Third question: estoppel
50 This question also arose on the appellant's notice of appeal. For reasons which will appear, the pleading background should be described.
51 In its statement of claim the appellant pleaded the July 1996 contract (para 5), breach of the contract (paras 7 and 8) and loss from the breach (para 9). It claimed damages for breach of contract.
52 After the respondent had pleaded s 54A of the Conveyancing Act in its defence, the appellant pleaded in its reply -
"6. In any event, the defendant took the benefit of the July agreement and it would now be inequitable or unconscionable for the defendant to rely on section 54A(1) … of the Conveyancing Act .
Particulars
(i) The plaintiff terminated the joint venture agreement, and the defendant ceased to be bound by its terms, including the term requiring the defendant to transfer the title to nine of the home units to the plaintiff.
(ii) The defendant sold the nine home units for significantly more than the defendant would have received if it had completed the sales to the plaintiff"s purchasers."
53 The judge recorded that this was treated in argument "as though it raised an allegation of estoppel". The respondent said that particular (ii) had not been supported at the trial, which the appellant implicitly accepted when it said that it did not rely on it.
54 In an amended statement of claim the appellant then pleaded an estoppel case in addition to the breach of contract case. It pleaded representations that the respondent would take over the contracts with the purchasers (para 10) and reliance on the representations (paras 11-13) whereby the respondent was "estopped from denying the existence of the contract referred to in paragraph 5 above" (para 14), and that the respondent was "accordingly" liable to pay compensation and equitable damages (para 15). It claimed damages for breach of contract, equitable damages and "such other equitable relief … as may be appropriate".
55 In the further amended statement of claim current at the trial the estoppel case was deleted, although the relief claimed still included equitable damages and "such other equitable relief … as may be appropriate".
56 The juge set out "the substance of the submissions [the appellant] made on this 'estoppel' point", citing from the written and oral submissions, and noted the handful of cases and the learned article to which he had been referred. He said -
"138 I regret to say that, having re-read the written submissions, and having re-read the transcript of the oral argument, I do not begin to understand which particular principles of estoppel are here relied upon, or how it is submitted the facts of the present case relate to any such principles. In that circumstances I cannot uphold the pleading said to give rise to the ' estoppel' claim."
57 A ground of appeal complained of error in "failing to give reasons for rejecting the appellant's argument based upon estoppel". The ground of appeal was not pressed, as it was accepted that this Court should address the question of estoppel for itself and that the complaint led nowhere. From the submissions as described by the judge, I share his inability to see how they could uphold the pleaded estoppel. In fairness to the judge, if submissions do not convey an understandable argument, the judge gives adequate reasons in saying so.
58 The appellant's submissions on appeal were more extensive. It has still not been easy to understand the argument for an estoppel against reliance on s 54A.
59 In its written submissions in chief the appellant described the estoppel as an equitable estoppel and invoked the summary by Brennan J in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 428-9 -
"In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise. For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will nevertheless be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant's property, a diminution of his rights or an increase in his obligations and he, knowing that the plaintiff's reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs."
60 In the appellant's application of this passage, the particular legal relationship was that the respondent had agreed to take over the appellant's contracts with the purchasers. It was said that the appellant had been induced by the respondent to assume that the relationship existed between them by the proposal for the changed arrangements, by the making of the July 1996 agreement and by partial performance of the July 1996 agreement with respect to, for example, the new building contract and the provision of back pages for the contracts. The appellant had acted on that assumption by agreeing to the new arrangements and so losing its ability to complete its contracts with the purchasers. If the respondent did not take over the contracts with the purchasers who insisted on performance, the appellant would suffer detriment. Thus, it was submitted, equity would come to the appellant's aid because it would be unconscionable for the respondent to resile from the assumption it induced in the appellant and upon which the appellant relied and acted to its detriment. It was said that the minimum remedy to make good the appellant's detrimental reliance was equitable compensation in the same amount as the damages which would have been awarded for breach of contract.
61 It is necessary to recall the pleaded estoppel, an estoppel against reliance on s 54A. It was distinct from the estoppel deleted in the further amended statement of claim, an estoppel against denying the existence of an agreement to take over the contracts with the purchasers.
62 The appellant had an agreement that the respondent would take over the contracts with the purchasers. That was found in its favour. It did not need an estoppel to establish the existence of that legal relationship. No doubt it would suffer detriment if the respondent did not take over the contracts with the purchasers who insisted on performance, and but for s 54A it would have a remedy for that detriment by way of an action for damages. What the appellant needed was an estoppel preventing the respondent from relying on s 54A. The appellant's argument may have supported the deleted estoppel, but did not engage with its pleaded estoppel.
63 In Actionstrength Ltd v International Glass Engineering IN.GL.EN SpA (2003) 2 AC 541 the guarantor said that its guarantee was unenforceable for lack of writing by force of s 4 of the Statute of Frauds, and the creditor replied that, having by its promise to guarantee encouraged the creditor to act to its detriment, the guarantor was estopped from relying on the Statute. It was held that the promise to guarantee was not enough for the estoppel, and that there must be something more by which the creditor was led to assume that the promise would be honoured.
64 Lord Bingham said (at 547) -
"It is implicit in the assumed facts that Actionstrength believed itself to be the beneficiary of an effective guarantee. Its difficulty, in my view insuperable, arises with the second question. For in seeking to show inducement or encouragement, Actionstrength can rely on nothing beyond the oral agreement of St-Gobain which, in the absence of writing, is rendered unenforceable by section 4. There was no representation by St-Gobain that it would honour the agreement despite the absence of writing, or that it was not a contract of guarantee, or that it would confirm the agreement in writing. Nor did St-Gobain make any payment direct to Actionstrength which could arguably be relied on as affirming the oral agreement or inducing Actionstrength to go on supplying labour. If St-Gobain were held to be estopped in this case it is hard to see why any oral guarantor, where credit was extended to a debtor on the strength of a guarantee, would not be similarly estopped. The result would be to render nugatory a provision which, despite its age, Parliament has deliberately chosen to retain."
65 Lord Hoffman considered that the estoppel failed because there was no more than the giving of the guarantee, saying (at 550-1) -
"It is in the nature of a contract of guarantee that the party seeking to enforce it will always have performed first. Unless he has advanced credit or forborne from withdrawing credit, there will be no guaranteed debt for which he can sue. It will always be the case that the creditor will have acted to his prejudice on the faith of the guarantor's promise. To admit an estoppel on these grounds would be to repeal the Statute."
66 Lord Clyde said (at 552) -
"The contract in the present case may be taken to have been constituted by the undertaking given by the second defendant and the actings of the claimant in keeping its workforce on site and continuing to work there. The distinct question arises whether the agreement is enforceable. To that question, in the absence of any writing, the Statute of Frauds gives a negative answer. Without entering into questions of the categorisation of different classes of estoppel, it seems to me that some recognisable structural framework must be established before recourse is had to the underlying idea of unconscionable conduct in the particular circumstances. The framework here should include the following elements: that Actionstrength assumed that St-Gobain would honour the guarantee; that that assumption was induced or encouraged by St Gobain; and that Actionstrength relied on that assumption.
The short answer to the case in my view is that these factors cannot all be found in the material before us, and in particular in the pleadings. The only assurance given to Actionstrength was the promise itself. In order to be estopped from invoking the Statute there must be something more, such as some additional encouragement, inducement or assurance. In addition to the promise there must be some influence exerted by St-Gobain on Actionstrength to lead it to assume that the promise would be honoured. But there is no suggestion made that St-Gobain said or did anything to lead Actionstrength to assume that St-Gobain would not stand on its rights. Nor is St-Gobain said to have done anything which would foster such an assumption. Further the acts of Actionstrength in keeping the labour force on site and continuing to work do not demonstrate a reliance on some assumption of the enforceability of the guarantee. The acts may have followed upon the giving of the verbal promise and they could operate to support the conclusion of the contract. But they do not necessarily relate to an assumption of the enforceability of that contract. They are essentially no different from the acts which any creditor would normally carry out after a surety has given him some guarantee relating to his provision of credit."
67 Lord Walker said (at 557) -
"In the present case, by contrast, what passed between the parties (as pleaded by Actionstrength and as set out in Mr Sutcliffe's witness statement) did not amount to an unambiguous representation that there was an enforceable contract, or that St-Gobain would not take any point on section 4 of the Statute of Frauds.
That is the point which Mr Soole (for St-Gobain) rightly put in the forefront of his submission as what he called the short answer to the appeal. He was willing to concede (in line with what Brooke J said in Bank of Scotland v Wright ) that an explicit assurance that St-Gobain would not plead the Statute of Frauds (like an explicit assurance not to take a limitation point) could found an estoppel. But it would wholly frustrate the continued operation of section 4 in relation to contracts of guarantee if an oral promise were to be treated, without more, as somehow carrying in itself a representation that the promise would be treated as enforceable.
To treat the very same facts as creating as an unenforceable oral contract and as amounting to a representation (enforceable as soon as relied on) that the contract would be enforceable, despite section 4 - and to do so while disavowing any reliance on the doctrine of part performance - would be to subvert the whole force of the section as it remains in operation, by Parliament's considered choice, in relation to contracts of guarantee. It would be comparable (in a non-statutory context) to treating the mere fact of a mistaken payment made by A to B as importing a representation by A that the money was indeed due to B, so as to create an estoppel if B (relying on the implicit assurance) acted to his detriment by spending even part of the money.
Mr Soole's submissions appear to me to be unanswerable, and I do not think it is necessary to go on to what he called his longer answer to the appeal. I quite see that the pleaded oral contract of guarantee is an unusual one, said to have been entered into by a company whose economic strength is no doubt much greater than that of most guarantors. St-Gobain does appear (again, on Actionstrength's pleaded case) to have obtained the benefit of about a month's work on its factory which might not otherwise have been performed. But in the absence of any assurance (other than the bare oral promise itself) the degree of detrimental reliance on the part of Actionstrength is irrelevant. I think that Simon Brown LJ was rignt in describing Actionstrength's case on estoppel as hopeless."
68 Lord Woolf agreed with the other of their Lordships, and Lord Walker expressed agreement also with the speeches of Lord Bingham, Lord Hoffman and Lord Clyde.
69 Applied to the present case, the reasoning of their Lordships would require not just that the respondent had agreed to take over the appellant's contracts with the purchasers, but that the respondent had done something more by which the appellant was led to assume that the respondent would honour that agreement. Perhaps the something more did not have to be as explicit as that the respondent would honour the agreement despite the absence of writing.
70 The appellant's primary submission was that it was unnecessary that there be anything more, with the estoppel founded only upon the legal relationship of an agreement to take over the contracts with the purchasers and reliance on the existence of that relationship. It submitted rather in passing that the assumption of that legal relationship "will inevitably carry with it, at least by implication, a representation or assumption tht the agreement will have legal effect".
71 In my respectful opinion, the reasoning of their Lordships in Actionstrength Ltd v International Glass Engineering IN.GL.EN SpA is conclusive against the appellant.
72 In some cases more than the unenforceable agreement has been found. In Collin v Holden it was acknowledged, citing from Waltons Stores (Interstate) Ltd v Maher at 406, that mere reliance on an executory promise did not bring promissory estoppel into play, but it was found that the defendant had so conducted himself as to represent to the plaintiff that their agreement was enforceable (see at 576-8). In The Commonwealth v Verwayen (1990) 170 CLR 394 the estoppel lay in the defendant holding out that it would not rely on the Statute of Limitations. In Agius v Sage [1999] VSC 100 it was found that the defendant's conduct had caused the plaintiff to assume that documents would be executed to record what had been agreed (see at [81] - [84]).
73 But the respondent relied on nothing more than the making of the July 1996 agreement. I do not accept that the making of the agreement of itself carried a representation or founds an assumption that the agreement would be performed. There was evidence that Mr Ward knew of the requirement of writing. Section 54A of the Conveyancing Act was part of the law of the land, and the making of the agreement was subject to any unenforceability under the law of the land. It could not without more be inequitable or unconscionable to rely on the law of the land, and agreement to take over the contracts with the purchasers did not of itself convey that the respondent would not rely on the law of the land so far as the law bore upon the validity or enforceability of the agreement.
74 Again recalling the pleaded estoppel, it was not inequitable or unconscionable for the respondent to rely on s 54A unless the respondent led the appellant to believe that it would honour the agreement notwithstanding any invalidity or unenforceability under the law of the land, here unenforceability by virtue of s 54A, and in other respects the basis for equitable intervention was made out.
75 Underlying the appellant's argument, although revealed mainly by a reference in submissions in reply to a learned article (Robertson, "The Statute of Frauds, Equitable Estoppel and the Need for 'Something More'", (2003) JCL 1), appears to have been that s 54A was outflanked because on principles of equitable estoppel there was an agreement to take over the contracts with the purchasers and an agreement so found was an independent source of legal rights enforceable through equitable relief. The learned author distinguished Actionstrength Ltd v International Glass Engineering IN.GL.EN SpA as "based on the notion that promissory estoppel does not operate to provide an independent source of rights, but simply operates to prevent a person from enforcing a strict legal right" (at 10). He reasoned that proprietary estoppel operates as an independent source of rights, that in Australia a distinction is no longer drawn between promissory and proprietary estoppel, and that "[t]he courts apply a broad doctrine of equitable estoppel that operates as an independent source of rights and provides a cause of action" (at 11). In order to establish an estoppel there was no need for what the author called a secondary assumption as something more than reliance on a promise, in order to establish an estoppel, and the purpose of the Statute of Frauds was not subverted (at 16-17).
76 It may be accepted that an estoppel can be a source of rights. That was the case in Waltons Stores (Interstate) Ltd v Maher itself, and from Ramsden v Dyson (1865) LR 1 HL 129 onwards interests in land have often been held to have arisen on principles of estoppel. Where an interest in land has been held to have arisen absence of a written record has not precluded its enforcement. That has been because the assumption induced by the defendant is taken to have encompassed enforceable rights (see Waltons Stores (Interstate) Ltd v Maher at 432-3, 446, 464), which can not be said of the mere assumption that a contract exists when the law of land requires a written record for enforceability.
77 It does not follow that where the source of the rights is contractual, the statutory imperative of s 54A can be overcome by creation of an alternative source of rights.
78 As a matter of pleading, I do not think that the appellant's argument is open to it. The appellant abandoned the pleaded case of an estoppel from denying the existence of a contract, and was left with an estoppel specifically directed at reliance on s 54A. It could not rely on an agreement found on principles of estoppel as an independent source of rights.
79 Putting that aside, I do not think the argument is sound. Its fundamental flaw is that there was an agreement, binding in contract, that the respondent would take over the contracts with the purchasers. There was no need for an independent source of rights, and neither occasion nor warrant to improve the appellant's position by creating rights alternatively sourced through principles of estoppel. To repeat, without more it was not inequitable or unconscionable for the respondent to rely on the law of the land.
80 Equity has ameliorated the harshness of reliance on s 54A through the doctrine of part performance. The doctrine would be unnecessary if the plaintiff could always fall back on an estoppel founded on no more than the making of the contract in question. And if the plaintiff could always do that, s 54A would be rendered nugatory.
81 The appellant relied on Riches v Hogben (1985) 2 Qd R 292 (McPherson J); (1986) 1 Qd R 315 (Full Court) for an estoppel on the basis of an assumption induced by the making an agreement, without any secondary assumption. The defendant agreed to buy a house in Australia and put it in the plaintiff's name if the plaintiff moved in and looked after her. The plaintiff came to Australia and moved in. The defendant bought the house, but in her own name, and ejected the plaintiff. The trial judge held that the agreement was binding in contract and was not unenforceable by reason of the equivalent to s 54A, but that if he was incorrect as to that the defendant had created an expectation in the plaintiff that the house would be provided to him, she had subsequently encouraged that expectation, and on equitable principles the house was held on trust for the plaintiff. In the Full Court it was held that the agreement was unenforceable, but that the relief on equitable principles should remain.
82 The case can be seen as supporting an estoppel without any secondary assumption. It can also be seen as an estoppel because, after the agreement was made, the defendant represented to the plaintiff that she would perform it - that is, as a case with "something more" founding a secondary assumption. The trial judge did not think the relief on equitable principles available if the agreement was unenforceable, saying (at (1995) 2 Qd R at 301) that if there was a legally binding promise "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 replace it". The Full Court thought otherwise, but it is not apparent that the estoppel was founded only on the making of the agreement rather than on the defendant's subsequent conduct. The reasons of the Full Court proceeded on the findings of the trial judge (see (1986) 1 Qd R at 320-1 per Kelly SPJ), and may have rested on the finding that, after raising the plaintiff's expectation by making the agreement, the defendant further encouraged it, including by saying after his arrival that even if in her name the house would be his. There was not the focus on the issue raised by the appellant's argument. I do not think the case stands clearly against the conclusion to which I have come.