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University of Technology Sydney Law Research Series |
Last Updated: 10 April 2017
Causation in Equitable Estoppel
Dr Allison
Silink[1]
A INTRODUCTION
This article examines the causal threshold in equitable estoppel in Australia. The role of causation is rarely discussed directly in equitable estoppel cases. However, causation is at the heart of the element of reliance and reliance is an essential element in establishing an equitable estoppel.[2] Meagher JA noted in Walsh v Walsh[3] that ‘the action or abstaining from action in reliance upon the assumption or expectation encouraged is what invites the intervention of equity.’[4] As observed by Robert Walker LJ in Campbell v Griffin, this question of reliance is ‘really an issue of causation.’[5]
To put the issue in context, there are two differing views in causation theory as applied to reliance in equitable estoppel. There is the view that favours a test of necessity; the well-known ‘but for’ test, so that the plaintiff needs to demonstrate that they would not have acted or refrained from acting in the way they did without the influence of the defendant’s conduct, and that they would have done something else.[6] The other favours a lower threshold causal test, where the defendant’s conduct needs only to be shown to have been to have ‘played a part’ or some synonymous expression, in the decision to act, and not that the plaintiff would necessarily have acted differently without the defendant’s conduct.[7] These are substantively different causal thresholds, and the corollary is that a court could potentially reach a different result on the same set of facts depending upon which is applied.
A review of Anglo-Australian case law reveals that, rather than any consistent approach, in fact a range of different causal tests have been employed to date that span the lower and higher causal thresholds. The High Court of Australia had the opportunity to resolve the issue in Sidhu v Van Dyke (‘Sidhu’)[8]. However, the reasons on this issue are not entirely clear and have given rise to different interpretations. For example, in the Supreme Court of Western Australia, in Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 6),[9] Edelman J observed in obiter dicta that the High Court had approved a lower threshold test. On the other hand, in the Supreme Court of New South Wales, in Priestley v Priestley,[10] White J held that in Sidhu the High Court applied a ‘but for’ test. Accordingly, it is an issue that needs to be resolved.
Against this background, this article has two points to make. Firstly, the preferable interpretation of the plurality’s reasons in Sidhu[11] on causation is that applied by White J in Priestley, namely that the plurality in Sidhu approved the ‘but for’ test. The second point is that this higher causal threshold test is not only the ratio of the case but it is also more consistent with the normative foundations of the doctrine than the lower causal threshold. The purpose of equitable estoppel is to relieve against detriment arising from the plaintiff’s change of position in reliance upon the defendant’s conduct.[12] A lower threshold under which a plaintiff need not demonstrate that he or she would have acted any differently without the impugned conduct, would amount to a departure from the normative underpinnings of the doctrine.
B ‘DECISION CAUSATION’ IN PRIVATE LAW
First, some explanation of the way in which causal questions arise in the context of reliance is warranted. Causation issues arise in equitable estoppel in two related but different ways. The first issue is whether the defendant’s representation or conduct caused the plaintiff to make an assumption,[13] and secondly, and most critically, whether that assumption caused the plaintiff to act in reliance upon it to their detriment. As described by Professor Bant, this second question really captures whether the assumption caused the plaintiff to change their position and ‘reliance’ is the ‘umbrella term’ that captures both of these issues.[14] It provides the causal nexus between the making of a representation or promise by the promisor and the alleged detriment that would be suffered by the promisee if the promisor were to depart from the representation or from fulfilling the promise.[15] Without actual evidence of reliance, or circumstances which give rise to an inference of reliance, a claim will fail.[16] However, the causative extent and consequence of that reliance is of course what is in issue.
Other private law doctrines also focus upon the mental state of the plaintiff in deciding to act in a particular way: common law estoppel by representation, deceit, negligent misstatement, fraudulent misstatement, undue influence, duress and statutory misleading and deceptive conduct claims are examples. The relevant causal inquiries in doctrines turning on reliance are sometimes described as ‘decision causation’ – did the plaintiff rely upon the representation in making the decision to act or refrain from acting in a certain way?[17]
Despite the fact that reliance is a common element in each of these doctrines, some use a lower causal threshold, and others the higher ‘but for’ threshold. Before considering which causal threshold is appropriate in equitable estoppel, it is important to analyse the use of the lower causal threshold in other doctrines applying decision causation, and the normative factors which courts have identified as underpinning that lower threshold, and compare them with doctrines applying a higher causal threshold. These considerations inform the appropriate choice in equitable estoppel.
A lower causal threshold
Starting with the lower causal threshold it has been said that the law has a more relaxed approach to causation in cases of wrongdoing.[18] It has been accepted that in intentional dishonesty and fraud, such as duress, fraudulent misrepresentation and deceit, it is not necessary to establish that the plaintiff would necessarily have acted in a different way absent the representation. The reason appears to be that, historically, courts have found the fraud of the defendant to warrant a remedy against the defendant, even if the plaintiff might not have acted any differently without the impugned conduct. In Reynell v Sprye[19] Lord Cranworth said that, ‘Once make out that there has been anything like deception, and no contract resting in any degree on that foundation can stand.’ In Smith v Kay, for example, Lord Chelmsford LC posed the rhetorical question:
But can it be permitted to a party who has practised a deception, with a view to a particular end, which has been attained by it to speculate upon what might have been the result if there had been a full communication of the truth?[20]
In some earlier cases dealing with deceit it is not entirely clear that a lower causal threshold was applied. For example, Edgington v Fitzmaurice it was accepted that the plaintiff relied upon a fraudulent misstatement in a prospectus but that he had also mistakenly believed that prospectus offered a charge over the property of the company. The court confirmed that the fraudulent representation did not need to be the sole cause of the plaintiff’s conduct, but it is not clear that the court held that the impugned cause was not a necessary cause.[21] On one view, there were two necessary causes: the mistaken belief as to the existence of a charge and also the reliance upon the misrepresentation in the debenture.[22] However the case has been interpreted as supporting a lower causal threshold.[23]
Later cases such as Barton v Armstrong[24] have clearly confirmed that in proceedings to have a contract set aside as a result of deceit or duress, it is only necessary to establish that the defendant’s conduct was ‘a’ reason for entry into the contract to obtain relief, even if it was not necessary and the plaintiff might well have entered into the contract anyway.[25] In Gould v Vaggelas (‘Gould’),[26] Wilson J held that it was sufficient if the fraudulent representation ‘played some part even if only a minor part in contributing to the formation of the contract.’[27] More recently in Taheri v Vitek[28] in the Court of Appeal in New South Wales, Leeming JA confirmed that it is the law in Australia and in England that if the fraudulent misrepresentation ‘plays some part, even if only a minor part in contributing to the formation of the contract’ that is sufficient.[29] Leeming JA noted that in such cases, ‘it is a heavy burden to demonstrate the absence of causality.’[30] For the avoidance of any doubt, his Honour said[31]:
To be clear, it would be no defence even if it were shown that Mr and Mrs Vitek might well have entered into the compromise absent any fraudulent misrepresentation: Barton v Armstrong at 119. As James VC put it in Re lmperial Mercantile Credit Association; Williams' case (1869) 9 LR Eq 225n at 226, in a passage endorsed by Meagher and Handley JJA in Demetrios v Gikas Dry Cleaning Industries Pty Ltd (1991) 22 NSWLR 561 at 570 and by Lord Millett in BP Exploration Operating Co Ltd v Chevron Transport (Scotland) [2001] UKHL 50; [2003] 1 AC 197 at [105]:
‘I do not think a Court of Equity is in the habit of considering that a falsehood is not to be looked at because, if the truth had been told, the same thing might have resulted.’
The policy underpinning the current acceptance of a lower causal threshold in deceit cases appears to be that fraudulent conduct should not be left without a consequence if it played a part, even if it was not necessary for the outcome. It does not matter, and it is therefore unnecessary to prove, that absent the representation, the plaintiff would have acted differently, or that the loss would not have occurred. The counterfactual inquiry, important in the ‘but for’ test, is irrelevant under this test.[32]
In addition to wrongdoing, this lower causal threshold has also been applied in other doctrines such as estoppel at common law. As Professor Bant has persuasively argued, the explanation offered with respect to fraudulent conduct does not account for this, as estoppel by representation does not depend upon any wrongdoing.[33] For example, in Steria v Hutchison Ltd (‘Steria’)[34] one of the issues was whether Mr Hutchison had relied upon certain statements made in booklets about the Steria Management Plan, an occupational pension scheme. The issue was whether he had relied upon the statements made in the booklet that, were he to complete 20 years pensionable service, his normal retirement date instead of being 65, would be 62. The estoppel was not made out, primarily due to the lack of evidence as to detriment. However, in the course of his reasons, Lord Neuberger observed in relation to reliance that:
In order to succeed in a claim based on estoppel, it is probably not necessary for a claimant to satisfy what is known in a somewhat different area of the law as the ‘but for’ test. In other words, in the present case, it does not appear to me that Mr Hutchison has to show that, if the representation in question had not been made, he would not have joined the Scheme. He merely has to show that the representation was a significant factor which he took into account when deciding whether to join the Scheme. (emphasis added).[35]
It is important to note that the phrase ‘significant factor’ is here used in a specific way: to represent an influence which is not minimal but which does not need to reach the threshold of necessity.
Similarly, in estoppel by convention, a lower causal threshold has been approved: Amalgamated Investment & Property Co. Ltd. v Texas Commerce International Bank Ltd (“Amalgamated Investment”).[36] As noted by Professor Bant, in that case it was clear that the bank was operating under its own mistaken belief that the claimant’s guarantee was binding, and the claimant’s course of conduct reinforced this belief but did not cause it in the sense that without it, the error would not have occurred.[37] Nonetheless, Goff J found:
I am satisfied that to hold the plaintiffs are estopped from denying the invalidity of their guarantee is permissible, despite the general principle that neither law not equity will enforce a purely gratuitous promise. For, by confirming the bank’s erroneous belief that the guarantee was binding and effective ... the plaintiffs contributed to the continuance of the bank’s error.[38]
Liability for holding out as a partner under s 14(1) of the Partnership Act 1892 (NSW) is another example of the use of a lower causal threshold. Lynch v Stiff [39] concerned a claim brought by one Mr Stiff who entered into agreements with two solicitors, including Mr Lynch, styled ‘partnership agreements.’ In fact the two solicitors were employees of the firm, not partners. The partner of the firm appropriated the money and Mr Stiff sued Mr Lynch on the basis that he had held himself out as a partner of the firm and was therefore liable under s. 14(1) of the Partnership Act 1892 (NSW). Barwick KC (as he then was) appeared for Mr Lynch and argued:
It must be shown either expressly or by necessary inference, that the results complained of was caused by the holding out, that is, that the representation was the causa sine qua non (Craine v Colonial Mutual Fire Insurance Co Ltd [1920] HCA 64; (1920) 28 CLR 305, 327. The evidence does not establish that but for the firm’s letterheads the respondent would not have invested the money. (emphasis added.)[40]
However this was not accepted. It was held:
In our opinion there is no justification for making any addition to the requirements of the section by holding that the person who has given credit must show that, apart from the holding out, he would not have given credit. The doctrine of holding out is a branch of the law of estoppel. So far as the element of action by the party relying upon an estoppel is concerned, it is sufficient if that party acts to his prejudice upon a representation made with the intention that it should be acted upon, though it is not proved that in the absence of the representation he would not so have acted.[41] (emphasis added.)
The focus of this paper is on equitable estoppel and not estoppels at common law. However, it is worth observing that the courts in these cases did not address the policy reasons or purpose for the lower causal threshold in the same way that these questions have been addressed in fraud cases in relation to intentional wrongdoing. It will be argued later that this lower causal threshold in common law estoppels is questionable for the same reasons as it is in equitable estoppel.
The ‘but for’ test
In contrast to these doctrines applying a lower causal threshold, the common law has traditionally applied the higher threshold test in doctrines including as negligent misstatement, the well-known ‘but for’ test, or the test of necessity.[42] This test simply means that on the balance of probabilities, the harm that in fact occurred, would not have occurred absent the impugned conduct.[43] The corollary to the ‘but for’ test is, as McHugh J explained in March v Stramare; ‘[i]f the damage would have occurred notwithstanding the negligent act or omission, the act or omission is not a cause of the damage and there is no legal liability for it.’[44] This has been described as the ‘standard rule’[45] or starting point at common law.
This is not the occasion for a full review of causation at common law, however it is well known that the ‘but for’ test is inadequate as a sole test for legal liability as it can be over or under inclusive of acts for which the law may or may not attribute legal liability in particular factual circumstances. In a number of particular, and defined, circumstances in which the ‘but for’ test is not satisfied, the defendant’s conduct may nonetheless be accepted as causative. For example, multiple causes, which individually are not sufficient, but which in combination are capable of producing the harm have also been recognised as causal under the NESS test.[46] The test of ‘material contribution to harm’ has been used in circumstances where ‘harm is brought about by the cumulative operation of two or more factors, but which is indivisible in the sense that it is not possible to determine the relative contributions of the various factors to the total harm.’[47] Under English law, negligent conduct that ‘materially increases the risk of harm’ in circumstances in which the state of scientific or medical knowledge makes it impossible to prove the cause of the plaintiff’s harm has also been accepted as causative.[48]
In March v E & MH Stramare Pty Ltd,[49], Mason CJ preferred a ‘common sense’ causal test to the ‘but for’ test.[50] Under a ‘common sense’ test, the court considers the ‘but for’ test in the context of other ‘value judgments and the infusion of policy considerations’[51] in determining whether the defendant’s conduct was a cause of the plaintiff’s loss.[52] However it also has been emphasised that it cannot be understood as an invitation to judges ‘to engage in value judgments at large.’[53] and ‘defines the approach to evaluating the evidence, not a test to be applied to it’.[54]
Under the civil liability statutes in Australian states and territories (except the Northern Territory),[55] the causal inquiry in cases to which the act applies has been clearly broken into two, quite discrete stages.[56] The statutory causation test is in two consecutive steps, the first being the factual inquiry, which is the ‘but for’ test, and the second step, the scope of liability issues.[57] The statutory test is also said to allow for exceptional cases that would fail the ‘but for’ test such as the circumstances in Bonnington Casting v Wardlaw through, for example, s.5D(2) of the Civil Liability Act 2002 (NSW) and its counterparts.
This review of causal tests in private law is necessarily brief and does not comprehensively address the role and function of causation in all these areas of private law. However, as Roscoe Pound famously said in 1957, attempting ‘a systematic exposition of causation an element of legal liability is undertaking what has been described as unscrewing the inscrutable’[58] and is not necessary for present purposes. It suffices to demonstrate firstly that there are substantively different causal thresholds applied in different private law doctrines which involve ‘decision causation’, and to provide some content and meaning to the causation terminology there applied which has been applied by analogy in equitable estoppel. The next part considers the use of causal tests in equitable estoppel.
Causal tests applied in estoppel before Sidhu
Returning now to equitable estoppel, there has been considerable inconsistency with respect to the tests applied as a causal threshold in Anglo-Australian law.[59] Under English law, Professor McFarlane has identified examples of four different tests[60] applied in estoppel which include: a test based on whether the plaintiff would have acted in the same way if the truth had been told, (rather than if the representation had never been made);[61] whether the representation was ‘a factor’[62] in the sense of being contributory without being necessary; whether the representation played ‘a ‘significant’ or a ‘real and substantial’ part[63] in the plaintiff’s decision, even if it was not necessary; and finally, the ‘but for’ test.[64]
A few examples from Australian and English case law suffice to indicate the range of different tests that have been applied. For example, in Taylors Fashions Ltd v Liverpool Victoria Trustees Co Ltd, Taylors’ estoppel case failed as it could not establish that it would have acted differently by not installing a lift into its leased premises if it had not been given a renewal of the lease. Oliver J reasoned:
But what Mr Taylor was unable to say was that they would not have done the work if they had not thought that option was available, much less that the defendants were or must have been aware that they would not have done it.[65]
This is the ‘but for’ test.
There are also cases under Australian law in which the evidence is held to demonstrate that ‘but for’ the representation the plaintiff would not have acted in a particular way, but without necessarily discussing whether that was the test that had to be applied or whether it was simply the threshold reached by the evidence in that case. In Bryant v Bryant[66] the plaintiff claimed that her husband, the defendant, had represented that he would leave the family home to her or at least to her son and that she had acted in reliance upon that promise. Lindsay J accepted that the first plaintiff:
would not have tolerated his continuing participation in her life (as a co-owner of her family home) but for her belief, based on reasonable grounds, that his interest in the property would pass to the second plaintiff (or to her, with the consent of her son) on attainment of the age of 21 years.[67] (emphasis added)
In Walsh v Walsh,[68] the appellant and respondent were brothers and were the owners as tenants in common in unequal shares of a rice growing property. The respondent acquired the appellant’s interest in that property in the belief that he would also obtain the appellant’s interest as co-owner of certain shares in a company to which were attached water entitlements. That interest was never transferred to the respondent and he commenced proceedings claiming an entitlement to the appellant’s interest in the shares by reason of, among other things, an equitable proprietary estoppel. This succeeded at first instance.[69] On appeal the appellant argued that it was always the respondent’s intention to use the property for rice growing and that he would have used it in this way even if he had known that he was only acquiring the appellant’s interest in the land and not the water allocation. However, the Court of Appeal rejected this on the basis that the respondent had given evidence that he would not have agreed to purchase the property without the full water allocation[70] which was not challenged in cross-examination, and that in his written submissions to the primary judge, the respondent had maintained this position.[71] In other words, the evidence satisfied the ‘but for’ test. Although not discussed directly, the Court of Appeal did not suggest that this inquiry into whether the respondent would have acted in the same way ‘but for’ the promise was the wrong test to apply in the circumstances.
However, other lower threshold tests are also evident in the cases. In Harrison v Harrison[72], Kaye J was satisfied that the promises which were found to have been made to the plaintiffs by their brother, the defendant, ‘did play a relevant role’ in inducing each of the plaintiffs not to institute legal proceedings in respect of their father’s estate until after 29 July 2008.[73] It was held that the promises were ‘a material factor’ in their decision, even if there were other factors. In particular, his Honour noted that:
There may well have been other factors which, also, contributed to the decision by the plaintiffs not to embark on litigation in respect of their father’s estate at that time. In particular, they would, naturally, have been reluctant to have taken a step, which would be likely to cause an irretrievable rift in the relationship with Christopher.
Reliance was accepted as having been established without any requirement to test the significance of the inducement against such thresholds as whether the plaintiffs would have acted differently but for the representation. There was no discussion as to the meaning to be attributed to the words ‘material factor’.[74]
Flinn v Flinn[75] concerned a proprietary estoppel claim. The plaintiff claimed that his uncle had promised that they would inherit a dairy farm on which the plaintiffs lived and worked for many years. There were two promises made, one in 1988 and the other in 1993. In issue was whether there was proof of reliance upon the latter promise. The defendant submitted that there was no evidence of any change of position upon the latter promise, and that therefore no detriment flowed from it as the plaintiffs simply continued living and working on the farm as they had done before it was made. Brooking JA held:
But this argument ignores the fact that everything the plaintiffs did for the benefit of the farm was done on the faith of expectations created by the legal owners’ promises: they came to and remained at the farm because of those promises. In answer to a leading question in cross-examination, Daniel said that he had worked on the farm down to July 1993 on the faith of the promise made in 1988. Perhaps he and his wife did not swear in terms that they continued to work the farm after July 1993 on the faith of the promise made in that month. But it would be remarkable if that promise was not, to say the least, an inducement, and this is all that is necessary: (citations omitted).[76]
Whilst the facts of that case seem clearly to amount to reliance which would satisfy a ‘but for’ test, it is Brooking JA’s observation that it is only necessary to demonstrate that the promise was ‘an inducement’ which is of interest for present purposes. Is this to be understood as a test that it was only necessary to show that the representation was ‘an inducement’, even if neither necessary nor sufficient?
In many cases, the courts have not expressly applied any particular test. Reliance is simply dealt with as a question of fact to be established: see for example Ronowska v Kus,[77] Byrnes v Byrnes,[78] Estephan v Estephan,[79] and Galaxidis v Galaxidis.[80]
This review of these cases is not designed to be comprehensive but rather illustrative of the range of tests being applied. It is not suggested here that there is necessarily any error in the result in any of these cases discussed above, or that the outcome in these particular cases would necessarily have been different had a different test been applied. However, the review demonstrates that courts have applied different tests and often not identified the appropriate test.
Against this background, it is appropriate to now consider the Sidhu litigation and its resolution of these issues under Australian law.
C: SIDHU V VAN DYKE
The Sidhu litigation is an example of how different causal tests can lead to different outcomes. The case concerned a claim for equitable relief brought in the Supreme Court of New South Wales by Ms Van Dyke against Mr Sidhu arising from representations which he had allegedly made to her to the effect that she would be given an interest in property which he owned jointly with his wife (‘Mrs Sidhu’). In short, she was living in a rented cottage on the property. They commenced having an intimate relationship and over the course of 8 years, it was found that he made various promises to her that she would be given the cottage. When the relationship broke down, he reneged on the promise.
Ms Van Dyke commenced proceedings claiming an equitable proprietary estoppel arose from the promises made to her by Mr Singh. At first instance the primary judge, Ward J, found that the pleaded promises were made.[81] However they were conditional upon the subdivision of the relevant land, Mrs Singh’s consent and available finance. Ward J found that it was not unreasonable for Ms Van Dyke to have understood the promise as meaning that if there were a subdivision of the property, Mr Singh would transfer or procure the transfer of the area of land on which the Oaks Cottage stood, or for her to have place faith in it.[82] However, her Honour considered that the conditional nature of the promises made reliance upon them ‘objectively unreasonable.’[83] The claim therefore failed on this ground however her Honour also considered reliance separately. Ward J applied a ‘but for’ test and did not accept that the plaintiff had relied upon the promises other than in so far as she forewent the opportunity to seek a property settlement in her divorce proceedings. Critically, her Honour found that the other pleaded acts of reliance, being (i) unpaid work by way of maintenance and renovation on Oaks Cottage and on Burra Station and another adjoining property, and (ii) giving upon opportunities to look for full-time employment – may well have been done by Ms Van Dyke in any event.[84] In her Honour’s view, the conclusion that she may well have acted in the same way anyway made it ‘impossible’ to find that she did those things in reliance upon the promises that had been made to her.[85] Her Honour found:
What the concessions by Ms Van Dyke make clear is that it is entirely possible that she would have remained living on the property, carrying out tasks on the property (even if not to the extent of the work she in fact carried out) and working part-time, whether or not the promises had been made. That seems to me to make impossible a finding that she did those things (and refrained from seeking or taking up other opportunities that may have been available to her) acting in reliance on the promises to her detriment. No detriment can have been suffered if Ms Van Dyke would or is likely to have done those things in any event. (emphasis added)[86]
Ms Van Dyke appealed, challenging, amongst other things, the finding that she had not relied upon the promises other than in relation to not seeking a property settlement. Barrett JA, with whom Basten JA and Tobias AJA agreed, delivered the main judgment.[87] The Court allowed the appeal. On the question of reliance, Barrett JA noted the argument put by Mr Singh that the correct test for determining reliance was, ‘whether the claimant would have acted differently if the promise had not been made or was likely to have done so,’[88] in other words, the ‘but for’ test. His Honour accepted the submission by Ms Van Dyke that this was the wrong test for establishing reliance and held that:
Proof of detrimental reliance does not mean that the plaintiff must go to the extent of proving that ‘but for’ the promise he or she would not have acted or abstained from acting in the way he or she did.[89]
The ‘presumption of reliance’
In addition to rejecting the ‘but for’ test, Barrett JA also observed that, ‘Such a requirement denies the plaintiff the benefit of the ‘presumption of reliance’ (emphasis added.)[90] It is addressed briefly here because it is relevant to the principles discussed later with respect to evidentiary matters in estoppel cases.
Barrett JA reasoned that if a promise or representation is of such a kind to form part of the inducement to do particular things (as he had just found the promise of ownership of the Oaks Property was) then:
[W]here inducement by the promise may be inferred from the claimant’s conduct, as is the case here what Brooking JA describes in Flinn as “the natural tendency of the promise” causes to arise “a commonsense and rebuttable presumption of fact that may arise from the natural tendency of the promise.[91] (emphasis added)
His Honour observed further that the consequence of this rebuttable presumption of fact was that:
... the onus or burden of proof shifts to the defendant to establish that the claimant did not rely on the promise. It was therefore for the respondent to rebut that presumption and establish that the appellant did not rely at all on the promises in acting or refraining from acting to her detriment.[92]
It is not entirely clear from the reasons whether Barrett JA intended to mean the legal onus of proof shifted (as was argued on the application for leave to appeal),[93] or that the evidentiary burden shifted. There are numerous examples of Australian courts using the terms ‘inference’ and ‘presumption’ interchangeably to refer to the drawing of an inference of fact by the court but where it is very clear that there is no shift in the ultimate onus of proof. For example, in Makeig v Batterham, Ward J observed:
461 I note that where a representation is one by its nature calculated to induce someone to enter into a contract then there is authority that an inference that the representation induced entry into the contract can be drawn .... However it seems that such a presumption will be stronger in cases of fraud (Smith v Kay [1859] EngR 38; (1859) 7 HLC 750; 11 ER 299) and that the drawing of such an inference is by no means automatic. The onus remains on the party alleging inducement to show reliance upon the representation as a matter of fact.[94] (emphasis added)
Again in Digi-Tech (Australia) Ltd v Brand it is evident that the terms were used synonymously. The Court said:
142 In requesting this Court to make a determination on the reliance issue, the appellants placed emphasis on what they described as an “inference of reliance”. They submitted that a presumption of reliance arose by reason of the principles expressed in Gould v Vaggelas (1983) 157 CLR 215 at 238-239, 249-251. (emphasis added).
In Macquarie Generation v Peabody Resources, Beazley JA (with whom Mason P and Giles JA agreed) said that:
78 The second element, namely, the necessity to prove inducement in fact, does not require any particular legal explanation. A misrepresentation will not be actionable unless the representee was in fact induced, the onus being on the representee to prove the fact: Coaks v Boswell (1886) 11 App Cas 232; Australian Steel and Mining Corporation Pty Limited v Corben [1974] 2 NSWLR 202; Attorney-General of New South Wales v Peters [1924] HCA 31; (1924) 34 CLR 146.
79 Inducement in fact may also be proved presumptively, although this is an inference of fact, not law. (emphasis added) [95]
Finally, in Flinn v Flinn, the Victorian Court of Appeal said that:
In considering inducement one should not forget the commonsense and rebuttable presumption of fact that may arise from the natural tendency of a promise: Greasley v. Cooke; Cameron v. Murdoch [1983] W.A.R. 321 at 351; Grimison v. Union Fidelity Trustee Co. of Australia Ltd. (1984) 3 B.P.R. 9469 at 9474; Riches v. Hogben [1986] 1 Qd.R. 315 at 319-20; Grant v. Edwards [1986] Ch.638 at 657; Austin v. Keele (1987) 72 A.L.R. 579 at 588-9; Wayling v. Jones at 173-5; compare Gould v. Vaggelas. A number of other authorities are discussed in Pawlowski, The Doctrine of Proprietary Estoppel, pp.44-47.[96]
In each of these cases, it is clear that the words ‘inference’ and ‘presumption’ are used interchangeably to refer to the same thing: the drawing of a rebuttable inference of fact whilst the legal onus to prove reliance remains at all times on the plaintiff. There is no suggestion that a presumption has been applied which reverses the legal onus of proof, requiring the defendant to establish that reliance did not occur.
However, a series of English cases referred to by Barrett JA[97] (and by the Court of Appeal in Flinn v Flinn[98]) has given rise to the question whether the courts there in fact reversed the legal onus of proof.
The first was the decision of Lord Denning MR in Greasley v Cooke, a proprietary estoppel case. There, his Lordship observed:
The first point is on the burden of proof. Counsel for the defendant referred us to many cases, such as Reynell v Sprye (citation omitted) and Brikom Investments Ltd v Carr (citation omitted) where I said that, when a person makes a representation intending that another should act on it –
‘It is not answer for the maker to say: “You would have gone on with the transaction anyway.” That must be mere speculation. No one can be sure what he would, or would not, have done in a hypothetical state of affairs which never took place... Once it is shown that a presentation was calculated to influence the judgment of a reasonable man, the presumption is that he was so influenced.’
So here. These statements to the defendant were calculated to influence her, so as to put her mind at rest, so that she should not worry about being turned out ...There is a presumption that she did so relying on the assurances given to her by Kenneth and Hedley. The burden is not on her but on them to prove that she did not rely on their assurances. They did not prove it, nor did their representatives. So she is presumed to have relied on them. So on the burden of proof it seems to me that the judge was in error.[99] (emphasis added)
Greasley was then applied in Wayling v Jones.[100] On appeal in that case, Balcombe LJ stated the relevant legal principles as:
(3) Once it is established that promises were made, and that there has been conduct by the plaintiff of such a nature that inducement may be inferred, then the burden of proof shifts to the defendants to establish that he did not rely on the promises – Greasley v Cooke, Grant v Edwards (citations omitted).
35 years before Greasley was decided in the Court of Appeal, Denning J (then on the High Court) wrote extra-judicially on presumptions and burdens in the Law Quarterly Review, and discussed the clear distinction between legal burdens which do not shift, and evidentiary burdens which can shift.[101] His Honour noted that in relation to legal burdens:
when the law puts on a party the burden of proving a certain fact in issue as a condition of giving him judgment, that burden never shifts and must be discharged or he will fail.[102]
His Honour also then discussed what he described as ‘provisional’ presumptions or burdens in the following way:
In order to discharge a legal burden, the person on whom it lies will often prove relevant facts or rely on presumptions from which he asks the Court to infer the fact in issue which he has to establish in order to succeed. ... Those relevant facts of circumstances are often said to raise a ‘presumption’ or make a ‘prima facie’ ‘case, as so they do in the sense that from them the fact in issue may be inferred, but not in the sense that it must be inferred unless the contrary is proved.’[103]
Did the court in Greasley really hold that the legal burden to prove reliance was reversed, casting upon the defendant the onus to disprove reliance? In Steria Ltd v Hutchison, Lord Neuberger doubted it, but was not certain. His Lordship observed:
130. In many cases, and I think that the Greasely case was one of them, it can fairly be said that, once it is established that the representation was made, the representation together with all the other facts of the case enables the claimant to say that, unless the defendant can elicit some further evidence to the contrary, the claimant will have discharged the onus. I am inclined to think that the Greasely case went no further than that. If, however, it did establish a point of general principle, then, in common with Mummery LJ, I would hold that it is limited to cases of proprietary estoppel: on the basis that it seems to me to be a questionable principle, I would limit its ambit to as narrow an area as respectably possible.[104]
Thus, some 25 years after Greasley was decided, there remained some confusion about whether it decided that the legal burden or evidentiary burden had shifted.
In the Law Quarterly Review article referred to earlier, Denning J had concluded that:
the only way to avoid [confusion between references to legal burdens and provisional burdens], whenever the words ‘burden of proof’ are used, is to make clear which particular sense is intended.[105]
Yet Greasley later gave rise to the very confusion the subject of that paper.
Returning now to Sidhu in the Court of Appeal, Barrett JA’s finding as to the shift in the ‘onus or burden of proof,’[106] together with the reference to Greasley and English cases following it, apparently gave rise to the same ambiguity. It was argued on the application for leave to appeal to the High Court as amounting to a shift in the legal onus of proof[107] and Mr Sidhu was granted leave to appeal.[108]
The appeal to the High Court
The High Court delivered two judgments, one of the plurality (French CJ, Kiefel, Bell and Keane JJ) and separate reasons by Gageler J.
Presumption of reliance
On the question of the ‘presumption of reliance’, the High Court accepted the appellant’s characterization of Barrett JA’s reasons as having reversed the legal onus of proof.[109] This was rejected.[110] Greasley was also interpreted as having applied a shift in the legal burden and it was held to be ’wrong in principle and contrary to authority.’[111]
Causation
Returning now to the issue of the appropriate causal test, the plurality first formulated the question with respect to causation in the following way:
[66] It may, therefore, be accepted that the respondent's notice of contention sufficiently raises the question, to adapt the words of Wilson J in Gould, whether, when all the facts are in, the court is satisfied on the balance of probabilities that the promises in question contributed to the respondent's conduct in deciding to commit to her relationship with the appellant and adhering to that relationship (with all that that entailed) for eight and a half years.[112]
It is noteworthy that this introduction to the question of causation in equitable estoppel adopted expressly the formulation of the question in Gould, which, as we have seen, is a cause in deceit applying a low causal threshold. The plurality accepted that Ms Van Dyke had established reliance upon the representations sufficient to support a claim in proprietary estoppel. The plurality found that:
[h]er Honour’s finding that the appellant’s promises ‘played a part in her willingness to spend time and effort in the maintenance and improvement of The Oaks Cottage and assisted on the Burra Station property’ warranted the conclusion that the respondent had discharged the onus she bore [to prove reliance] on the basis that it is not necessary that the conduct of the party estopped should be the sole inducement operating on the mind of the party setting up the estoppel.[113]
Pausing here, perhaps the only certain aspect of causation law, both in estoppel and at common law generally, is that the impugned conduct need not be the ‘sole’ cause of the harm suffered and the plurality noted that Mr Sidhu’s counsel could provide no authority to the contrary. However, the plurality proceeded to refer to the causal tests in both Amalgamated Investments and Steria v Hutchison which whilst they confirm that the sole test is not appropriate, approve a lower causal threshold as appropriate in relation to estoppel by convention and estoppel by representation respectively. The plurality observed:
[72] In Amalgamated Investment & Property Co Ltd (in liq) v Texas Commerce International Bank Ltd,77 Robert Goff J said that:...
the question is not whether the representee acted, or desisted from acting, solely in reliance on the encouragement or representation of the other party; the question is rather whether his conduct was so influenced by the encouragement or representation ... that it would be unconscionable for the representor thereafter to enforce his strict legal rights. [Emphasis in original.]
[73] Similarly, in Steria,78 Neuberger LJ said that it is sufficient for the representee to show that ‘the representation was a significant factor which he took into account when deciding whether to [act as he did]’. This approach conforms to that taken by the High Court as long ago as Newbon,79 where it was said that the ‘supposed belief’ of the representee as ‘a contributing cause’ of the representee’s conduct was a ‘sufficient connection between the assumption and the position of detriment’. It is the view which continued to prevail in Gould.80
As we have already seen, each of the authorities referred to by the plurality in relation to the test for reliance, Newbon,[114] Gould,[115] Steria[116] and Amalgamated Investment[117] arose in doctrines in which the courts had applied a lower causal threshold. It will be recalled that in Steria Neuberger LJ expressly rejected the ‘but for’ test:
in order to succeed in a claim based on estoppel, it is probably not necessary for the claimant to satisfy what is known in a somewhat different area of law as the ‘but for’ test. ... He merely has to show that the representation was a significant factor which he took into account when deciding whether to join the scheme.[118]
On one view, the reference to these cases, in the context of determining the appropriate causal threshold for equitable estoppel, appears as an endorsement of the lower causal threshold. However, the plurality then held:
[76] But the question here is whether the respondent would have committed to, and remained in, the relationship with the appellant, with all that that entailed in terms of the effect upon the material well-being of herself and her son, had she not been given the assurances made by the appellant...[119]
In contrast with the preceding reasoning under which it would not matter whether the plaintiff would have acted the same way without the representation, this question asks: ‘would she still have done what she did but for the representation?’ The plurality was satisfied that a ‘compelling’ case of reliance had been made out and that on the balance of probabilities, Ms Sidhu had acted in a manner that she would not have done if the representation had not been made. Their Honours earlier expressed the finding that:
[69] It is unlikely that she would have thrown her lot with the appellant and exerted herself as she did over a period of eight and a half years if he had not made the promises which he in fact made. To the contrary, it is likely that she would have sought to maximize her own income for the benefit of herself and her infant son by seeking the most gainful form of employment.[120]
These questions, and answers, are only relevant to determining causation on a test of necessity, or ‘but for’ causation, and causation on this higher threshold test was made out.
Gageler J agreed in the reasons of the plurality but delivered additional reasons on the question of causation. His Honour confirmed that the plaintiff bore the onus of establishing that her assumption was a ‘contributing cause’.[121] However, this was explained in terms of a ‘but for’ test of causation. Gageler J said:
To establish that the belief to which she was induced by the appellant’s representations was a contributing cause to the course of action or inaction which she took, the respondent needed to establish more than that she had the belief and took the belief into account when she acted or refrained from acting. She needed to establish that having the belief and taking the belief into account made a difference to her taking the course of action or inaction: that she would not have so acted or refrained from acting if she did not have the belief. (emphasis added)[122]
In other words, a plaintiff is required to demonstrate positively that he or she would not have acted in the way she did ‘but for’ the representation in order to establish causation. Gageler J linked this directly to the stated purpose of the doctrine in Grundt v Great Boulder Pty Gold Mines:
The need for the respondent to establish such a difference stems from what Dixon J described in Grundt v Great Boulder Pty Gold Mines Ltd as the’ indispensable’ condition that a party asserting an estoppel ’must have so acted or abstained from acting upon the footing of the state of affairs assumed’ that the party asserting the estoppel ’would suffer a detriment if the opposite party were afterwards allowed to set up rights against him inconsistent with the assumption’. That is to say, ’the real detriment or harm from which the law seeks to give protection is that which would flow from the change of position if the assumption were deserted.’ There can be no real detriment if the party asserting the estoppel would have been in the same position in any event.
Gageler J expressly endorsed the ‘but for’ approach to causation taken by the primary judge:
The question of causation is therefore ordinarily appropriately framed, as it was implicitly framed by the primary judge in the present case, as being: ‘Despite any other contributing factors, would the party seeking to establish the estoppel have adopted a different course (of either action or refraining from action) to that which [the party] did had the relevant assumption not been induced?’[123]
His Honour concluded that whilst it was possible that the respondent would have remained and done what she had done even if she had not believed and taken account of the appellant’s representations, the joint reasons for judgment demonstrated that the probability was otherwise. His Honour concluded that, ‘The inference to be drawn from the whole of the evidence is that, were it not for her belief in the appellant’s representations, the respondent would not have remained on the property and done what she had done.’[124]
The proper interpretation of Sidhu on causation
There is evident uncertainty as to how the High Court’s reasons on causation are to be interpreted: whilst Gageler J’s judgment is clear, did the plurality approve the lower or higher causal threshold?
On the one hand, the reasoning has been noted as supporting the interpretation that the plurality approved a lower causal threshold.[125] In the Supreme Court of Western Australian in Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 6), Edelman J considered Sidhu, not in an equitable estoppel claim, but in the context of a claim of estoppel by convention. In obiter dicta his Honour noted the consideration by the High Court in Sidhu of the causal thresholds applied in Newbon, Steria and Amalgamated Investments, and observed that in Amalgamated Investments, Goff J ‘was not proposing a ’but for‘ test of causation.”[126] His Honour also cited the views of Dr Hudson,[127] to the effect that ‘the ‘tenor of the formulations’ of the joint judgment in Sidhu is that there is no requirement for the connecting link to detriment to be a “but for” causal link.’[128] His Honour has repeated this view writing extra-judicially:
[The plurality] did not say that Ms Van Dyke was required to prove that but for Mr Sidhu’s promises, she would not have acted as she did ... Instead (and similar to the misrepresentation cases discussed above) their Honours referred to Ms Van Dyke’s need to show that the representation was “an influence”, “a significant factor”, “a contributing cause”, or “had “sufficient connection” with the detriment suffered (see French CJ, Kiefel, Bell and Keane JJ at [72]-[73]; cf Gageler at [95].
However, Sidhu has also been interpreted as approving a ‘but for’ test: see for example Stone v Stone per Darke J.[129] Gageler J’s explication of the test was also cited with apparent approval in Raphael Shin Enterprises Pty Limited v Waterpoint Shepherds Bay Pty Limited.[130] It is important to note that Gageler J did not suggest that his additional reasons on causation contradicted the reasons of the plurality, as they would necessarily have done if the plurality should be understood as having applied a lower causal threshold.
The proper interpretation of the High Court’s reasons in Sidhu was recently considered in detail by White J in the Supreme Court of New South Wales in Priestley v Priestley.[131] This case concerned a claim by the plaintiff that, amongst other things, his mother as the executrix of his late father’s estate was estopped from denying his entitlement to inherit certain farming land known as ‘Salt Glen’. White J analysed the High Court’s reasons on the question of causation in Sidhu. His Honour noted[132] the plurality’s finding that but for the defendant’s promises, the plaintiff would not have acted as she did,[133] that were followed by references to Amalgamated Investment and Steria as authority for the proposition it is not necessary that the conduct of the party estopped should be the sole inducement.[134] As already discussed, Amalgamated Investment and Steria both approved a lower causal threshold as well as confirming that there may be more than one inducement. White J observed:
There is here, with respect, an elision between the notion that the conduct of the party estopped need not be the sole operative inducement on the mind of the party setting up the estoppel, and the requirement that but for the inducement the plaintiff would have acted differently.[135]
His Honour held that it did not follow that because the conduct of the party estopped need not be the sole cause of the detriment relied on, that it was enough ‘that the conduct of the party estopped is ‘a cause’ ... if the party asserting the estoppel would have acted in the same way in any event.’[136] His Honour concluded that:
In my view, when properly analysed, there is no inconsistency between what was said by the plurality and what was said as to the necessary causal relationship by Gageler J. Therefore, for Duncan to establish detrimental reliance on the assumption that Gordon encouraged, that is, that he would inherit Salt Glen after Gordon’s death, it is necessary for Gordon to show that he would have acted differently if Gordon had not encouraged him in that belief.[137]
Ultimately, the plaintiff’s claim failed, not for lack of reliance but because his Honour found that the plaintiff’s reliance from 2008 on the assumption that he would inherit the farm was not reasonable in the circumstances.[138]
The ‘but for’ test is preferable
It is argued here that the better interpretation of the High Court’s reasons in Sidhu is that both the plurality and Gageler J approved the ‘but for’ test. Furthermore, it is also argued that this higher causal threshold test is also the test is that it is most consistent with the purpose of the doctrine.
The purpose of equitable estoppel
It is a recurring theme in causation law that analysis of the causal inquiry depends very much upon purpose of the particular rule being applied.[139] In Environment Agency (formerly National Rivers Authority) v Empress Car Co (Abertillery) Ltd[140] Lord Hoffmann observed that:
One cannot give a common sense answer to a question of causation for the purpose of attributing responsibility under some rule without knowing the purpose and scope of the rule.
In equity, similar consideration is also required. In O’Halloran v RT Thomas & Family, Spigelman CJ specifically referred to these observations by Lord Hoffmann when his Honour held that, ‘It is necessary to identify the purpose of the particular rule to determine the appropriate approach to issues of causation.’[141]
What is the purpose of equitable estoppel? The fundamental purpose of both equitable estoppel and estoppel by representation is widely accepted as that which Dixon J propounded in Grundt v Great Boulder:
‘.. [T]he basal purpose of the doctrine ... is to avoid or prevent a detriment to the party asserting the estoppel by compelling the opposite party to adhere to the assumption upon which the former acted or abstained from acting. This means that the real detriment or harm from which the law seeks to give protection is that which would flow from the change of position if the assumption were deserted that led to it. So long as the assumption is adhered to, the party who altered his situation upon the faith of it cannot complain. His complaint is that when afterwards the other party makes a different state of affairs the basis of an assertion of right against him then, if it is allowed, his own change of position will operate as a detriment.’[142]
In that case, Latham CJ clearly approved the ‘but for’ test:
They were induced to act to their detriment (by doing work and spending money) as they would not have otherwise done, by the facts that the company acted so as to show that it was content to regulate the relations between the tributers and itself upon the basis that the agreement applied in all respects to the ore produced from the western swing.[143] (emphasis added)
The concept of a ‘change of position’ in this context would be arguably rendered meaningless if it were accepted that the plaintiff could have acted in the same way regardless of whether the representation was made or not. This is consistent with the way causation is applied in relation to the defence of change of position at common law. It requires the defendant to demonstrate that but for receipt of the enrichment, (such as through receipt of a mistaken payment), the defendant’s change in position (such as by way of expenditure incurred) would not have occurred.[144] Expenditure that would have been incurred anyway cannot constitute a relevant change of position.[145]
Returning to equitable estoppel, as Gageler J observed in Sidhu, ‘[t]here can be no real detriment if the party asserting the estoppel would have been in the same position in any event.’[146] From this perspective, and seeking to locate the causal inquiry in the proper purpose of the doctrine, the ‘but for’ test is consistent with the policy which underpins equitable estoppel.
Professor McFarlane also supports the application of the ‘but for’ test in equitable estoppel under English law on the basis on the basis of a consideration of the position of the defendant in equitable estoppel cases. He argues amongst other things that:
A should not he made to bear responsibility for B’s detriment if, even in the absence of the conduct of A on which B’s claim depends, B would in any case have acted in such a way as to suffer that detriment. ... [T]he question of reliance is not a purely factual one, and the test adopted should take account of the nature of B’s claim. A promise-based proprietary estoppel claim can impose a duty on A even if A has not acted fraudulently, and that duty can extend beyond the mere return to B of benefits retained by A. As a result, none of the [lower causal threshold tests] provides adequate protection for A.[147]
Inconsistency with the causal test at common law
If the ‘but for’ test is the appropriate test in equitable estoppel for the reasons discussed above, this gives rise to somewhat of a conundrum: if common law estoppel by representation and equitable estoppel are acknowledged as having the same fundamental policy, namely that articulated by Dixon J in Grundt v Great Boulder, why should there be a difference in causal tests between them? Why should estoppel by representation, or other common law estoppels for that matter, have a lower causal threshold than equitable estoppel?
Professor Macfarlane has suggested that perhaps the difference lies in the fact that estoppel by representation is not a cause of action as such and on that basis, as it does not lead to direct liability, perhaps a lower causal threshold is warranted.[148] Whilst there is this substantive difference in function between the common law estoppel and the equitable estoppels, this does not entirely explain why estoppels sharing the same fundamental purpose should be determined by the same causal inquiry. This is particularly so as an estoppel by representation which prevents a defendant from denying certain facts may lead indirectly to liability of the defendant in the cause of action that arises from those facts, so has a similar potential for significant consequence for the defendant.
There is historical reference to a ‘but for’ analysis applied in estoppel in pais. For example, in his treatment of estoppel in pais in A History of English Law (3rd ed) Sir William Holdsworth approved a higher causal threshold:
[Estoppel in pais] was developed and broadened mainly by equity, and by its application in a sphere of mercantile law. As the result of these new applications, the common lawyers began to see that the doctrine depended on the fact that the party estopped had so conducted himself that another, in reliance on that conduct, had acted in a manner in which, but for that conduct, he would not have acted....[149]
A ‘but for’ analysis was also applied in Craine v Colonial Mutual Fire Insurance Co Ltd,[150] in which Dixon, Isaacs and Starkey JJ applied the statement of principle in Sarat Chunder Dey v. Gopal Chunder Laha[151], to the effect that:
‘the principle ... is, that it would be most inequitable and unjust to [a plaintiff] .. if another, by a representation made, or by conduct amounting to a representation, has induced him to act as he would not otherwise have done, the person who made the representation should be allowed to deny or repudiate the effect of his former statement, to the loss and injury of the person who acted on it.’[152] (emphasis added)
This appears to support a ‘but for’ causal test. However, in the later statement of the elements of the doctrine under Australian law set out by Jordan CJ in Franklin v Manufacturers Mutual Insurance Ltd, it was held that it was only necessary for a plaintiff to establish:
(5) .. that the representation should have been material in inducing the person to whom it was made to act on it in that way, (6) so that his [or her] position would be altered to his [or her] detriment if the fact were otherwise than as represented. [153]
‘Material’ does not unequivocally suggest that a ‘but for’ test is not required. However, as mentioned earlier, in Lynch v Stiff [154] the High Court held at least in that context that a lower causal threshold applied:
So far as the element of action by the party relying upon an estoppel is concerned, it is sufficient if that party acts to his prejudice upon a representation made with the intention that it should be acted upon, though it is not proved that in the absence of the representation he would not so have acted.[155] (emphasis added.)
If this is correct, there is arguably an inconsistency between Craine v Colonial Mutual Fire Insurance Co Ltd on the one hand, and possibly Franklin v Manufacturers Mutual Insurance Ltd and Lynch v Stiff on the other. As Lynch was in fact a case on the interpretation of s. 14(1) of the Partnership Act 1892 (NSW) and not estoppel at common law, it is arguable that it ought not to be regarded as binding in respect of common law estoppel by representation.
The correct causal test at common law is not the focus of this article. However, to the extent that it is relevant to consider whether the causal test at common law should differ from that applied in equity, it is suggested here that the tests ought to be consistent and that the ‘but for’ test expressed in earlier decision in Craine is the test which is more consistent with the purpose of estoppel in pais set out in Grundt. However, clarification of the law with respect to causation in estoppel at common law and in equity would be desirable.
Evidential Uncertainty in Estoppel
There is one further issue with respect to the use of the ‘but for’ test in equitable estoppel that warrants consideration. How do courts deal with the problems of evidential uncertainty that pose a problem in so many estoppel cases, particularly domestic cases? In many estoppel cases, there may be little or no direct evidence that satisfies the counterfactual inquiry of what the plaintiff would have done had the representation not been made. How does a plaintiff prove their decision-making process, particularly individuals as opposed to commercial plaintiffs? In many cases it will be impossible. In Gillett v Holt, Robert Walker LJ observed that the question what the plaintiff would have done if the defendant had told him that he could not rely on his intention to make a will in his favour was ‘entirely a matter of conjecture.’[156] And as White J noted in Priestley, self-serving evidence from a plaintiff that he or should would not have acted in the manner in which they did but for the representation would in any event be treated with ‘a high degree of caution’ by the court.[157]
There have been persuasive scholarly calls for a single test for factual causation that abandons the ‘but for’ test and adopts a common lower threshold test on the basis that these evidentiary problems support the application of a lower threshold test for factual causation, leaving the scope of liability to be determined by the application of other normative considerations rather than setting a higher causal threshold.[158] One argument made in support of this is that the inherent forensic uncertainty that surrounds human decision making, and the fact that ‘considerations cannot be quantified, nor their relative role in the decision-making process [be] objectively and scientifically assessed,’ make such findings impossibly difficult for a court to make.[159]
These problems are undeniable. Proving what influenced a decision is nothing like proving whether a fire was caused by a faulty power point. However, this is not to suggest that an estoppel claim must necessarily fail without direct evidence of the decision-making process or the counterfactual inquiry as to what would have been done. As was confirmed in Sidhu, applying the principle in Gould,[160] in some circumstances it may be possible for a court to draw the inference that, on the balance of probabilities, the promises in question relevantly led to the plaintiff’s conduct.[161] In Gould, Wilson J confirmed that:
if a material representation is made which is calculated to induce the representee to enter into a contract and that person in fact enters into a contract, there arises a fair inference of fact that he was induced to do so by the representation.[162]
His Honour then noted that:
the inference may be rebutted, for example, by showing that the representee before he entered into the contract, either was possessed of actual knowledge of the true facts and knew them to be true or alternatively made it plain that whether he knew the true facts of not he did not rely upon the representation. [163]
His Honour further observed that drawing such an inference may result in a shift in evidentiary onus to the defendant, although the legal onus to prove its case remains always upon the plaintiff:
Where a plaintiff shows that a defendant has made false statements to him intending thereby to induce him to enter into a contract and those statements are of such a nature as would be likely to provide such inducement and the plaintiff did in fact enter into that contract and thereby suffered damage and nothing more appears, common sense would demand the conclusion that the false representations played at least some part in inducing the plaintiff to enter into the contract. However, it is open to the defendant to obstruct the drawing of that natural inference of fact by showing that there were other relevant circumstances. Examples commonly given of such circumstances are that the plaintiff not only actually knew the true facts but knew them to be the truth or that the plaintiff either by his words or conduct disavowed any reliance on the fraudulent representations. It is entirely accurate to speak of an onus resting on a defendant to draw attention to the presence of circumstances such as those I have described in order to show that the inference of the fact of inducement which would ordinarily be drawn from the fraudulent making of a false statement calculated to induce a person to enter into a contract followed by entry into that contract should not in all the circumstances be drawn. But it is no more than an evidentiary onus — an obligation to point to the existence of circumstances which tend to rebut the inference which would ordinarily be drawn from the primary facts. When all the facts are in, the fact-finding tribunal must determine whether or not it is satisfied on the balance of probabilities that the misrepresentations in question contributed to the plaintiff's entry into the contract. The onus to show that they did is a condition precedent to relief and rests at all times on the plaintiff. (emphasis added)[164]
This was confirmed emphatically in Sidhu: there can be no operative ‘presumption’ of reliance, in the sense of a legal presumption, giving rise to a shift in onus of proof to the defendant to disprove reliance.[165] The onus of proof always remains with the plaintiff to prove the elements of his or her case. However, reliance as a question of fact, can be inferred from the evidence as a whole and there are examples in the context of equitable estoppel where this approach has been used.[166]
The proper role for drawing an inference from evidence was earlier explained by Lord Macmillan in Jones v Great Western Railway Co:
... An inference in the legal sense ... is a deduction from the evidence, and if it is a reasonable deduction it may have the validity of legal proof. The attribution of an occurrence to a cause is, I take it, always a matter of inference. The cogency of a legal inference of causation may vary in degree between practical certainty and reasonable probability. Where the coincidence of cause and effect is not a matter of actual observation there is necessarily a hiatus in the direct evidence, but this may be legitimately bridged by an inference from the facts actually observed and proved. Indeed, as Lord Shaw said in Marshall v Owners of SS Wild Rose (26 The Times L R 608; [1910] AC 486 at 494): 'The facts in every case may leave here and there a hiatus which only inference can fill.'[167]
Properly used, this is a means by which the evidential uncertainty in estoppel and other decision causation cases can be resolved in circumstances in which the court is satisfied that, when all the evidence is considered, the defendant’s conduct was more likely than not to have induced the plaintiff to act in the way in which the plaintiff acted, which the plaintiff would not have done but for the representation.
D: CONCLUSION
It is widely acknowledged that the ‘but for’ test has its limitations. However, it is argued in this paper that the ‘but for’ test is the appropriate starting point to apply to determine issues of causation in equitable estoppel and the preferable interpretation of the High Court’s reasons in Sidhu[168] on causation.
This article has sought to highlight that this higher causal threshold test of necessity is also more consistent with the normative foundations of the doctrine than the lower causal threshold. As observed by Spigelman CJ in O’Halloran v RT Thomas & Family, the purpose and scope of the doctrine of estoppel is the proper starting point for determining the proper approach to causation. As the purpose of equitable estoppel is to relieve against detriment arising from the plaintiff’s change of position in reliance upon the defendant’s conduct, a lower threshold under which a plaintiff need not demonstrate that he or she would have acted any differently without the impugned conduct, would amount to a departure from the normative underpinnings of the doctrine. Just as certain exceptions to the ‘but for’ test have been recognised at common law, the same may potentially arise in equity. But the important point is that any departure from the ‘but for’ test should be taken deliberately and for clear reasons that relate to the deficiency of the ‘but for’ test in the particular circumstances.[169]
[1] Barrister and lecturer, University of Technology Sydney.
I am very grateful to Katy Barnett and Jamie Glister for their helpful suggestions on previous drafts. All errors remain my own.
2Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387; Thorner v Major [2009] UKHL 18; [2009] 1 WLR 776 [29].
[3]Walsh v Walsh [2012] NSWCA 57
[4] Ibid, Meagher JA cited Riches v Hogben [1985] 2 Qd R 292 at 300 (cited in Giumelli v Giumelli [1999] HCA 10 (1999) 196 CLR 101 at [35]–[36]).
[5] [2001] EWCA Civ 990 (2001) 82 P & CR DG 23 [19].
[6] See Ben McFarlane, The Law of Proprietary Estoppel, (Oxford University Press, 2014) 189.
[7] See for example, Elise Bant, ‘Causation and Scope of Liability in Unjust Enrichment’ (2009) 17 Restitution Law Review 60; see also Andrew Robertson, ‘Estoppels and Rights-Creating Events: Beyond Wrongs and Promises’ in (eds) Jason W Neyers, Richard Bronaugh, Stephen G A Pitel, Exploring Contract Law, (Hart Publishing, 2009) 199, 219-220.
[8] [2014] HCA 19; (2014) 251 CLR 505.
[9] [2015] FCA 825 [776]-[778]. See also the Hon Justice James Edelman, ‘Unnecessary Causation’ (2015) 89 Australian Law Journal 20, 28; Jessica Hudson, ‘Equitable Compensation for Equitable Estoppels’ in S Degeling and J Varuhas, Equitable Compensation and Disgorgement of Profit (Hart, 2017, forthcoming).
[11] Sidhu v Van Dyke [2014] HCA 19; (2014) 251 CLR 505, [91] per Gageler J.
[12] Grundt v The Great Boulder Proprietary Gold Mines Limited [1937] HCA 58; (1937) 59 CLR 641, 674-675 per Dixon J.
[13] Elizabeth Cooke describes this as ‘reliance in the mind’, E Cooke, The Modern Law of Estoppel (OUP, Oxford 2000), 88-96, referred to by E Bant, ‘Causation and Scope of Liability in Unjust Enrichment’ Restitution Law Review 60, 62.
[14] E Bant, ‘Causation and Scope of Liability in Unjust Enrichment’ Restitution Law Review 60, 62.
[15] See B McFarlane, The Law of Proprietary Estoppel (OUP, Oxford, 2014), 124.
[16]See for example Duic v Duic [2013] NSWCA 42.
[17] For a detailed discussion of this concept, see E Bant, ‘Causation and Scope of Liability in Unjust Enrichment’ (2009) 17 Restitution Law Review 60.
[18] L Hoffmann,
“Causation” (2005) 121 LQR
592.
[19] [1852] EngR 371; (1852) 1 De GM & G
660, 708 per Lord Cranworth.
[20] [1859] EngR 38; (1859) 7 HLC 750,
759.
[21] (1885) 29 Ch D 459, per
Cotton LJ 480-481. See also Standard Chartered Bank v Pakistan Shipping
Corporation, [2002] UKHL 43; [2003] 1 AC 959, Lord Hoffmann discussed the law with respect
to the tort of deceit and referred in particular to Edgington v
Fitzmaurice (1885) 29 Ch D 459, 481 (per Cotton LJ) and held that:
‘This case seems to me to show that if a fraudulent representation is
relied upon, in the sense that the claimant would not have parted with his
money if he had known it was false, it does not matter that he also held
some other negligent or irrational belief about another matter and, but for that
belief, would
not have parted with his money either.’ (emphasis
added)
[22] In Priestley v
Priestley [2016] NSW 1096, at [126]-[127] White J discusses this case as an
application of the ‘but for’
test.
[23] Ibid.
[25] Ibid 118-119 per Lord Cross delivering the judgment of the majority; 121 per Lord Wilberforce and Lord Glaisdale dissenting in the result but in agreement as to the test to be applied.
[27] Ibid, 236 per Wilson J.
[29] Ibid [73]-[81] per Leeming JA.
[30] Ibid [81].
[31] Ibid [51].
[32] The Hon K R Handley AO QC, ‘Causation in Misrepresentation’ [2015] 131 Law Quarterly Review 275, 282-285.
[33] E Bant, “Causation and Scope of Liability in Unjust Enrichment” (2009) 17 Restitution Law Review 60, 66.
[35] [2006] EWCA 1551, [71]. Approved in Catchpole v The Trustees of the Alitalia Airlines Pension Scheme [2010] EWHC 1809 (Ch) at [40] per Warren J.
[36] [1982] Q.B. 84.
[37] See E Bant,
‘Causation and Scope of Liability in Unjust Enrichment’ (2009) 17
Restitution Law Review 60, 64; see also Ben McFarlane, The Law of
Proprietary Estoppel, (Oxford University Press, 2014),
172-174.
[38] Above n 35,
108.
[39] [1943] HCA 38; (1943) 68 CLR 428
[40] [1943] HCA 38; (1943) 68 CLR 428, 432.
[41] [1943] HCA 38; (1943) 68 CLR 428, 435, applied in Nationwide Building Society v Lewis [1998] Ch 482 488, 488 per Peter Gibson LJ.
[42] See for example, Hedley Byrne & Co Ltd v Heller & Partners Ltd [1963] UKHL 4; [1964] AC 465; J Stapleton, ‘Legal Causation: Cause-in-Fact and the Scope of Liability for Consequences’ (2001) 54 Vanderbilt Law Review 941, 959.
[43] Wallace v Kam [2013] HCA 19; (2013) 250 CLR 375, 383 [17].
[44] March v (EH & M) Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506, 530 per McHugh J.
[45] Barker v Corus UK Ltd [2006] UKHL 20; [2006] 2 AC 572, [1] per Lord Hoffmann.
[46]There are many scholarly discussions of this concept but see for example J Stapleton, ‘Choosing What we Mean by ‘Causation’ in the Law’ 73 Missouri Law Review 433.
[47] Ipp Report 7.28 see for
example Bonnington Casting v Wardlaw [1956] UKHL 1; [1956] AC 613 the claimant suffered
from pneumoconiosis, a disease caused by the gradual accumulation of silica
particles in the lungs. There had
been several sources of exposure and it was
not possible to determine whether but for one source of exposure, the harm would
have
resulted.
[48]For example
Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32.
[49] March v (E & MH) Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506.
[50] Ibid 515-517 per Mason CJ.
[51] Ibid 516.
[52] Applied in for example, Wardley Australia Limited v Western Australia [1992] HCA 55; (1992) 175 CLR 514, 525; Chappel v Hart (1998) 195 CLR 232, 238; Marks v GIO Australia [1998] HCA 69; (1998) 196 CLR 494, 512-3; Kenny & Good Pty Ltd v MGICA (1999) 199 CLR 413, 426 [19] per Gaudron J, 456-7 [118] per Kirby and Callinan JJ; Henville v Walker [2001] HCA 52; (2001) 206 CLR 459, 480 [61] per Gaudron J, 489 [95] per McHugh J; Travel Compensation Fund v Tambree [2005] HCA 69; (2005) 224 CLR 627 [55]-[56] per Kirby J, [63], [78]-[80]; Roads and Traffic Authority v Royal [2008] HCA 19; (2008) 82 ALJR 870, 878 [32]; Tabet v Gett [2010] HCA 12; (2010) 240 CLR 537 [112], [150].
[53] Travel Compenstion Fund v
Tambree [2005] HCA 69; (2005) 224 CLR 627, 639 [29] per Gleeson
CJ.
[54] See for example
Gunnersen v Henwood [2011] VSC 440, [379] per Dixon J.
[55] Civil Liability Act 2002 (NSW) s 5D(1); Civil Liability Act 2003 (Qld) s 11(1); Wrongs Act 1958 (Vic) s 51(1); Civil Liability Act 1936 (SA) s 34(1); Civil Liability Act 2002 (Tas) s 13(1); Civil Liability Act 2002 (WA) s 5C(1); Civil Law (Wrongs) Act 2002 (ACT) s 45(1).
[56] This follows the
recommendations in the Review of the Law of Negligence Final Report 2002
(‘Ipp Report’).
[57]
See for example Wallace v Kam (20130) [2013] HCA 19; 297 ALR 383 [11] per French CJ,
Crennan, Kiefel, Gageler and Keane
JJ).
[58] Roscoe Pound,
‘First Harry Schulman Lecture of Torts at Yale Law School’
(1957-1958) 67 Yale Law Journal
1
[59] For a detailed discussion
of a similar problem under English law, see Ben McFarlane, The Law of
Proprietary Estoppel, (Oxford University Press, 2014)
160-203.
[60] B McFarlane, The
Law of Proprietary Estoppel (OUP, Oxford, 2014),
160.
[61] Wayling v Jones
(1993) 69 P & CR 170.
[62]
Amalgamated Investment & Property Co Ltd (in liquidation) v Texas
Commerce International Bank Ltd [1982] 1 QB 84, 105-106 per Goff J.
[63] Steria v Hutchison
[2006] EWCA Civ 1551.
[64]
Taylors Fashions Ltd v Liverpool Victoria Trustees Co Ltd [1982] QB 133,
156-7 per Oliver J.
[65] [1982] QB 133, 157 per Oliver J.
[66] [2014] NSWSC
374.
[67]Ibid [84].
[68] [2012] NSWCA
57.
[69]Ibid
[16]-[17].
[70]Ibid.
[71]Ibid.
[72] [2011] VSC
459.
[73][273]-[278].
[74]
In Strong v Woolworths [2012] HCA 5; (2012) 246 CLR 182, the High Court noted at [22]
that confusion may result from the different ways in which the term
‘material contribution’
has been used in tort, and that it is
necessary to understand the contextual development of these terms.
[75] [1999] VSCA 109; [1999] 3 VR
712.
[76]Ibid [20].
[77]Ronowska v Kus [2012] NSWSC 280.
[79] [2012] NSWSC 52 per Bergin Cj in Eq.
[80] [2001] NSWSC 1123 per Austin J.
[81]Ibid [182].
[82]Ibid [188].
[83]Ibid [189].
[84]Ibid [203]-[204].
[85]Ibid [204].
[86]Ibid
[204].
[87] Van Dyke v
Sidhu [2013] NSWCA 198; (2013) 301 ALR 769.
[88]Ibid 785, [77].
[89]Ibid [78].
[90]Ibid, [78] per Barrett
JA.
[91]Ibid
[83].
[92]Ibid
[83].
[93] [2013] HCA Trans
312.
[94] [2009] NSWSC 344
[461]
[95] [2000] NSWCA 361,
[78]-[79].
[96]3 VR 712, [117]
per Brooking JA.
[97] Van Dyke
v Sidhu [2013] NSWCA 198; (2013) 301 ALR 769, [79]-[99] per Barrett
JA.
[98] Flinn v Flinn
[1999] VSCA 109; [1999] 3 VR 712, [117] per Brooking
JA.
[99] [1980] 3 All ER 710,
713.
[100] (1993) 69 P & CR 170,
173.
[101] AT Denning,
Presumptions and Burdens, (1945) 61 Law Quarterly Review
379.
[102] Ibid,
379.
[103]
Ibid.
[104] [2006] EWCA Civ 1551; [2007] ICR 445, 467
[130].
[105] AT Denning,
Presumptions and Burdens, (1945) 61 Law Quarterly Review 379,
383.
[106] Van Dyke v
Sidhu [2013] NSWCA 198; (2013) 301 ALR 769,
[83].
[107] [2013] HCA Trans
312.
[108]
Ibid.
[109] [2014] HCA 19; (2014) 251 CLR 505,
521 [50].
[110]
Ibid.
[111] [2014] HCA 19; (2014) 251 CLR 505,
523, [61].
[112] Ibid, 524-525
[66].
[113]Ibid [71].
[114] [1935] HCA 33; (1935) 52 CLR 723, 735.
[115] (1985) 157 CLR 215, 236, 250-1.
[116] [2006] EWCA Civ 1551; [2007] ICR 445, [117].
[117] [1982] QB 84, 104-5.
[118] Above n 114, [117].
[119] [2014] HCA 19; (2014) 251 CLR 505, [76].
[120] [2014] HCA 19; (2014) 251 CLR 505, [69].
[121] Ibid, [90].
[122] Ibid, [91].
[123] [2014] HCA 19; (2014) 251 CLR 505, [93].
[124] Ibid, [95].
[125] [2015] FCA 825 [776]-[778]; the Hon Justice James Edelman, ‘Unnecessary Causation’ (2015) 89 Australian Law Journal 20, 28; J Hudson, ‘Equitable Compensation for Equitable Estoppels’ in S Degeling and J Varuhas, Equitable Compensation and Disgorgement of Profit (Hart, 2017, forthcoming).
[126] Ibid,
[777].
[127] J Hudson,
‘Equitable Compensation for Equitable Estoppels’ in S Degeling and J
Varuhas, Equitable Compensation and Disgorgement of Profit (Hart, 2016,
forthcoming)
[128] Ibid, [778].
[129] At [46] per Darke J: ‘I do not think that the defendant has discharged his onus of proof on this issue. The defendant has not shown that, based on what his mother said to him, he held particular beliefs or expectations in relation to the Land, and that such beliefs or expectations made a difference to the manner in which he conducted himself. Put another way, the defendant has not shown that he would have adopted a different course had such beliefs or expectations not been induced in him.’ (emphasis added.)
[130] [2014] NSWSC 743 [92] per Sackar J.
[131] [2016] NSW 1096.
[132] Ibid,
[122].
[133] [2014] HCA 19; (2014) 251 CLR
505, [71].
[134] Ibid
[72]-[73].
[135] Above n 130,
[123].
[136] Ibid
[124].
[137] Ibid [137].
[138] [2016] NSW 1096 [155].
[139] Environment Agency (formerly National Rivers Authority) v Empress Car Co (Abertillery) Ltd [1998] UKHL 5; [1988] 2 WLR 350; [1998] 1 All ER 481 per Lord Hoffmann, cited in O’Halloran v RT Thomas and Family Pty Ltd [1998] NSWSC 596; (1998) 45 NSWLR 262, 271 per Spigelman CJ. See also Travel Compensation Fund v Tambree [2005] HCA 69; 224 CLR 627, [45] per Gummow and Hayne JJ.
[140] [1988] 2 WLR 350, 358; [1998] UKHL 5; [1998] 1 All ER 481.
[141] Ibid, 275, per Spigelman CJ.
[142] [1937] HCA 58; (1937) 59 CLR 641, 674.
[143] [1937] HCA 58; (1937) 59 CLR 641, 657.
[144] See for example David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353, 357.
[145] Elise Bant & Peter Creighton, ‘The Australian Change of Position Defence’ (2002) Western Australian Law Review 208, 213.
[146] [2014] HCA 19; (2014) 251 CLR 505, 531 [92].
[147] Ben McFarlane, The Law of Proprietary Estoppel, (Oxford University Press, 2014) 189 [3.175].
[148] B McFarlane, The Law of Proprietary Estoppel (OUP, Oxford, 2014), 153.
[149]A History of English Law (3rd ed, London, 1944), vol 9, at pp 144-146, referred to in Labracon Pty Limited v Cuturich & Anor [2013] NSWSC 97 per Lindsay J at 148.
[150] [1920] HCA 64; (1920) 28 CLR 305.
[151] (1902) A.C 1,130.
[152] [1920] HCA 64; (1920) 28 CLR 305, 327.
[153][1935] NSWStRp 62; (1935) 36 SR(NSW) 76, 82.
[154] [1943] HCA 38; (1943) 68 CLR 428.
[155] [1943] HCA 38; (1943) 68 CLR 428, 435, applied in Nationwide Building Society v Lewis [1998] Ch 482 488, 488 per Peter Gibson LJ.
[156] Gillett v Holt [2001] Ch 210, 235.
[157] Priestley v Priestley [2016] NSWSC 1096, [140].
[158]See E Bant, ‘Causation and Scope of Liability in Unjust Enrichment’ (2009) 17 Restitution Law Review 60; J Stapleton, ‘Legal Causation: Cause-in-Fact and the Scope of Liability for Consequences’ (2001) 54 Vanderbilt Law Review 941.
[159] E Bant, ‘Causation and Scope of Liability in Unjust Enrichment’ (2009) 17 Restitution Law Review 60, 67-68 and Andrew Robertson, ‘Estoppels and Rights-Creating Events: Beyond Wrongs and Promises’ in (eds) Jason W Neyers, Richard Bronaugh, Stephen G A Pitel, Exploring Contract Law, (Hart Publishing, 2009) 199, 219.
[160] (1984) 157 CLR 215, 236 per Wilson J.
[161] Sidhu, [66].
[162] Above n 158.
[163]
Ibid.
[164] (1984) 157 CLR 215,
238-239.
[165] It is unnecessary for present purposes to trace the history of the confusion as to whether a presumption of reliance arose. This history is considered in the reasons of the plurality.
[166] See for example Wayling v Jones (1993) 69 P & CR 170, 173 per Balcombe LJ (with whom Hoffmann LJ and Leggatt LJ agreed, ‘Once it has been established that promises were made, and that there has been conduct by the plaintiff of such a nature that inducement may be inferred then the burden of proof shifts to the defendants to establish that he did not rely on the promises – Greasley v Cooke [1980] 1 WLR 1306; Grant v Edwards [1986] Ch 638, 657.’
[167] (1930) 47 TLR 39, 45.
[168] Sidhu v Van Dyke [2014] HCA 19; (2014) 251 CLR 505, [91] per Gageler J, ‘She needed to establish that having the belief and taking the belief into account made a difference to her taking the course of action or inaction that she would not have so acted or refrained from acting if she did not have the belief.’ (emphasis added).
[169] The Hon Justice James Edelman makes this argument writing extra-judicially in ‘Unnecessary Causation’ (2015) 89 Australian Law Journal 20.
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