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The publication of a book devoted entirely to the Australian doctrine of equitable estoppel is a welcome development. The principles of estoppel by conduct have undergone a dramatic transformation in Australian law in recent years, and that transformation has left many important philosophical and practical issues unresolved. The new doctrine of equitable estoppel is potentially so far reaching, and raises issues of such complexity, that it cannot adequately be covered in standard texts on contract, equity or property law. Protecting Reliance: The Emergent Doctrine of Equitable Estoppel does not attempt to provide a comprehensive coverage of the new doctrine. Its author, Dr Michael Spence, expressly disavows any intention to provide a comprehensive treatment of the current law on estoppel.[1] Instead, the book attempts to identify and describe the duty underlying equitable estoppel, and to use the duty to shape the doctrine.[2] In doing so, Protecting Reliance raises many interesting issues about the nature of equitable estoppel, the way in which it operates, its potential applications and its connections with other parts of the law of obligations. Protecting Reliance consists of three chapters. Chapter one outlines the nature of the duty underlying equitable estoppel. Chapter two describes the emergent doctrine of equitable estoppel. Chapter three explores the utility of equitable estoppel, its relationship to the law of contract, and its potential application in relation to particular legal problems which the courts have been unable to solve through the application of the principles of contract, tort and unjust enrichment.
Spence sees equitable estoppel as based on a ‘duty to ensure the reliability of induced assumptions’.[3] He argues that this duty can be used to shape the developing Australian doctrine of equitable estoppel. It is not immediately apparent what the content of such a duty would be, or how it would shape equitable estoppel. A duty to ensure that assumptions are reliable could require all assumptions to be made good, or could require those assumptions which have been relied upon to be made good. In fact, Spence regards the duty to ensure the reliability of induced assumptions as a duty to prevent harm, as becomes clear when he describes the primary and secondary obligations imposed by the duty.[4] The primary obligation is to prevent harm being suffered by someone who is induced by one’s conduct to adopt and rely on an assumption. The secondary, remedial obligation is to compensate the relying party for any harm that he or she has suffered, which might reasonably have been prevented.[5]
Spence sees the duty to ensure the reliability of induced assumptions as part of a set of three overlapping moral duties.[6] The first is the duty to keep promises, which is given expression through the law of contract. The second is the duty not to lie, which is given expression through the tort of deceit. The third is the duty to ensure the reliability of induced assumptions, which is given expression through several doctrines, including the tort of negligent misstatement, the principle in Nocton v Lord Ashburton[7] and estoppel by conduct. It is a feature of Spence’s approach that he regards the various duties as part of a moral code, which is separate from the relevant legal obligations. The legal and equitable doctrines, in Spence’s view, give effect to the underlying moral obligations.
As I have argued elsewhere,[8] it is essential to an understanding of equitable estoppel to attempt to situate it within a coherent taxonomy of the law of obligations. The way in which one situates the doctrine within the law of obligations provides a good indication of the way in which one understands the doctrine. Chapter one of Protecting Reliance indicates that Spence sees equitable estoppel as a reliance-based doctrine, which is part of the law of wrongs. The doctrines listed by Spence might be argued to give effect to just two duties, though, rather than the three identified by Spence: first, a duty to keep one’s promises and, secondly, a duty to prevent harm resulting from reliance on one’s conduct.[9] The law of contract creates or, as Spence would have it, gives effect to, a duty to keep promises. The primary duty in contract is to perform a contractual promise, and the secondary duty, arising when a contractual promise has been breached, is to pay damages sufficient to place the promisee in the position he or she would have occupied had the promise been fulfilled.
No relevant distinction can, however, be drawn between the duty not to lie and the duty to ensure the reliability of induced assumptions. Spence distinguishes between these duties on the basis that a lie involves a deliberate or reckless falsehood, while the duty to ensure the reliability of induced assumptions may be breached without in any way being deceitful.[10] Spence does not, however, explain why, from a functional perspective, deceit needs to be isolated from the duty to ensure the reliability of induced assumptions. The fundamental duty underlying deceit, negligent misstatement, Nocton v Lord Ashburton, equitable estoppel and related doctrines[11] is simply a duty to prevent harm being suffered by those who rely on one’s conduct.[12] In each of the relevant doctrines, a breach of the primary duty gives rise to a secondary obligation to compensate the relying party for the harm suffered as a result of their reliance. What distinguishes equitable estoppel from the other doctrines is the particularity of the duty not to cause harm which is created by equitable estoppel: it is a duty not to cause harm by acting inconsistently with an assumption induced by one’s conduct.
The second chapter of Protecting Reliance provides a very clear and concise account of what Spence describes as ‘the emergent doctrine of equitable estoppel.’[13] We are promised that the duty outlined in chapter one will be used in chapter two to ‘shape the estoppel doctrine that emerged in Waltons Stores (Interstate) Ltd v Maher[14] and Commonwealth v Verwayen’.[15] The headings of the sections within this chapter have been designed so that, strung together, they provide an outline of Spence’s view of the doctrine’s operation:
(a) Equitable estoppel is a single doctrine of common law and equity, (b) able to be used as either a cause of action or defence, (c) between two parties not necessarily in any kind of pre-existing relationship. (d) To establish an estoppel, one party, A, (or his privy?) (e) must show that he has held an assumption (f) regarding the present or future, fact or law (g) and that he has acted or refrained from acting (h) in reliance upon the assumption (i) to his detriment. (j) A must also show that the other party, B, (or his privy?) (k) induced the relevant assumption, (l) and that, having regard to a number of specified considerations, it would be unconscionable for B not to remedy the detriment that A has suffered by relying upon the assumption. (m) When these things are established, the court may award a remedy sufficient to reverse the detriment that A has shown.[16]
Although the account of the doctrine in chapter two is brief, it has been well thought out and thoroughly researched. It provides helpful discussions of a number of difficult issues, and offers many useful insights drawn from lesser-known Supreme and Federal Court decisions, both reported and unreported. The requirement of unconscionable conduct is given the most detailed consideration and will be discussed further below. There are, however, a number of important issues which have been left out of Spence’s account, and others which arguably deserve more attention than is devoted to them in Protecting Reliance.
The first deficiency in Spence’s account of the doctrine in chapter two lies in his treatment of the unification of common law and equitable estoppel. Spence argues that unification is desirable, and advocates a model of unification in which equitable estoppel would be extended to cover assumptions of fact, thus swallowing up the common law doctrine. This method of unification was articulated and explained by Mason CJ in his judgment in Verwayen.[17] An alternative, and fundamentally different, model of unification was proposed by Deane J. Deane J’s unified doctrine of estoppel by conduct incorporates significant aspects of the common law doctrine. It does not operate to provide a cause of action in itself, but provides a prima facie right to have the relevant assumption made good.[18] The differences between the Mason CJ and Deane J models constitute a significant barrier to the adoption of a unified estoppel. Spence does not distinguish between the two different models, and gives the impression that their Honours were in agreement as to the mode of unification:
In [Verwayen] three of the judges — Mason CJ, Deane and Gaudron JJ — argued that common law and equitable estoppel should themselves be merged into just one ‘single overarching doctrine’. It was argued that common law estoppel should be collapsed into equitable estoppel and effectively disappear.[19]
Spence adopts the powerful arguments advanced by Mason CJ in Verwayen in favour of unification.[20] They are that the distinction between assumptions of fact and assumptions of future conduct is unsatisfactory, and that it is ‘anomalous and potentially unjust to allow the two doctrines to inhabit the same territory and yet produce different results.’[21] Since the move towards a unified doctrine is a desirable development, Spence proceeds on the footing that ‘equitable estoppel’ is a ‘single doctrine of common law and equity.’[22] While the arguments in favour of a unified doctrine are well-founded, Spence’s treatment of unification as a fait accompli causes two difficulties. The first problem[23] is that, as Spence acknowledges, a unified doctrine does not represent the law in Australia. Separate doctrines of common law and equitable estoppel remain and continue to be applied in Australian courts.[24] Until a unified doctrine is accepted, significant issues of demarcation remain, such as which estoppel applies to an assumption of rights, and whether equitable estoppel, with its flexible approach to relief, is presently capable of operating in relation to assumptions of fact.[25] Spence’s approach leaves these important issues out of account. This is, of course, excusable in a book which purports only to ‘shape’ equitable estoppel and not to explicate its principles, but it does mean that chapter two leaves the reader without a full appreciation of the contours and limits of the existing doctrine of equitable estoppel.
The second problem with Spence’s approach to unification is that he adopts Mason CJ’s arguments in favour of unification, and Mason CJ’s model, without considering the practical consequences of such unification. Unification under the model proposed by Mason CJ in Verwayen has the potential to cause significant practical difficulties. The model would potentially create a cause of action for compensatory damages where one person induces another to adopt an assumption of fact, and then seeks to act inconsistently with that assumption. In a number of situations, the preclusionary effect of common law estoppel is taken for granted, such as where a contract or agency is said to arise by estoppel.[26] The consequences of replacing that preclusionary doctrine with one that yields a compensatory remedy must be given further consideration before a unified doctrine of the type promoted by Spence can be adopted.
Little more than a page of Protecting Reliance is devoted to the important question whether equitable estoppel can operate as an independent cause of action outside the proprietary estoppel context.[27] Spence sees the relevant question as whether equitable estoppel can be used as a sword or simply as a shield. He concludes that ‘[t]here is no sense in maintaining the fiction, as two judges of the High Court seem prepared to do, that the doctrine is only being used defensively.’[28] The relevant question is not simply whether equitable estoppel can be used aggressively, however, but whether it is a source of independently enforceable rights. Deane J acknowledged in Verwayen that equitable estoppel can be used aggressively, provided that it simply supports another cause of action. It can, in other words, be used to ‘provide an ingredient of a cause of action’.[29]
Spence refers to Deane J’s example of a situation in which the owner of land, A, promises to transfer it to B, but then later refuses to do so. Deane J claimed that estoppel provides no cause of action in such circumstances. The cause of action, according to Deane J, would be ‘the ordinary one of a beneficiary against a trustee for actual or threatened breach of trust in which the estoppel was relied upon to establish the factual ingredient of B’s beneficial ownership of the alleged trust property.’[30] Spence is right to criticise Deane J’s analysis on the basis that ‘[i]t is estoppel and not breach of trust that gives rise to the liability.’[31] Other powerful arguments can also be advanced against Deane J’s analysis. Deane J’s own approach to remedy, for example, belies his claim that it is not the estoppel that is providing the cause of action.[32] It is, however, inaccurate to say, as Spence does, that Deane J claimed that ‘the estoppel is merely being used as a defence’.[33] Spence’s adoption of the sword–shield metaphor elides analysis of the more subtle distinction between Brennan J’s equitable estoppel, which operates as an independent source of rights, and Deane J’s estoppel by conduct, which operates to preclude denial of an assumed state of affairs, by reference to which the rights of the parties are then determined. Deane J explicitly accepted that the state of affairs that a party is estopped from denying ‘may be relied upon defensively or it may be used aggressively as the factual foundation of an action arising under ordinary principles’.[34]
A surprising omission from Spence’s discussion of the cause of action question is the extraordinary case of W v G.[35] W v G is important to a discussion of this question for two reasons. First, the case shows that, despite the disagreement in the High Court on this issue, equitable estoppel is being recognised as an independent cause of action, and is generating remedies in situations in which no remedy would previously have been granted.[36] Secondly, since the fact situation of W v G is so far removed from the traditional ambits of promissory and proprietary estoppel, the case provides a good illustration of the potential breadth of the new equitable estoppel. In W v G equitable estoppel effectively provided a cause of action for child maintenance against a woman who had promised her lesbian partner that she would help to raise the partner’s children. The plaintiff conceived and gave birth to two children on the faith of an assumption, encouraged by the defendant, that the defendant would act with the plaintiff as parent of the children and would assist in and contribute to the raising of them. Hodgson J granted relief on the basis of equitable estoppel, ordering the defendant to pay a sum of money into an interest-bearing account, which was to be used to buy annuities for each child.
Closely connected with the cause of action question is whether an assumption, which does not relate to an existing or expected legal relationship between the parties, is capable of founding an equitable estoppel. Although this issue raises fundamental questions about the nature and scope of the doctrine, it is not addressed in Protecting Reliance. A restrictive interpretation was adopted by Brennan J in Waltons Stores, when he articulated the elements necessary to establish an equitable estoppel. Brennan J held that it was necessary for a plaintiff to prove that he or she assumed that a particular legal relationship existed or would exist between the plaintiff and the defendant, and the defendant would not be free to withdraw from that relationship.[37] Although it is not clear what constitutes a ‘legal relationship’ for this purpose, it is difficult to see how this requirement could have been satisfied in W v G. This raises the important question whether an equitable estoppel can arise where one person relies to their detriment on an assumption which is simply that a promise will be performed, or that a person will act in a particular way. In Austotel Pty Ltd v Franklins Selfserve Pty Ltd[38] Priestley JA indicated that it could. He observed that an equitable estoppel could operate in relation to ‘an assumption that a contract will come into existence or a promise be performed or an interest granted to the plaintiff by the defendant’.[39]
The 1998 judgment of the Full Court of the Federal Court in Mobil Oil Australia Ltd v Wellcome International Pty Ltd[40] underlines the importance of this issue. The case concerned an incentive scheme operated by Mobil for its franchisees. The franchisees were told that Mobil was looking for a way to ensure that any franchisee who met certain performance targets over a period of six years would be granted a renewal of their franchise without charge. After four years Mobil unilaterally abandoned the scheme by which the franchisees’ performance was judged. Wilcox J held at first instance that, although the franchisees incurred some additional costs in attempting to achieve their targets, the detriment suffered by them was not proportional to the expectation relief claimed.[41] On appeal, the Full Federal Court held that the assumption adopted by the franchisees was not capable of giving rise to an equitable estoppel. The Court held that ‘it is a necessary element of the principle that the defendant has created or encouraged an assumption that “a particular legal relationship” or “an interest” would arise or be granted’.[42] The generalised commitment given by Mobil to ‘find a way’ to implement a ‘tenure for achievement’ scheme was held not to be capable of giving rise to an equitable estoppel, since the ‘elements and details of the legal relationship’ were lacking.[43]
The approach taken by the Full Federal Court in Mobil v Wellcome is clearly inconsistent with the decision in W v G, since the estoppel in the latter case was based on a simple assumption that a promise would be performed. It was not an assumption that a particular legal relationship would come into existence between the parties, nor was it an assumption that an interest would be granted. The judgments in W v G and Mobil v Wellcome exemplify the two very different conceptions of equitable estoppel held and applied in Australia. One sees estoppel as a broad principle of equity which is formulated in an abstract way, so that it is capable of yielding relief in a wide range of situations in which relief would previously have been denied. The other is a far more cautious approach, which sees the new doctrine as little more than a modestly extended combination of the old doctrines of promissory and proprietary estoppel. While Spence has made it clear that he favours the former approach, one might have expected some discussion of the restrictive approach, and the choice faced by the courts, in a book such as the one under review.[44]
A central question in relation to equitable estoppel is whether it is fundamentally concerned with preventing unconscionable conduct or with protecting reasonable reliance. In other words, is equitable estoppel essentially concerned with the representor’s misconduct, or with the representee’s plight?[45] Although Spence sees equitable estoppel as based on a duty to protect against harm, he sees unconscionable conduct as lying at the heart of the doctrine. Spence argues that an equitable estoppel will only arise where it would be unconscionable for a person inducing the adoption of the assumption to resile from the assumption, or at least not to remedy the detriment caused by so resiling.[46] Spence contends that unconscionability should form the basis for determining liability in estoppel, and argues that the focus of the doctrine must be ‘on the wrongfulness of the behaviour of the party against whom the estoppel is sought’, rather than ‘on the conduct of the party seeking to establish the estoppel’.[47]
The novelty of Spence’s discussion of the unconscionability element is that he fully articulates a conscience-based approach to establishing liability in estoppel. Spence argues that several criteria are used to determine whether it is unconscionable for a party who has induced an assumption to resile from that assumption. Judges exercise a discretion in determining the relative importance to be accorded to each criterion in the fact situation before them. Spence outlines eight factors that a judge must consider in determining whether it is unconscionable for a person who has induced the adoption of an assumption to depart from that assumption.[48] The first factor is the way in which the assumption is induced: the more active the inducing conduct, the more likely it is to be unconscionable to depart from the assumption. Secondly, a judge should take into account the content of the assumption: it is more likely to be unconscionable to depart from an assumption of fact than a promise as to future conduct.[49] The third matter to be considered is the relative knowledge of the parties: it is more likely to be unconscionable to depart from an assumption that the representor knows will be relied upon. Fourthly, the court should take into account the interest the representor has in reliance, and whether reliance is likely to benefit the representor. Fifthly, the nature of the relationship between the parties, and the extent to which reliance could be expected by the representor, should be taken into account. The sixth factor Spence argues should be taken into account under the heading of unconscionability is the relative strength of positions of the parties: a stronger party is more likely to induce reliance than a weaker party. The history of the relationship between the parties is the seventh factor to be taken into account: reliance will more readily be induced in longstanding relationships. The eighth and final factor is whether the representor has taken any steps to ensure that he or she does not cause any preventable harm.
The requirements of reasonable reliance and unconscionable conduct are essentially alternative means of limiting the scope of application of equitable estoppel. Each provides a basis for rejecting undeserving claims. Unconscionable conduct is a limiting factor which is considered from the point of view of the representor, while reasonableness of reliance is considered from the point of view of the representee. The choice between the two is important from the point of view of the philosophy of the doctrine, and whether its primary concern is with the conduct of the representor or the representee’s plight. In embracing the requirement of unconscionable conduct as the limiting factor for equitable estoppel, Spence rejects the requirement of reasonable reliance, taking issue with the reviewer’s argument that an estoppel can arise at common law or in equity where four basic elements are satisfied: assumption, inducement, detrimental reliance and reasonableness.[50] I have argued that an estoppel arises where one person (the representor) induces another (the representee) to adopt an assumption, the representee acts on that assumption in such a way that the representee will suffer harm if the representor acts inconsistently with it, and the representee has acted reasonably in adopting and relying on the assumption.[51]
I have argued elsewhere that equitable estoppel is part of the law of wrongs.[52] If this is so, Spence asks, then what identifiable wrong has been committed if those four elements are established?[53] The answer is that a wrong is committed only when the representor departs from, or acts inconsistently with, the assumption, without ensuring that the representee does not suffer harm as a result of that action. The unconscionable conduct lies in departing from the assumption, but that departure is only regarded as unconscionable if the representor bears responsibility for inducing the assumption, and the representee has reasonably relied on it in such a way that he or she will suffer detriment if the assumption is not adhered to. If one were describing the elements of the cause of action in equitable estoppel, or the elements of the wrong, one would add to the four elements listed above the requirement that the representor must also have departed or threatened to depart from the assumption in question, thus raising the prospect of detriment. It is more accurate, however, to say that an estoppel arises both at common law and in equity merely by virtue of the assumption, inducement, detrimental reliance and reasonableness, even before the representor threatens to depart from the assumption. At common law, an estoppel then arises which prevents the representor from denying the truth of the assumption. In equity, an estoppel then arises which prevents the representor from acting inconsistently with the assumption, without taking steps to ensure that the departure does not cause harm to the representee. Appropriate steps might include compensating the representee for any financial loss, or giving the representee reasonable notice of the intention to depart from the assumption so that his or her original position can be resumed.
Spence rejects the reasonable reliance limitation and advocates the requirement of unconscionability on the basis that the focus of the doctrine must be on the wrongfulness of the behaviour of the representor, rather than on the conduct of the representee.[54] The ‘unconscionability’ factors outlined by Spence, however, focus primarily on the reasonableness of the representee’s reliance, rather than the wrongfulness of the representor’s departure from the assumption. It is more reasonable to adopt and rely on an assumption that is actively induced than one induced passively. It is more reasonable to rely on an assumption of fact than an assumption of future conduct. It is more reasonable to rely on a specific assumption than a general one.[55] It is more reasonable to rely on an assumption where the inducing party has an interest in the reliance and stands to benefit from it. It is more reasonable to rely on an assumption induced by a stronger party, such as a government or large corporation. It is more reasonable to rely on an assumption induced by a party with whom one has a longstanding relationship than on an assumption induced by a relative stranger. Spence’s eighth factor is not a question of conscience: since the primary obligation created by equitable estoppel is to prevent harm, it is clear that no estoppel will arise where the party inducing the assumption takes steps to prevent reliance occurring,[56] or to alleviate any harm that results. That leaves only Spence’s third and fifth factors: the inducing party’s knowledge or reasonable expectation of reliance. As I have argued elsewhere, the unconscionability factor is ultimately only concerned with whether the inducing party knew of, or reasonably expected, reliance by the party adopting the assumption.[57] It is by no means clear that such knowledge or expectation is required in all cases: it is arguably only necessary in cases of estoppel by silence.[58]
Spence’s detailed discussion of the difficult unconscionability element is the most substantial part of his account of estoppel doctrine in chapter two. His attempt to formulate an approach to unconscionability, and particularly his attempt to focus that approach on the misconduct of the representor, make an important contribution to the estoppel literature. Spence’s conscience-based approach to establishing liability does not, however, sit comfortably with either his underlying duty or his preferred approach to relief. It is difficult to see how a doctrine in which liability is determined by reference to unconscionable conduct can be said to be based on a ‘duty to ensure the reliability of induced assumptions’.[59] If the equity is indeed founded on unconscionable conduct, then it is difficult to see why Spence is so strongly committed to the view that the relief provided by equitable estoppel should be limited to protecting the representee against reliance loss. If liability is established by reference to unconscionable conduct, and the courts are given a broad discretion in determining whether conduct is unconscionable, then surely the approach to relief should also be discretionary, and based on what the conscience of the representor requires in the circumstances.[60]
Spence advocates a strict reliance-based approach to relief, which would require the courts to grant a remedy which is the minimum necessary to prevent detriment resulting from the representee’s reliance on the relevant assumption. He argues that the courts should grant whatever personal or proprietary relief is necessary to place the representee in the position he or she would have occupied had the assumption not been induced.[61] Spence accepts that sometimes the only way to protect reliance is to grant a remedy in the expectation measure, but suggests that expectations should only be enforced as a last resort.[62] The reliance-based approach to remedy was first articulated by Brennan J in Waltons Stores,[63] and was supported by several members of the High Court in Verwayen.[64] It has, however, remained controversial,[65] and with two notable exceptions has had little impact on the cases decided since Verwayen.[66]
Spence’s support for a reliance-based approach to relief may not have been so strong had he been able to take into account the High Court’s decision in Giumelli v Giumelli.[67] The Giumelli decision, handed down shortly after the book was published, indicates a lack of enthusiasm on the part of the current High Court for a strict reliance-based approach. Giumelli involved an appeal against the Western Australian Supreme Court’s decision to grant a constructive trust over land which was promised to the respondent. The High Court allowed an appeal, but did not accept the appellants’ argument that the judgments in Verwayen required more limited relief to be granted. The Court found that, in the circumstances of the case, monetary relief was more appropriate, and ordered that the monetary relief should be calculated by reference to the value of the land the respondent expected to receive.[68] The Court thus substituted expectation relief in monetary form for expectation relief in specie. The Court did not reject the reliance-based approach to relief, but the Court’s failure to consider whether compensation calculated on a reliance basis was more appropriate suggests a move away from the approach articulated in Verwayen and adopted by Spence.
Spence argues in Protecting Reliance that a successful claimant’s expectations should be made good only as a last resort.[69] He claims in chapter three that: ‘[o]nly very rarely will it be appropriate to protect reliance by an award in the expectation measure.’[70] This claim is contradicted by the available evidence, which shows that courts grant expectation remedies in almost all cases.[71] While Spence is entitled to disregard the results of the cases in attempting to shape equitable estoppel, analysis of the cases indicates that reliance can be fully protected in most cases only by fulfilling expectations.[72] Accordingly, even a strict reliance-based approach to relief such as that advocated by Spence will have effect only at the margins.[73] The High Court appeared in Giumelli to favour approaching the determination of relief on the basis that a person establishing an equitable estoppel has a prima facie right to have his or her expectations made good.[74] That is certainly the approach taken by the Court itself in Giumelli. Despite quoting extensively from the judgments in Verwayen on the need to go no further than is necessary to avoid detriment,[75] the Court gave no consideration to the question whether it was possible in the circumstances of the case to avoid detriment by granting more limited relief. Given the difficulty of compensating reliance in most cases, it may be appropriate to adopt expectation relief as the starting point. A representee would then have a prima facie right to expectation relief, which would be displaced only where the representor could demonstrate that reliance could adequately be protected by some other means.[76] It must also be conceded that expectation relief is almost certain to remain the norm in equitable estoppel cases, and so equitable estoppel cannot be distinguished from contract, or from the enforcement of contracts through part performance, on the basis that the normal measure of relief is different.
Chapter three of Protecting Reliance begins with a discussion of the interrelation of equitable estoppel and contract.[77] Spence suggests that estoppel will not provide a rival to contract for four reasons: first, the doctrines are not coterminous, contract being based on promise, and estoppel being based on induced assumptions; secondly, the remedial consequences are different, contract paradigmatically fulfilling expectations, while estoppel protects reliance; thirdly, relief in contract is available as of right, while relief in estoppel is discretionary; fourthly, liability in estoppel may be avoided by warning against reliance. While I agree with Spence’s conclusion that equitable estoppel provides a complement, rather than a rival, for contract, I would take issue with two aspects of Spence’s argument.
First, in drawing the remedial distinction, Spence does not attempt to account for the fact that the results of the estoppel cases do not fit his theory. While Spence suggests that the ‘remedial consequences of applying the doctrines will differ’,[78] the evidence indicates that they do not, at least in terms of the interest protected.[79] It must also be noted that Gleeson CJ, McHugh, Gummow and Callinan JJ in Giumelli dismissed suggestions that the measure of relief provided by equitable estoppel must be limited in order to avoid outflanking the requirement of consideration to support a contractual promise.[80] They adopted the observation of Dawson J in Verwayen that the discretionary nature of the relief distinguishes equitable estoppel from contract.[81] They also adopted the reasons McPherson J gave in Riches v Hogben[82] for distinguishing equitable estoppel from contract. These were: first, that what triggers the operation of equitable estoppel is not the promise itself, but the expectation it creates; and, secondly, that equitable estoppel ‘has no application where the transaction remains wholly executory on the plaintiff’s part.’[83] It is the conduct of the plaintiff in acting upon the expectation that attracts the intervention of equity, rather than the existence of an unperformed promise. In other words, equitable estoppel is founded upon the representee’s reliance, rather than the representor’s promise.
Secondly, in distinguishing estoppel from contract, Spence suggests that it is ‘unlikely that many parties will choose to argue their case in equitable estoppel when a cause of action in contract would be available’ because relief will only be available in estoppel on a discretionary basis.[84] This raises the interesting and important question whether an equitable estoppel can be established when a cause of action in contract is available. In the United States there have been suggestions that promissory estoppel is sometimes relied upon, in lieu of traditional contract liability, in cases where bargained-for consideration has been given.[85] In Lyndel Nominees Pty Ltd v Mobil Oil Australia Ltd,[86] Wilcox J at first instance seemed to assume that equitable estoppel can be relied upon in Australia where the promise in question forms part of an enforceable contract. He first considered whether the relevant promise was enforceable on the basis of equitable estoppel, finding that it was not, before considering whether it was enforceable on the basis of contract, finding that it was. It is suggested that there are two reasons why both Spence and Wilcox J are wrong to assume that equitable estoppel can be raised in relation to reliance on a contractual promise. First, a plaintiff who has enforceable contractual rights arising from a promise could not be regarded as having suffered detriment as a result of their reliance on that promise. Secondly, if the common law provides a remedy to the promisee through contract, there is no reason for equity to intervene. This second point was acknowledged by McPherson J in Riches v Hogben, in a passage adopted by Gleeson CJ, McHugh, Gummow and Callinan JJ in Giumelli.[87] McPherson J observed that if there is a legally binding promise, ‘then the plaintiff must resort to the law of contract in order to enforce it, it being the function of equity to supplement the law not to replace it.’[88] The proper order of analysis, then, is to ask first whether a promise forms part of an enforceable contract. If it does, then the plaintiff’s only remedy is in contract. It is only where the promise does not form part of an enforceable contract that the application of equitable estoppel should be considered.
The remainder of chapter three consists of an examination of the use of equitable estoppel in four situations that the law of contract has not adequately been able to deal with: first, work undertaken in anticipation of a contract that does not materialise;[89] secondly, the ‘battle of the forms’;[90] thirdly, firm offers in the construction industry;[91] and, fourthly, variations of contract unsupported by consideration.[92] These issues are given a relatively detailed treatment. Spence spends several pages, for example, explaining why contract, tort and restitution all fail to explain the cases in which compensation has been granted for work done in anticipation of a contract which does not materialise.[93] Spence argues that equitable estoppel is capable of providing more satisfactory results in all of the problem areas he discusses. In doing so, Spence assumes without discussion that equitable estoppel is capable of operating in relation to an assumption that a person will act in a particular way in the future. Spence argues, for example, that equitable estoppel would be capable of arising on the facts of two cases in which lessors undertook alteration work in anticipation of a lease, Jennings & Chapman Ltd v Woodman, Matthews & Co[94] and Brewer Street Investments Ltd v Barclays Woollen Co Ltd.[95] Spence describes the relevant assumption in these cases as follows:
In each case, the prospective lessees induced the prospective lessors to start work on alterations to a property in reliance upon an assumption that the prospective lessees would bear their cost. In Brewer Street it is relatively clear that the assumption induced was that the lessors would be paid whether or not the lease went ahead.[96]
If the relevant assumption was simply that a lease would come into existence between the parties then, after Waltons Stores, such an assumption would provide an uncontroversial foundation for an equitable estoppel. The notion that an estoppel can arise from an assumption that another party will pay the cost of work to be performed is, however, inconsistent with the proposition that an equitable estoppel must be founded on an assumption that a particular legal relationship will come into existence between the parties.[97] The assumption referred to by Spence is not an assumption relating to an existing or expected legal relationship between the parties. Similar problems arise in applying equitable estoppel to the ‘battle of the forms’ situation, and firm offers in the construction industry. In each case Spence frames the relevant assumption in terms of the way in which the representor will act in the future, rather than in terms of a particular legal relationship arising between the parties.[98] The analysis of these problem areas in chapter three, therefore, leads us back to the important question which went unconsidered in chapter two; namely, whether an assumption relating to future conduct outside a legal relationship is capable of founding an equitable estoppel.
The final section of chapter three deals with the problem of contractual variations unsupported by consideration. The problem arises where A has entered into a contract with B and, before performance is completed, A seeks additional remuneration from B or seeks to be released from a contractual obligation. Any promise by B to pay additional remuneration to A, or to release A from a contractual obligation, will not be contractually binding in the absence of consideration. The traditional rule is that a promise by A to perform his or her existing contractual obligations to B will not be regarded as good consideration to support any additional promise by B.[99] In Williams v Roffey Brothers & Nicholls (Contractors) Ltd,[100] the English Court of Appeal held that a promise by A to perform his or her existing contractual obligations will provide good consideration to support an additional promise by B if, as a result of giving the promise, B obtains a practical benefit. Spence argues that Williams v Roffey does not provide a satisfactory solution to the problem, principally because the concept of practical benefit is vacuous, and the law of economic duress fails to provide adequate protection for a party who is placed under commercial pressure to agree to a contract modification.[101] It is unfortunate that Spence does not consider the refinements of the Williams v Roffey principle by Santow J in Musumeci v Winadell Pty Ltd,[102] since Santow J’s refinements go at least some way towards answering Spence’s criticisms. Santow J held that B’s promise should be enforceable only if A’s performance is worth more to B than any remedy against A, and B’s promise is not induced by ‘unfair pressure’ (a broader concept than economic duress) on the part of A.[103]
Spence argues that, while contract law is incapable of dealing adequately with the contract modification problem, equitable estoppel may provide a solution. Spence acknowledges that the crucial question here is whether the party requesting the variation, A, could establish that they stood to suffer detriment as a result of their reliance on the promise made by B, if B did not fulfil their promise. Spence argues that it is possible for A to show that they had suffered detriment as a result of their reliance on B’s promise, because A might have been better off had they breached the contract.[104] A might, for example, have been able to find work elsewhere which would have been sufficiently well remunerated to enable A to pay damages to B for breach of contract, and still be better off. This raises the question whether the performance of a contractual obligation can ever be regarded as detrimental action for the purposes of equitable estoppel. Spence’s analysis is based on the assumption that a contracting party has a choice as to whether or not to perform his or her contractual obligations:
In a fact situation such as that in Williams v Roffey the party requesting the variation is often faced with a very difficult choice: should he break the contract or should he continue with performance? It will often be difficult to tell which of these two options will be the most beneficial, and the party making the decision is in a very vulnerable position as he seeks to weigh the probabilities.[105]
The notion that a contracting party is faced with a choice between performing and paying damages is open to serious question. Accordingly, the notion that performance of a contractual obligation can constitute detrimental reliance for the purposes of estoppel is also doubtful. As Windeyer J made clear in Coulls v Bagot’s Executor & Trustee Co Ltd[106] and Placer Development Ltd v Commonwealth,[107] a party to a contract does not have a choice as to whether to keep his or her promise:
It is, I think, a faulty analysis of legal obligations to say that the law treats a promisor as having a right to elect either to perform his promise or pay damages. Rather ... the promisee has ‘a legal right to the performance of the contract’.[108]
A contracting party cannot, therefore, claim to have suffered detriment simply by reason of having performed a contractual obligation, and having thereby lost the opportunity to breach the contract.[109] Equitable estoppel will not then provide a remedy in a contract variation case unless A has taken some action on the faith of B’s promise, other than mere performance of A’s contractual obligations, which would operate to A’s detriment if the promise was not kept. Cases involving such detrimental reliance would surely be exceptional.
While this review has taken issue with several omissions and arguments made in Protecting Reliance, such differences of opinion are almost inevitable in relation to equitable estoppel. As the subtitle of Spence’s book suggests, equitable estoppel is an emerging doctrine, and there remains considerable scope for debate about its philosophy, mode of operation and scope of application. At this stage in the development of the doctrine, there is also a great need to debate these issues. Protecting Reliance is a valuable contribution to that debate, particularly for its attempt to formulate a conscience-based approach to liability, and its exploration of the role equitable estoppel might play in situations the law of obligations has long found troublesome.
ANDREW ROBERTSON[*]
[1] Michael Spence, Protecting Reliance: The Emergent Doctrine of Equitable Estoppel (1999) 1 (‘Protecting Reliance’).
[2] Ibid.
[3] Ibid.
[4] Ibid 2.
[5] Ibid.
[6] Ibid 1.
[7] [1914] UKLawRpAC 31; [1914] AC 932.
[8] Andrew Robertson, ‘Situating Equitable Estoppel within the Law of Obligations’ [1997] SydLawRw 2; (1997) 19 Sydney Law Review 32.
[10] Ibid 7–8.
[11] Most importantly, the statutory prohibitions on misleading or deceptive conduct in trade or commerce: Trade Practices Act 1974 (Cth) s 52; Fair Trading Act 1987 (NSW) s 42; Fair Trading Act 1989 (Qld) s 38; Fair Trading Act 1987 (SA) s 56; Fair Trading Act 1990 (Tas) s 14; Fair Trading Act 1999 (Vic) s 9; Fair Trading Act 1987 (WA) s 10; Fair Trading Act 1992 (ACT) s 12; Consumer Affairs and Fair Trading Act 1990 (NT) s 42. A person who suffers loss ‘by’ such conduct may recover damages from the person who engages in such conduct: Trade Practices Act 1974 (Cth) s 82; Fair Trading Act 1987 (NSW) s 68; Fair Trading Act 1989 (Qld) s 99; Fair Trading Act 1987 (SA) s 84; Fair Trading Act 1990 (Tas) s 37; Fair Trading Act 1999 (Vic) s 159; Fair Trading Act 1987 (WA) s 79; Fair Trading Act 1992 (ACT) s 46; Consumer Affairs and Fair Trading Act 1990 (NT) s 91.
[12] See Neil MacCormick, ‘What is Wrong with Deceit?’ [1983] SydLawRw 2; (1983) 10 Sydney Law Review 5, 17–18.
[14] (1988) 164 CLR 387 (‘Waltons Stores’).
[15] (1990) 170 CLR 394 (‘Verwayen’). The quote is from Spence, above n 1, 1.
[16] Spence, above n 1, v–vi. I have changed the punctuation and corrected a typographical error. Gender-specific language is used throughout the book. The final heading in chapter two is ‘(n) Defences’.
[17] (1990) 170 CLR 394, 413.
[18] Ibid 440 (Deane J).
[19] Spence, above n 1, 28, citing ibid 411 (Mason CJ) (citations omitted).
[21] Verwayen (1990) 170 CLR 394, 412 (Mason CJ).
[22] Spence, above n 1, 30.
[23] Ibid 28.
[24] In Giumelli v Giumelli (1999) 196 CLR 101, 112–13, Gleeson CJ, McHugh, Gummow and Callinan JJ applied the principles of equitable estoppel to the facts at hand, noting that unification was not accepted by Dawson, McHugh or Brennan JJ in Verwayen, and that Mason CJ, Brennan, Dawson, Toohey and Gaudron JJ referred in Australian Securities Commission v Marlborough Gold Mines [1993] HCA 15; (1993) 177 CLR 485, 506 to ‘an equitable estoppel of the kind upheld in Verwayen’. In Supreme and Federal Court decisions since Verwayen, judges have continued to apply discrete principles of common law estoppel to assumptions of fact and equitable estoppel to assumptions of future conduct.
[25] For an examination of these issues see Andrew Robertson, ‘Estoppel by Conduct: Unresolved Issues at Common Law and in Equity’ (1999) National Law Review 7 <http://www.nlr.com.au/
articles/robertson/robertson.htm> [35]–[49].
[26] See ibid [71]–[74].
[27] Spence, above n 1, 30–1.
[28] Ibid 31. Spence appears to be referring here to the judgments of Deane and Dawson JJ in Verwayen (1990) 170 CLR 394, 437–40 (Deane J) and 459–60 (Dawson J).
[29] Verwayen (1990) 170 CLR 394, 438 (Deane J).
[30] Ibid 437.
[31] Spence, above n 1, 31.
[32] See Robertson, ‘Estoppel by Conduct’, above n 25, [50]–[59].
[33] Spence, above n 1, 31.
[34] Verwayen (1990) 170 CLR 394, 445.
[36] See also Lee Gleeson Pty Ltd v Sterling Estates Pty Ltd (1991) 23 NSWLR 571.
[37] Waltons Stores (1988) 164 CLR 387, 428.
[39] Ibid 610 (emphasis added).
[40] [1998] FCA 205; (1998) 81 FCR 475 sub nom Mobil Oil Australia Ltd v Lyndel Nominees Pty Ltd [1998] FCA 205; (1998) 153 ALR 198 (‘Mobil v Wellcome’).
[41] Lyndel Nominees Pty Ltd v Mobil Oil Australia Ltd (1997) 37 IPR 599. For a discussion of the difference between expectation relief and reliance relief, see below Part II(E).
[42] Ibid 513. The reference to ‘an interest’ being granted is a recognition of the proprietary estoppel cases, which do not necessarily involve an assumption that a legal relationship will arise between the parties.
[43] Ibid 515.
[44] See also Robertson, ‘Estoppel by Conduct’, above n 25, [60]–[65].
[45] The expression ‘representee’ will be used below to describe the person claiming the benefit of the estoppel, and ‘representor’ to describe the person against whom an estoppel is claimed.
[46] Spence, above n 1, 55.
[47] Ibid.
[48] Ibid 59–66.
[49] As noted above, Spence treats equitable and common law estoppel as unified and, therefore, assumes that the equitable doctrine will apply to assumptions of fact.
[50] Spence, above n 1, 55.
[51] Andrew Robertson, ‘Knowledge and Unconscionability in a Unified Estoppel’ [1998] MonashULawRw 6; (1998) 24 Monash University Law Review 115, 116.
[52] Robertson, ‘Situating Equitable Estoppel within the Law of Obligations’, above n 8.
[53] Spence, above n 1, 55.
[54] Ibid.
[55] Spence links the specificity of the assumption with the unconscionability question earlier in the book: ibid 36.
[56] It could also be said that it is not reasonable to rely on an assumption in such circumstances. An example of this situation given by Spence is the decision of Kearney J at first instance in Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 2 BR 318. Spence suggests that one reason an estoppel was not established in that case was because ‘the defendant had made it clear all along that a formal contract would need to be finalised and this was also understood to have been the case by the plaintiff’: ibid 56. Any reliance by the plaintiff in those circumstances would clearly have been unreasonable.
[57] Robertson, ‘Knowledge and Unconscionability in a Unified Estoppel’, above n 51.
[58] Ibid 138–44.
[59] Spence, above n 1, 1.
[60] For an example of such an approach, see P D Finn, ‘Equitable Estoppel’ in P D Finn (ed), Essays in Equity (1985) 59, 90–3.
[61] Spence, above n 1, 66–7.
[62] Ibid 69.
[63] (1988) 164 CLR 387, 416, 425, 427, 433.
[64] (1990) 170 CLR 394, 413 (Mason CJ), 430 (Brennan J), 454 (Dawson J), 475 (Toohey J), 501 (McHugh J). The approach favoured by Gaudron J was essentially reliance-based, but with a prima facie right to expectation relief: ‘it may be that an assumption should be made good unless it is clear that no detriment will be suffered other than that which can be compensated by some other remedy’: at 487.
[65] See, eg, Commonwealth v Clark [1994] VicRp 66; [1994] 2 VR 333, 342–3 (Marks J), 383 (Ormiston J); Elizabeth Cooke, ‘Estoppel and the Protection of Expectations’ (1997) 17 Legal Studies 258.
[66] See Andrew Robertson, ‘Satisfying the Minimum Equity: Equitable Estoppel Remedies after Verwayen’ [1996] MelbULawRw 5; (1996) 20 Melbourne University Law Review 805 and Andrew Robertson, ‘Reliance and Expectation in Estoppel Remedies’ (1998) 18 Legal Studies 360. The two notable exceptions are Public Trustee v Wadley [1997] TASSC 74; (1997) 7 Tas R 35, discussed in Andrew Robertson, ‘Estoppel and the Minimum Equity Principle: The Public Trustee, as Administrator of the Estate of Percy Henry Williams (dec’d) v Wadley’ (1998) 13 Journal of Contract Law 178, and the decision of Wilcox J at first instance in Lyndel Nominees Pty Ltd v Mobil Oil Australia Ltd (1997)
[67] (1999) 196 CLR 101 (‘Giumelli’).
[68] Ibid 125–6.
[69] Spence, above n 1, 69. This approach is carried through into chapter three of the book, where Spence argues that equitable estoppel will not usurp the doctrine of part performance, and does not provide a rival to contract, because ‘awards in the expectation measure ought not normally to be the measure of relief in equitable estoppel’: at 77.
[70] Ibid 79.
[71] Robertson, ‘Satisfying the Minimum Equity’, above n 66.
[72] Ibid 828–36.
[73] See Robertson, ‘Reliance and Expectation in Estoppel Remedies’, above n 66, 366–8.
[74] Giumelli (1999) 196 CLR 101, 123–5.
[75] Ibid.
[76] This is the approach articulated by Gaudron J in Verwayen (1990) 170 CLR 387, 487.
[77] Spence, above n 1, 78–81.
[78] Ibid 80.
[79] Above nn 66–76 and accompanying text.
[80] Giumelli (1999) 196 CLR 101, 120.
[81] Verwayen (1990) 170 CLR 394, 454.
[82] [1985] 2 Qd R 292, 300–1.
[83] Ibid 301, quoted in Giumelli (1999) 196 CLR 101, 121.
[84] Spence, above n 1, 80.
[85] Daniel Farber and John Matheson, ‘Beyond Promissory Estoppel: Contract Law and the “Invisible Handshake”’ (1985) 52 University of Chicago Law Review 903, 908; Phuong Pham, ‘The Waning of Promissory Estoppel’ (1994) 79 Cornell Law Review 1263, 1267–8.
[87] (1999) 196 CLR 101, 121–122.
[88] Riches v Hogben [1985] 2 Qd R 292, 301.
[89] Spence, above n 1, 87–106.
[90] The ‘battle of the forms’ problem arises where two parties, such as a buyer and a seller, exchange inconsistent standard forms during contract negotiations and reach agreement on the principal terms without deciding whose standard form should prevail: ibid 107–16.
[91] Ibid 116–27.
[92] Ibid 128–38.
[93] Ibid 87–98.
[95] [1954] 1 QB 428 (‘Brewer Street’).
[96] Spence, above n 1, 99.
[97] See above nn 37–44 and accompanying text.
[98] Spence, above n 1, 114–16, 121, 124–5.
[99] Stilk v Myrick [1809] EngR 552; (1809) 2 Camp 317; 170 ER 1168.
[100] [1991] 1 QB 1 (‘Williams v Roffey’).
[101] Spence, above n 1, 130–5.
[103] Ibid 747.
[104] Spence, above n 1, 134.
[105] Ibid 135.
[106] [1967] HCA 3; (1967) 119 CLR 460.
[107] [1969] HCA 29; (1969) 121 CLR 353.
[108] Coulls v Bagot’s Executor & Trustee Co Ltd [1967] HCA 3; (1967) 119 CLR 460, 504, quoting Lord Erskine in Alley v Deschamps [1806] EngR 367; (1806) 13 Ves Jun 225, 227; [1806] EngR 367; 33 ER 278, 279.
[109] Cf Je Maintiendrai Pty Ltd v Quaglia (1980) 26 SASR 101, 115–16 (White J).
[*] LLM (Hons) (QUT), PhD (ANU); Senior Lecturer, Faculty of Law, The University of Melbourne. Thanks are due to Dr Anne Orford and the anonymous referee for their helpful comments on earlier drafts of this review.
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