The Law of Equity in Australia

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Equity – Assignment Question 3 Introduction As described by Sir Frank Kitto, Justice of the High Court of Australia from 1950 to 1970, the law of equity is ‘the saving supplement and complement of the Common Law….’ which prevails over the Common law in case of conflict between both the laws and thus by repairing the deficiencies of the Common Law.[1] An estoppel is a principle whereby a party is prevented from asserting a contrary position to any fact which has already been established.[2] Points of distinction regarding Law of Estoppel in common law and equity: As to definition:
  • Estoppel in common law occurs where the relying party acted upon an assumption of an existing fact only as confined by the decision of House of Lords in Jorden v Money [1843–60] All ER Rep 350. [3] For instance, when the party represented induced the relying party to believe that he has signed a contract.[4]
  • Whereas, an Estoppel in equity is an equitable claim that prevents someone from denying the existence of a state of affairs in circumstances in order to protect and prevent a party from departing from an assumption encouraged by the other party's conduct, representations or promises, where to do so would be unconscionable and would cause loss and injury to the party who acted upon that assumption.[5] Equitable estoppel also occurs in case of a representation of future conduct where the relying party acted upon an assumption as to the future conduct of the representor. For instance, the representor induced the relying party to believe he will sign the contract in the future. [6]
Thus from here, it is derived as per Priestley JA in Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466, at 472, that common law estoppel operates when certain conditions are fulfilled, establishes a state of affairs by reference to which the legal relation between the parties is to be decided. It does not itself create a right against the party estopped. The right flows from the court’s decision on the state of affairs established by the Estoppel. Whereas, equitable estoppel operates upon representations as to future conduct, including promises about legal relations. When certain conditions are fulfilled, this kind of estoppel is itself equity, a source of legal obligation.[7] As to nature: The common law estoppel is a rule of evidence and a device used merely to determine the facts upon which the legal rights of the parties will then be determined by the court, whereas estoppel in equity may confer substantive rights which flow directly from the operation of estoppel in equity.[8] As to form The common law estoppel can only act as a shield not as a sword as it is only a way to establish evidence, not a cause of action. Whereas, the equitable estoppel can act as both a sword and a shield because it does not only determines evidence, but it is itself a cause of action.[9] As to applicability The common law of estoppel only applies to representation of existing legal facts such as promises made in agreements or contracts already signed and not of future representations or conducts of the representor. The general principle of common law estoppel was stated by Dixon J in Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641, at 674 as being 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’. Whereas, the scope of equitable estoppel is much wider as it applies to both future facts, representations and existing legal facts. It does not require consideration or an agreement on terms. Thus in the case ofMobil Oil Australia Ltd v Lyndel Nominees Pty Ltd (1998)it was held that main objective of equitable estoppel is actually to avoid detriment rather than enforcing promises.[10] As to effect The effect of Common Law Estoppel is to prevent the representor from denying his representation in court. The contractual rights and obligations will be determined as if the representor’s representation was true. Thus the representor will be ‘estopped’ from denying the asserted facts that he has signed the contract and hence the contract will be deemed to be s signed, and therefore enforceable. Whereas, the effect of Equitable Estoppel is to prevent the representor from acting inconsistently with his representation without taking steps to ensure that the relying party does not suffer detriment as a result of his inconsistent conduct. Thus, the representor will need to give reasonable notice of its intention to act inconsistently with the representation, and in the case damages will still be suffered by the Relying Party, compensate the Relying Party for those damages. [11] As to types: At common law, estoppel could be of the following types: Estoppel by deed: It provides that a statement within a deed under seal cannot be denied and must be understood as binding by the party who makes it. This was held in the case ofGreer v Kettle [1938] AC 156. Estoppel by record: This refers to judicial decisions, i.e. once a court has decided an issue between the parties, it cannot be re-litigated. Estoppel by conduct: Estoppel by conduct includes within it various types of estoppels which can take place before a contract, during and contract and within a relationship. This type of estoppel is sometimes classified into sub-types:
  1. Estoppel by Agreement or Convention: It occurs when the parties involved agree on certain facts, though those facts may be incorrect.If they are both in agreement, each is then estopped from denying this as an agreed fact.
  2. Estoppel by Representation: It occurs when a party, A has made some representation to another party B, B then act on that representation, however, A then denies the truth of that representation. A may be estopped from denying the truth.
Whereas, in equity, the followings are the types:
  1. Proprietary estoppel: It relates to issues that arise surrounding land ownership that is disputed transfers of land and the right to use the land of the owner. This doctrine aims to protect people who have relied or acted upon the promise of land but suffered detriment a change in position as a result of the promise being withdrawn.
Such as in Dillwyn v Llwellyn[12]in Chancery a father promised a property to his son, who took possession, expended a large sum of money on the house and otherwise improved the property. The father never actually gifted the property to the son. After his death the son, claiming to be the equitable owner, obtained a court judgment forcing the trustees to convey the land to him.[13]
  1. Promissory estoppel: In equitable promissory estoppel,[14] it is necessary for a plaintiff to establish (1) that it has adopted an assumption as to the terms of a legal relationship with the defendant; (2) that the defendant has induced or acquiesced in the plaintiff’s adoption of that assumption; (3) that the plaintiff has acted in reliance on its assumption; (4) that the defendant knew or intended that the plaintiff so act; and (5) that it will occasion detriment to the plaintiff if the assumption is not fulfilled. [15]
Whereas, in common law estoppel, it is necessary for a plaintiff to establish :(1) that it has adopted an assumption as to the terms of its legal relationship with the defendant; (2) that the defendant has adopted the same assumption; (3) that both parties have conducted their relationship on the basis of that mutual assumption; (4) that each party knew or intended that the other act on that basis; and (5) that departure from the assumption will occasion detriment to the plaintiff. [16]
  • In Australia, the doctrine of promissory estoppel was first authoritatively accepted by the High Court in Legione v Hateley (1983)[17]. Unlike common law estoppel, it is discretionary as provided in the case of D & C Builders v Rees[18], where the courts refused to recognise a promise to accept a part payment of £300 on a debt of £482 on the basis that it was extracted by duress.
  • In Waltons Stores (Interstate) Ltd v Maher[19] is a landmark case since it upheld that:
  • It is a general principle which could operate in any legal relations, not just existing contractual relations.
  • In this case the following notion as distinctive from common law of estoppel was established: ‘A common thread’: Equity will act to relieve a plaintiff who has acted to his detriment on a basic assumption where the other party has played such a part in its adoption that it would be unfair or unjust if he were left free to ignore it.
Conclusion According to the above facts it is clear that there are clear distinction can be seen in between Common Law Estoppel and the Equity Estoppel. Bibliography Cases Central London Property Trust Ltd v High Trees House Ltd [1947] 1 KB 130. D & C Builders v Rees [1965] EWCA Civ 3. Dillwyn v Llwellyn [1862] All ER 384. Greer v Kettle [1938] AC 156. Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641, at 674. Legione v Hateley (1983) 152 CLR 406. Mobil Oil Australia Ltd v Lyndel Nominees Pty Ltd (1998) 153 ALR 198. Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387. Waterman v Gerling Australia Insurance Company Pty Ltd (2005) 65 NSWLR 300, [83], [96]. Book Radan& Stewart, Principles of Australian Equity and Trusts :Equitable Estoppel (Reed International Books Australia Pty Limited, LexisNexis,2009) <http://sydney.edu.au/lec/subjects/equity/materials SUMMER 2009-10/Radan & Stewart Ch 12.pdf > Study Guide: Jaani Riordan, Contracts: Part VIII Estoppel (2004) p. 1. < http://www.jaani.net/resources/law_notes/contracts/08_Estoppel.pdf > Seminar paper Michael Kirby, ‘Full text of Michael Kirby's speech: Equity's Australian isolationism’, The Australian Business Review, (online) 20 November 2008. <http://www.theaustralian.com.au/business/legal-affairs/equitys-australian-isolationism/story-e6frg97x-1111118084379> .       Conference Paper P L G Brereton RFD, ‘Equitable Estoppel In Australia: The Court Of Conscience In The Antipodes’ (Paper presented at the Australian Law Journal Conference, 16 March 2007). <http://www.supremecourt.justice.nsw.gov.au/agdbasev7wr/supremecourt/documents/pdf/brereton_2007.03.16.pdf> Internet Materials: UniStudy Guides, Estoppel (19 March, 2013) <http://www.unistudyguides.com/wiki/Estoppel> UniStudyGuides, Waltons Stores (Interstate) Ltd v Maher(LAWS1071) <http://www.unistudyguides.com/wiki/Waltons_Stores_(Interstate)_Ltd_v_Maher_(LAWS1071)> Wikipedia, D & C Builders Ltd v Rees (25 June 2014 ) <http://en.wikipedia.org/wiki/D_&_C_Builders_Ltd_v_Rees>. WikiSpace, Group 8- Estoppel (2014) < http://laws1008.wikispaces.com/Group+8+-+Estoppel> Vedini Herath – u3104205
[1] Michael Kirby, ‘Full text of Michael Kirby's speech: Equity's Australian isolationism’, The Australian Business Review, (online) 20 November 2008. <http://www.theaustralian.com.au/business/legal-affairs/equitys-australian-isolationism/story-e6frg97x-1111118084379> . [2]Jaani Riordan, Contracts: Part VIII Estoppel (2004) p. 1. < http://www.jaani.net/resources/law_notes/contracts/08_Estoppel.pdf > [3] Radan & Stewart, Principles of Australian Equity and Trusts :Equitable Estoppel (Reed International Books Australia Pty Limited, LexisNexis,2009) <http://sydney.edu.au/lec/subjects/equity/materials SUMMER 2009-10/Radan & Stewart Ch 12.pdf> [4] UniStudy Guides, Estoppel (19 March, 2013) <http://www.unistudyguides.com/wiki/Estoppel >. [5] WikiSpace, Group 8- Estoppel (2014) < http://laws1008.wikispaces.com/Group+8+-+Estoppel> [6] Above n 4. [7] Above n 3. [8] Above n 3. [9] Above n 2. [10] Above n 5. [11] Above n 4. [12] [1862] All ER 384. [13] Above n 5. [14] Also known as High Trees Estoppel as Denning J revived the doctrine in this case Central London Property Trust Ltd v High Trees House Ltd 1947] 1 KB 130., where landlord was estopped from going back on such an unequivocal promise that was made with the intention that the tenants would act on it. [15] Waltons v Maher, 428-429. (Brennan J). [16] Waterman v Gerling Australia Insurance Company Pty Ltd (2005) 65 NSWLR 300, [83], [96] [17] 152 CLR 406. P L G Brereton RFD, ‘Equitable Estoppel In Australia: The Court Of Conscience In The Antipodes’ (Paper presented at the Australian Law Journal Conference, 16 March 2007). <http://www.supremecourt.justice.nsw.gov.au/agdbasev7wr/supremecourt/documents/pdf/brereton_2007.03.16.pdf> [18][1965] EWCA Civ 3. Wikipedia, D & C Builders Ltd v Rees (25 June 2014 ) <http://en.wikipedia.org/wiki/D_&_C_Builders_Ltd_v_Rees>. [19] (1988) 164 CLR 387.UniStudyGuides, Waltons Stores (Interstate) Ltd v Maher(LAWS1071) <http://www.unistudyguides.com/wiki/Waltons_Stores_(Interstate)_Ltd_v_Maher_(LAWS1071)>
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