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We now come to the much-heralded topic of estoppel. You have probably gathered by now that something has happened in Australian law which has had some important impact. What happened was that the High Court in Waltons Stores v Maher made a big breakthrough in the area of estoppel so that the law about estoppel in Australia is now much different from that in England and is, arguably, way ahead of the English law. In making this breakthrough the High Court looked to United States law for inspiration. In order to understand the significance of the Waltons case, we need to lay some ground work.

The first thing to make clear is that estoppel provides a way in which promises can be legally binding, even though there is no consideration. Estoppel is reliance based and, you may recall, reliance was never sufficient to constitute a consideration. Estoppel is, strictly speaking, nothing to do with contract, that is, it is not part of contract law in the traditional sense. It is something which exists as a separate body of law - just like negligence or trespass. Its importance is that it has impacted on the law of contract by making it possible to argue for legal obligations which are contract-like but which do not satisfy the traditional requirements of consideration.

Estoppel has therefore had an important impact on contract, but, it should be kept in mind that estoppel is a general doctrine which operates in all sorts of other areas as well.

Estoppel - its origins and various forms

Let us go back and lay some ground work for understanding what estoppel is all about. Broadly estoppel is about the idea that you should not blow hot and cold. If you say or do or promise one thing, then it may be unfair to allow you to change and say or do or promise the opposite. The word "estoppel" has the same root as the word "stop" and the way it is used in this context is that a person who has made a representation or promise may be estopped - or stopped - from going back on it. On p 208 you can see the basic idea just after Grundt v Great Boulder Pty Gold Mines Ltd - "...the law should not permit an unjust departure by a party from an assumption which he or she has caused the other party to adopt or accept for the purpose of their legal relations".

Because estoppel may apply to a variety of different types of behaviour, it has a bewildering number of forms. Historically, these various forms grew up, each pursuing its own path. The High Court has now said in the Waltons case, and in subsequent cases, that there is really only one overarching concept of estoppel, even though it can apply in a great variety of situations.

Let us look briefly at its various forms which are mentioned on pp 209-212.

The first one - estoppel by record - is of no immediate interest to us and is about litigation. Once a court has decided an issue then it cannot be relitigated between the parties.

The second one - estoppel by deed - is again of little importance to us. Basically, as between the parties to a deed under seal, the facts stated in the deed cannot be denied. But there are exceptions which are briefly outlined for you in the case book.

The third one - estoppel by conduct - is of much more importance and includes within it the types of estoppel which may arise in contract, or near contract, relationships. You will see that the case book editors divide estoppel by conduct into sub-categories.

The first sub-category is estoppel by agreement which is sometimes called estoppel by convention. This is where two parties have agreed as to an existing state of facts. They may have agreed that the facts are other than they really are, but if they have both agreed, then each is estopped from denying the state of facts as agreed. So, if someone says "Let us assume for present purposes that the A$1 is worth US 70 cents" and the other party agrees and then both act on that assumption in some material way, then one party cannot come along later and say that the A$1 is in fact worth US 65 cents.

This type of estoppel can also arise if there is simply a mutual assumption without any explicit agreement.

Here we are talking about a representation made by one party to the other which the latter has relied on. We will see later in the course that there is a great deal of law to do with misrepresentation in its various forms. One major area we must look at is the effect on a contract of a misrepresentation which is made during negotiations for a contract. Here we are concerned more generally with the situation: one party makes a representation to the other and then wishes to deny the truth of that representation. The effect of an estoppel, as always, is that the person who made the representation may be estopped from denying the truth of it.

Both the common law and equity developed estoppel by representation and it was not until the Waltons case that these were unified. You will see a statement of common law estoppel by representation on p 210 in an extract from the judgment of Brennan J in the Waltons case ("A party who induces..."). The key to this type of estoppel is that the representation must be of some existing or past fact. If the representation was about future conduct then the common law courts said that this was not something they could deal with. You can see that when you start talking about representations of future conduct, you are getting very close to promises. "I will do such and such."

The courts of equity did have something to say about representations as to future conduct. This was called equitable - or sometimes promissory - estoppel. Again Brennan J in the Waltons case provides a definition of this equitable type of estoppel (p 210)("Equitable estoppel does not operate..."). This type of estoppel embraced both promissory statements and statements concerning land - see below under the heading "proprietary estoppel".

The statement by the case book editors after the quote from Brennan J is misleading. They say that equitable estoppel could arise only out of a representation about past or existing fact but they qualify this by saying "subject to what is said below". But this qualification is all important so that the basic statement is misleading.

The courts of equity developed a special branch of estoppel which was to do with land. We came across this briefly in Beaton McDivitt in which a possible basis for allowing the promisee in that case a remedy was proprietary estoppel (although that argument got lost in the course of the litigation). Generally speaking, land transactions require certain formalities. You will learn about these in the Property course. Even the law of contract treats land as a special category and insists that contracts involving an interest in land should be in writing. The courts of equity, however, recognised that people do not always behave as the law would have it and they make informal arrangements concerning land. Take the following example.

A farmer says to his newly married daughter and son in law: "I have no use for the bottom paddock. Why don't you use it and build a house on it. You can treat it as yours. In any case you will get it in the end in my will." On the basis of this, the newly married couple build a house on the land and live there. Some time later, there is a falling out between the daughter and her father. What rights has the couple over the land?

We do not need to investigate the ins and outs of property law but, suffice it to say that there is no legal basis for saying that the land belongs to the couple. The law of contract is not much help either. There may be no intention to create legal relations, no consideration and no writing.

Equity steps in and says that it is most unfair to encourage someone to make a major commitment such as building a house and then to deny that the people who have acted on that encouragement have any rights. It is, in other words, unconscionable for the father to deny that his daughter has some rights over the land. That word - "unconscionable" - is one which is a very important one in any discourse about equity and its role. We will come across it time and again.

You will see from the extract from Chitty on pp 210-211 that proprietary estoppel can arise not just when the owner of land has encouraged another to use the land (as in the example I just gave) but also in a situation where the owner of the land has simply stood by and allowed someone to use the land - sometimes called acquiescence. An example might be where the owner knows that the other party has made a mistake (for example about where a boundary is) and says nothing while the other builds a barn on the land. Estoppel can operate to prevent (estop) the owner from asserting his or her title to the land on which the barn stands. This means that the other party has a remedy which may include being granted an interest in the land.

We will see that proprietary estoppel played a major part in the breakthrough that occurred in the Waltons case even though Waltons was not a case about title to land.

We now come to the type of estoppel which was most closely associated with contract - an estoppel about future conduct. Where some representation is made about future conduct, then this is either a promise or something very close to a promise. The courts of equity said that in certain circumstances a person could not depart from such a statement about the future. In other words it was binding, despite there being no consideration.

Promissory estoppel was a concept which was recognised in a couple of 19th century cases but then it lay dormant until the High Trees case in which Denning J, then at the beginning of his judicial career, revived the doctrine and thereafter plugged it very hard in a number of English cases. The High Trees case became the best known case for many years.

The two 19th century cases which recognised the idea were

extracts from which appear in the case book. In each of these cases a contractual deadline was either extended or suspended with the result that the strict rights under the contract could not be enforced. The more general statement appears in the extract from the Birmingham case, the second of the two extracts on p 211.

These ideas were taken up in the High Trees case

This was the famous case where Denning J as a young judge made his mark on the law of estoppel. The case represents the beginning of the modern revival of promissory estoppel. The facts were simple enough. A landlord said to a tenant that, during the course of the war, the rent would be reduced. The landlord company went into receivership. The receiver noted that the reduced rent had been paid for some 5 years and demanded the arrears. A test case was brought to see if the landlord's promise to reduce the rent was legally enforceable.

As a matter of consideration, of course, there was nothing moving from the tenant for the benefit of the landlord's promise (unless one accepts the recent Musumeci analysis - but this was quite out of the question at the time of High Trees). But Denning J relied on the Hughes and Birmingham cases to hold that the landlord was estopped from claiming the arrears of rent.

Some important features of this use of estoppel should be noted.

I have mentioned this case already in the context of the rule in Pinnel's case. This was the case where a builder, in dire financial straits, agreed to accept a payment of a lesser sum in discharge of a debt owing to it. They accepted a cheque for £300 for a debt of £482. Could the builder sue for the outstanding £182?

It was argued by the debtor that the builder, having accepted a cheque for the lesser amount, could not claim the difference. Remember I mentioned this theory as a possible way of getting around the rule in Pinnel's case. Denning LJ rejected this theory, saying that the case law on which it was based was very shaky. So, this argument could not be used by the debtor.

The debtor then argued that the builder was estopped from claiming the arrears. It is here that the equitable nature of estoppel is made clear. He who comes to equity must come with clean hands. Lord Denning makes it clear that the estoppel principle could work to get around the rule in Pinnel's case but not where the settlement has been procured by intimidation. Therefore, on the facts in this case, the debtor could not use estoppel with the result that the debtor was still caught by the rule in Pinnel's case.

The High Trees case met with some resistance in Australia. Very little happened for many years. It was not until 1980 that it was applied in a South Australian case and then the High Court finally recognised the doctrine of promissory estoppel in 1983 in

Although the High Court recognised the doctrine in this case it did not, in the end, actually apply it. This was because an essential element was missing on the facts. The case involved a contract for the purchase and sale of land. The purchasers were permitted under the contract to pay a deposit and then move on to the land immediately and pay off the balance a year later. They moved on to the land and built a house. When the year was up and the purchasers had to pay the balance, they found themselves in difficulties. They stood to lose both the deposit and the land (with the house on it) if they could not come up with the money. The deadline was July 1 but the vendors effectively extended it to August 10 by sending a notice. On August 9 the purchaser's solicitor rang the vendor's solicitor's office and talked to a secretary. The purchaser's solicitor said that finance would be obtained but that there would be a further delay of 7 days. He asked whether that was acceptable to the vendor. The secretary replied, "I think that'll be all right but I'll have to get instructions." The vendor on August 14 then terminated the contract pursuant to the clause which said that time was of the essence.

The purchasers argued, amongst other things, that this conversation generated an estoppel so that the vendors were estopped from insisting on their strict legal rights, namely, the deadline. The High Court, by a majority, said that this conversation could not generate an estoppel. For an estoppel to work, there must be a clear and unequivocal statement, promise or representation. Here the statement by the secretary was qualified and no-one knowing anything about conveyancing practice would be entitled to rely on it.

The significance of Legione is simply that the High Court for the first time recognised the doctrine of promissory estoppel, that is, an estoppel concerning future intention. Australian law had recognised estoppel relating to a representation of existing fact but had not gone so far as recognising estoppel concerning future intention or promises. The High Court limited the application of promissory estoppel to promises about existing contractual relations, such as "I promise not to insist on a contractual deadline" or "I promise that you do not have to pay the full rent." In other words they limited it to the same area of operation as applied in the High Trees case.

Mason and Deane JJ went on to say that a statement which is the basis for an estoppel must be clear and unambiguous (pp 217-218). Of course, this was the problem on the facts of Legione itself. The conclusion that the statement by the secretary could not found an estoppel was reached by Mason and Deane JJ on p 219 "It follows that Miss Williams ...".

They also mentioned another aspect of estoppel on p 218. There must be detrimental reliance ("material disadvantage") by the person to whom the statement or representation was made. This aspect of estoppel has sometimes caused difficulties. It is sometimes not clear what constitutes sufficient detrimental reliance. For example, if a landlord says to a tenant that the tenant does not have to pay the full rent, what detrimental reliance is there by the tenant?

Another important point mentioned by Mason and Deane JJ on p 218 2nd last para is that a promise or representation may be implied rather than express. However, it is obviously more difficult to argue for an implied promise or representation to found an estoppel argument.

In the end the purchasers did not lose their house and land because of a quite separate equitable doctrine called relief against forfeiture. We need not be concerned about that aspect of the case.

So, two points emerge from this case:

We now come to

which is the case where the High Court made a big breakthrough in relation to the doctrine of estoppel, particularly promissory estoppel. In Legione v Hateley promissory estoppel was given recognition in terms of the High Trees principle. This was, as I have said, a limited doctrine. It prevented someone in an already-existing contractual relationship from insisting on his or her strict legal rights under the contract if he or she had made a promise or representation that the other party was relieved of a contractual obligation. It was confined to negative promises about contractual obligations. "You need not observe clause 4..." It could only be used as a shield and not as a sword. Typically, High Trees promissory estoppel would be used when the person who made the promise or representation tried to insist on contractual performance and the other party said "But you assured me that I did not have to..." It was used as a defence.

The High Court also attempted to draw together the various strands of estoppel into one overarching doctrine.

The facts of the case are set out on pp 219-220. Waltons, the erstwhile retailer owned by Mr Bond, wanted to build a store in Nowra on the South Coast of NSW. They found a suitable site owned by Maher. It already had some buildings on it. They negotiated a deal whereby Maher would demolish the existing buildings and then erect a store to Waltons' specifications and would then lease the property to Waltons. Waltons was in a hurry; they wanted the store erected by mid January 1984. The contract was pretty well settled by early November 1983. On 7 November, some minor amendments were made to the contract. Waltons' solicitors in Sydney indicated that the final amendments looked OK to them but that they would have to clear them with the client, i.e. Waltons. They said "We shall let you know to-morrow if any amendments are not agreed to." Maher's solicitor, having heard nothing further, then got Maher to execute the contract and sent two counter-part contracts off to Sydney "by way of exchange". (The way in which contracts involving an interest in land are executed is by an exchange of identical parts. Maher had done his bit and the appropriate response from Waltons would have been that one part, duly executed by Waltons, should have been sent back.)

Maher started to demolish the buildings on the site. Remember, Waltons was keen to have the building erected very quickly. Meanwhile Waltons had a change of heart and asked their solicitors whether they had a contract with Maher yet. When told that there had not yet been a completed exchange, Waltons instructed their solicitors to go slow on the deal. Maher heard nothing from Waltons for some 9 or 10 weeks. He had demolished the buildings on the site, had completed about 70% of the brickwork and approximately two-fifths of the concrete work. Waltons had a representative in Nowra and knew what was going on. Around about 20th January, Waltons' solicitors sent a letter to Maher saying that Waltons had decided not to go ahead with the deal.

If we pause there and analyse the legal situation as it was perceived to be in 1984, the answer was very simple. Everyone knows that deals of this kind are finalised by the exchange of contracts. That had not happened. Maher started work at his own risk. The doctrine of estoppel did not meet the case because it applied to existing contractual relations where one party had promised the other that he or she need not do something. If estoppel could be used here it would be transforming it entirely because it would apply outside an existing contract and it would be using it as a cause of action, that is, it would be giving Mr Maher a positive remedy in the absence of contract.

Maher brought an action seeking a declaration that there was an existing contract, specific performance of that contract or, alternatively, damages. He won his case all the way to the High Court with not a single dissenting judge. The basis on which he won was estoppel.

The various judges differed in their interpretation of the facts. This meant that the historically different types of estoppel were called in aid, depending on the interpretation of the facts. If Waltons made a representation about an existing fact then common law estoppel would be appropriate; if future intention, then promissory estoppel. By the time it reached the High Court, the basis on which some judges proceeded was that Maher believed that Waltons had said that exchange of contracts would take place. In other words, on one interpretation of the facts, they had in effect promised that exchange would go ahead. This, of course, tested the limits of promissory estoppel.

Mason CJ and Wilson J put it on the basis that Maher believed that exchange would take place as a matter of course. This belief had, of course, been fostered by Waltons, through their solicitors, when they said that they would communicate only if there was a problem with the last minute amendments to the contract. In their judgment they discuss on p 221 the sword/shield distinction and the fact that promissory estoppel had been confined to the modification of existing contractual rights. They express the concern that to allow estoppel to operate as a positive cause of action would undermine the doctrine of consideration.

Mason and Wilson then draw on proprietary estoppel cases to show that estoppel has supported the enforcement of promises in the absence of consideration. Crabb v Arun District Council and Ramsden Dyson are such cases. They then say that there is a common thread running through the case which they bring together in the 2nd last para on p 222 "One may therefore discern..."

On p 223 last para they go to some length to show what the necessary ingredients of an estoppel must be. It is based on unconscionability. They say quite explicitly that merely breaking a promise is not by itself unconscionable conduct so as to support an estoppel. But breaking a promise does become unconscionable conduct when the promisee has sufficiently relied on it to his or her detriment. It appears from this passage that mere reliance by the promisee is still not enough. It must be a reliance that has been encouraged or generated by the promisor.

All of this was satisfied on the facts of this case. Mason and Wilson relied particularly on the background of urgency which had been generated by Waltons' desire to have the store built as quickly as possible. They also stressed that Maher had been encouraged to believe that exchange was a mere formality, that is, the failure of Waltons to get back to Maher meant that the last minute amendments were apparently OK and that the deal was going ahead. As Mason and Wilson put it (p 224):

The judgment of Brennan J compared and contrasted common law and equitable estoppel. He considered the facts on the assumption that Waltons indicated that it would exchange on p 226. He, too, drew on proprietary estoppel cases to show that estoppel can support a positive cause of action. Much of Brennan's judgment is concerned to explain the place of a new estoppel, which allows estoppel to be used as a sword and not just as a shield, alongside contract. He stressed that the two doctrines come from different positions. See p 228 4th para where he talked about equity's role in preventing unconscionable conduct - or at least to redress or avoid the detriment caused by unconscionable conduct. He then made a comparison between estoppel and contract on p 228 last para "But there are differences..."

This analysis leads to a most important point about estoppel and that is the remedies which flow from a successful estoppel argument. The remedies are tailored to achieve one aim: to avoid the detriment generated by the person who has reneged on a promise or denied the truth of a representation. This means that the remedy is limited and is determined by the particular circumstances. It just happens that in the Waltons case the only way to remove the detriment suffered by Maher as a result of his reliance on the assumption generated and encouraged by Waltons was to enforce the assumed contract.

Brennan turned to the particular issue raised by the facts of this case and that was: can an estoppel be built on someone remaining silent? He dealt with this on p 230. Silence can support an estoppel if the silence reinforces or generates an assumption which, if not adhered to, causes detriment to the other party. This is what happened here. Waltons had two choices: to warn Maher or to act consistently with the assumption made by Maher. They did neither.

Brennan then helpfully set out a nice summary of the elements of estoppel on p 230 last para.

The final point to note is that the formalities required for the making of contracts involving an interest in land - called the Statute of Frauds requirements - do not apply if the legal basis for the enforcement of rights is estoppel and not contract - see p 231. The Conveyancing Act 1919 (NSW) s 54A is the Statute of Frauds section in NSW and the judges made the point that it is simply irrelevant in an estoppel case. This point is of some importance and will be taken up again in the Property course.

The most difficult and potentially troublesome element in the whole estoppel business is the element of detrimental reliance. It is sometimes unclear what this means. In some of the estoppel cases in which Lord Denning had a say he would argue that it is sufficient if the promisee has acted on the promise. He de-emphasised the requirement of detriment. It is probably safe to assume that in Australia the courts require detrimental reliance. The time for testing this is at the time when the promisor or representor decides to go back on the promise or representation.

Reliance must be reasonable in the circumstances. So, if someone has relied on the other when they ought to have realised that it was not sensible to do so, then an estoppel may not work. One argument that is tried in this context is that it is never reasonable to rely on another's promise unless it is in a contract or in a deed. But this argument is no longer tenable now that there is a third way (estoppel) of enforcing promises.

But we need not be confined to contract. This is illustrated by

In this case the Commonwealth announced to sailors, who were seeking to claim compensation from the Commonwealth in respect of their injuries suffered when the HMAS Melbourne sank HMAS Voyager off Jervis Bay in 1964, that the Commonwealth would not use the Statute of Limitations defence in respect of these claims. The Commonwealth also said it would not rely on a common law defence which provided immunity to the government in relation to negligence actions arising out of active service, including in peace time, by military personnel. The reason why sailors were still attempting to seek compensation some 25 years after the accident is a long story but suffice it to say that the Commonwealth could kill any such claims dead if it pleaded the Statute of Limitations or the common law defence. Having said that it would not use these defences (in other words that it would deal with the claims on their merits), the Commonwealth then decided that it would use the defences. The case which went to the High Court was simply on the question: can the Commonwealth plead the Statute of Limitations, having regard to what it had announced previously? The other defence was more dubious and there was a possibility that it in fact did not apply to the facts. The question for the High Court focused principally on the Statute of Limitations, though the other defence was also mentioned.

By a majority the High Court held that the Commonwealth could not plead the defences. However, the majority based their decisions on different grounds. Only Deane and Dawson JJ used estoppel. Toohey and Gaudron JJ relied on waiver.

A word about the doctrines of estoppel, election and waiver. There is a lot of confusion about their boundaries and their operation. Election and waiver are discussed by Brennan J on pp 236-238.

Election is reasonably clear. It is about making a choice between two inconsistent courses of action. We will come across examples of election when a party to a contract has a choice whether to rescind or terminate the contract or whether to continue on. The doctrine of election simply says that he or she must make the choice reasonably promptly and, once the choice is made, then he or she is bound by that decision. There is no element of reliance by the other party, as pointed out by Brennan on p 236 3rd last para.

Waiver is far more obscure. We will again come across it later on. One example is where a person has waived a right to terminate a contract for serious breach. It is the giving up of a right which has already accrued. Once it has been given up, it cannot thereafter be asserted. But, it has to be said, waiver has been used in other senses and it may be that now, after the Waltons case, it is sensible to deal with most cases of waiver as estoppel cases. There are two distinctions between waiver and estoppel. One is that an estoppel looks to existing facts or to the future and "fixes" those facts or the future in the sense that the person estopped is not allowed to depart from them whereas waiver looks to a past right which has been given up. The second distinction is that waiver applies to what might be called "procedural" rights rather than substantive ones. To waive a substantive right like a right to performance under a contract, it is necessary to find a consideration or an estoppel. But to waive a procedural right, like the right to terminate a contract for breach, no consideration or estoppel is necessary. It is also possible to waive the mode or manner of performance of a particular obligation under a contract, such as the time of delivery. This is, again, a kind of "procedural" right rather than the substantive right to delivery as such. But the distinction is, it must be admitted, a troublesome one.

Because the Commonwealth's right arising from the Statute of Limitations - that is, the right to defend the claim - was procedural in nature, at least some of the judges considered that it was more appropriately dealt with on the basis of waiver. But, the fact that there were widely varying views about whether waiver was appropriate indicates the uncertainties associated with waiver.

Remember that there were three minority judges who allowed the Commonwealth's appeal. Mason CJ, Brennan and McHugh JJ all argued that the only way in which Verwayen could succeed was on the basis of estoppel but that the estoppel remedy should be limited to the "minimum equity" which was needed to avoid the detriment suffered by Verwayen as a result of the Commonwealth changing its mind. This was achieved by awarding costs to Verwayen in respect of wasted legal fees but allowing the Commonwealth to plead the defence.

The other two estoppel judges, Dawson and Deane JJ, said that this would not suffice because the detriment suffered by Verwayen was more than just the legal costs incurred. He had built his life for some considerable time on the assumption that the only issue to be fought was assessment of damages. See p 245 last para of Deane's judgment "If the Commonwealth were now allowed..." and p 246 2nd last para in Dawson's judgment "But the real detriment to the respondent ..."

The detriment issue was the real difficulty in this case. Mason CJ pointed out on p 235 that detriment could not be found simply in the disadvantage to Verwayen if the Commonwealth decided to argue a good defence when it originally said that it would not. Reneging on the promise is not enough. There had to be some consequential detriment flowing from relying on the Commonwealth's promise or assurance.

What does the Verwayen case tell us about how the doctrine of estoppel has developed in Australia since the Waltons case? One answer might be that it has become more confused, particularly in relation to what is the appropriate remedy. There is a discernible effort to find a single, overarching doctrine of estoppel which has unified the various strands. This is explicitly stated by Mason CJ middle p 233 culminating in the statement in the 3rd para of p 234 "The result is that..." I think that Deane J is trying to say the same thing in his elaborate judgment. But there is one particular element of his judgment which I find difficult to accept. He draws it all together on pp 243-4 in 8 points. Point number 7 is the unsatisfactory one where he says that estoppel is not a cause of action. Estoppel, according to Deane, sets the stage for some other cause of action to operate. For example, in the Waltons case the estoppel set the stage for contract to operate. But not all estoppels work this way. In particular proprietary estoppel, whose influence was so important in the Waltons case, provides a variety of remedies without recourse to some external cause of action. The correct view is that estoppel can itself be a cause of action.