An estoppel is a useful tool to use in litigation that prevents an individual from going back on their word when they have mutually agreed a set of facts with a second party and the second party has relied upon those facts. In this guide, we have broken down the facts as well as presenting some examples as to how this technique can be applied.
- What is estoppel?
- Types of estoppel
- Estoppel by representation
- Promissory estoppel (also known as equitable forbearance)
- Proprietary estoppel
- Estoppel by convention
- Estoppel by deed
- Contractual estoppel
- Waiver by estoppel
- Which type of estoppel should be used?
- Practical advice
What is estoppel?
In a very general summary, an estoppel is a tool that binds a party to their original proposition where a second party has been induced to take any action based on that proposition and the first party seeks to abandon this position. Once established, the estoppel prevents the party from diverging from this position to the detriment of the second party.
There are several situations in which estoppel can apply with the key element of preventing unconscionable action arising from Grundt v Great Boulder Proprietary Gold Mines Ltd (1938) 59 CLR 641 which states that asserts that “the law should not permit an unjust departure by a party from an assumption of fact which he has caused another party to adopt or accept for the purpose of their legal relations”.
Types of estoppel
Summary
Throughout English history various form of estoppel have developed in the courts of law and equity. There is no single set of requirements for each type and therefore they must be considered individually. With this in mind when seeking estoppel it is required to identify the specific type that you are alleging and present the facts and arguments on this basis. The most common types of estoppel are:
- Estoppel by representation
- Promissory estoppel (also known as equitable forbearance)
- Proprietary estoppel
- Estoppel by convention
- Estoppel by deed
- Contractual estoppel
- Waiver by estoppel
This is not an exhaustive list and there are other types that may apply.
Common features
As identified above, there are elements of each type that differ but there some similarities. In order for party A to get an estoppel against party B there needs to be evidence of:
- B has provided clear and unequivocal communication as to a given situation or alternatively, there is some kind of shared understanding between the two parties
- B must objectively have intended for A to rely on the given statement or position
- A had reasonably relied upon or was influenced by that statement or position and had suffered as a result
- B seeks to resile (abandon) from the position of the communication or shared understanding
- As an equitable doctrine, A must come to the court with “clean hands”
Generally speaking, estoppel does not give rise to a new cause of action and most commonly is used as a shield (defence) and not a sword (affirmatively). In other words, other than the exceptions mentioned, the estoppel is used as a form of defence as opposed to basing an entire claim on that point. The main exception to this is proprietary estoppel. Another exception is that the effect of estoppel is powerful enough to permit a claimant to advance a cause of action that would otherwise fail. Whilst estoppel is often described as being a shield and never a sword, it would more accurate to portray them as a “blunt sword” or “sharp shield”.
Estoppel by representation
This form exists to prevent a party from contradicting a previous misrepresentation by subsequently attempting to take a new opposing position. In essence, the estoppel prevents a party from saying a set of facts or a situation is untrue when they previously represented that they were. The party is then estopped from doing so if their action caused the defendant/second party to take action to their detriment believing those facts to be true. This is useful for a defendant if they were misled out of court only for the other party to deny it once before a judge.
The representation can also be inferred from silence or lack of action or silence when it would normally be expected for them to speak out. This is highlighted that when a person who in the face of a particular situation would be expected to be reasonable and honest but refrain from doing so. This specific situation is sometimes known as estoppel by acquiescence.
A very early example was Pickard v Sears [1837] (112 E.R. 179) where Pickard had a mortgage on some machinery. The creditor of the mortgage seized then later sold this machinery to Sears. During the seizure, Pickard made representations that he had no title on the machinery which influenced the creditor and Sears to change their actions accordingly. Pickard later claimed the property but was estopped from arguing this position for failing to mention this initially.
Promissory estoppel (also known as equitable forbearance)
Promissory estoppel is similar to one by representation but requires additional requirements to be met. It can be described as preventing a party from acting in a particular manner having previously promised not to. It is more accurate to describe the estoppel of suspending rather than extinguishing contractual rights.
To establish promissory estoppel, there must be an established legal relationship as well as a clear and unambiguous promise that for all intents and purposes was expected to be fulfilled whether it is express or implied. The party must then change their position on that promise (i.e. go back on their promise) and if that promise were to have reneged on an injustice would occur. There is also no need for the defendant to provide consideration for the promise.
The classic case in this area is Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130 where a landlord had rented a block of flats to the defendant but had promised to halve their rent owing to the lack of tenants during World War II. They did not however make an explicit agreement as to how long this position would last for and the defendants argued that this new rate would continue for the duration of the lease. Having managed to find tenants the landlord now demanded the rent be paid in full as well as back-payment for the period where the rent was reduced. The court ruled that as the defendant had acted in line with what they were promised the claimant was estopped from claiming full rent for the duration of the war. Rent would resume at the full rate after the war since it would be just and fair for this to be the case and the position underpinning the promise would no longer be in place.
Proprietary estoppel
When an individual or company relies on the belief that they have (or will have) an interest in land that is in somebody else’s name proprietary estoppel occurs. It is also required that as a result of this reliance they then act accordingly which would be to their detriment if it transpires they do not have an interest in the land. It is key that the claimant can establish a genuine interest in the land because without so proprietary estoppel cannot be relied upon. Whilst primarily used for property rights it can also be applied to intellectual property.
Inwards v Baker [1965] 2 QB 29 was a case where a father had told his son that a piece of land would be given to him in his will and as a result the son built a house that was he lived in for 30 years up to the point of his father’s death. Once his father had passed away it was found that the land was not passed to the son in the will but as a result of proprietary estoppel the son could not be evicted from the land.
Unlike the previous types, proprietary estoppel can be used as the basis for a case to enforce the promise of the right to land. In other words, the claimant expected that the land would be transferred to them based on them taking a certain action or set of actions.
The modern example of this is Thorner v Major [2009] UKHL 18 the claimant had worked on the farm of the defendant’s father for 30 years without compensation on the understanding that he would inherit the farm. The father did not however leave a will on his death so without this the farm would normally pass to the son (the defendant). The claimant was however able to use proprietary estoppel to have the farm awarded to him on the understanding that the unpaid work was completed to inherit the farm and to not do so would be ‘unconscionable’.
The court will be proportional when deciding the entitlement to relief. A number of areas will be considered including the conduct and circumstances, what the detrimental effect would be and also if there are any additional claims on the property. Typically the court will uphold the promise of the land but may instead decide to award compensation.
Estoppel by convention
Estoppel by convention differs from the above examples as it does not refer to a particular statement or action and instead refers to a pattern of behaviour over a period of time. If two parties have consistently behaved and interacted in a particular manner over a given period and it would be reasonably expected that this behaviour to continue then it could amount to a convention. Departing from this could therefore be grounds for estoppel by convention.
To take this action, both parties must share this assumption of the said convention. There must also be a reliance on this convention that would influence their behaviour and it would inequitable to act contrary to the convention. The estoppel will prevent the parties from going back on the assumed state of affairs if it would be to the detriment of one of the parties and be unconscionable not to.
Estoppel by deed
When a deed contains a specific and unambiguous statement of a specific fact and this is used as the basis for the transaction then estoppel by deed may apply. To establish estoppel by deed then both the parties will be named on the deed that is not void, voidable or rectifiable and the party who the estoppel is raised against has sought to deny the fact within the deed.
Contractual estoppel
This type of estoppel exists to hold parties to a prior agreement within a contract that a state of affairs will be the basis of their dealings with each other even if they know that the state of the affairs is not the case. Both parties are bound by the agreement and neither party can assert that the opposite is true.
This was explained in Peekay Intermark Ltd v Australia and New Zealand Banking Group Ltd [2006] EWCA Civ 386 where it was stated:
“Where parties express an agreement … in a contractual document neither can subsequently deny the existence of the facts and matters upon which they have agreed, at least so far as concerned those aspects of their relationship to which the agreement was directed. The contract itself gives rise to an estoppel.”
Waiver by estoppel
This is a form of estoppel where a party is entitled to exercise their contractual rights but their actions leads the other party to believe it will not do so and therefore amends their behaviour to their detriment.
Which type of estoppel should be used?
Determining the type of estoppel is relevant to the individual case requires analysis of the exact matter as well the exact nature of the statement/action. Broadly this can be summarised as:
- Proprietary estoppel is the most likely to be relevant in cases of property rights
- For contractual rights/claims then promissory estoppel, estoppel by convention or contractual estoppel are the likely types
- In other contexts estoppel by representation is likely to be relevant
- If it is regards to statement of future intentions then proprietary or promissory estoppel is the likely route
Practical advice
- Assess whether the common aspects of estoppel apply. There must be assurance, reliance and a detriment if it does not come to pass.
- Identify the type of estoppel required
- Assess whether the requirements of the individual type are met
- Identify in clear terms the parameters of the relief sought
- Seek an alternative plea to provide a second route should the court not agree with that position
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