon mere hope rather than a belief induced or encouraged by the other
party, will not be sufficient grounds for estoppel Lorimer v State Bank of New South
Wales, Chellaram & Co v China Ocean Shipping Co [1991]).
If an unauthorized statement is made to the knowledge of the principle in circumstances
where the principal knows or ought to know that the statement is being relied upon, a
failure to deny the statement is in fact authorized and may reasonably be relied upon by
the other party (Corpers (No. 664) Pty Ltd v NZI Securities Australia Ltd (1989)).
Reliance
The party claiming estoppel must act or abstain from acting in reliance upon the
assumption or expectation.
The parties reliance upon an assumption must be reasonable (Waltons Stores (Interstate)
Ltd v Maher (1988)).
The characteristics of the plaintiff in assessing the reasonableness of the reliance, are
relevant. For example, if the parties are stockbrokers and merchant banker experienced
in commerce with the intention of their solicitor to prepare formal documentation
(Austotel Pty Ltd v Franklins Self Serve Pty Ltd (1989), or are large commercial entities
represented by solicitors (Capital Market Brokers Pty Ltd v Hamelyn UPC Ltd ).
Knowledge or Intention
The party who induced the adoption of an assumption or expectation must know or intend
the other party to act or abstain from acting on reliance on the assumption or expectation
(Waltons Stores (Interstate) Ltd v Maher (1988)).
Detriment
The party will suffer detriment if the assumption or expectation goes unfulfilled.
The party claiming estoppel must suffer detriment in the sense that ‘as a result of
adopting the assumption as the basis of action or inaction, the plaintiff will have placed
himself in a position of material disadvantage if departure from that assumption is
permitted (Thompson v Palmer (1933)).
The detriment is determined as at the date the defendant seeks to resile from the
assumption or expectation he or she has encouraged or induced, and upon which the othe
party has acted (Lorimer v State Bank of NSW).
Failure to avoid detriment
The party encouraging or inducing the assumption must fail to avoid the detriment
suffered by the party claiming estoppel, by failing to fulfill the assumption or
encouragement (Waltons Stores (Interstate) Ltd v Maher (1988)).
Depending on the circumstances, the defendant may be required to do no more than warn
the plaintiff that the assumption or expectations mistaken before the plaintiff incurs
irreversible detriment (Lorimer v State Bank of NSW).
It may be possible to show the relevant detriment where the defendant has made an
attempt to avoid detriment being suffered by the plaintiff but the attempt proves to be
inadequate (Silovi Pty Ltd v Barbaro (1988)).
Remedies
The object of equitable estoppel is not to enforce promises but to avoid the detriment
suffered by a party who relies on a promise. The remedy is the minimum equity to do
justice between the parties and that it is in the nature of the reliance or loss
(Commonwealth v Verwayen (1990)). However, in some circumstances the enforcement
of a promise may be the only means of avoiding the detriment (Waltons Stores
(Interstate) Ltd v Maher (1988)).
The remedy should be proportionate to the unconscionability. Normally this will be
reliance loss rather than expectation loss, i.e. compensation for loss incurred in reliance
on the assumption rather than making good the expectation of the parting invoking
estoppel (Commonwealth v Verwayen (1990)).