The recent High Court decision of Kramer v Stone [2024] HCA 48 is a useful application of the principles of both estoppel by encouragement and estoppel by acquiescence. The following article and case study will provide a brief overview of the key differences between such doctrines. After reading this article may decide to consider any promises you make with more caution in the future.
What is proprietary estoppel?
The doctrine of proprietary estoppel is a legal principle that prevents people from going back on their words and actions said or made in the past in relation to real property. This does not mean that every time one person makes a promise to gift another person some property it is enforceable at law. What differentiates the right between enforcing one promise to another, is the detriment suffered by the person in relying on the promise that will make it unreasonable for the promise to be denied.
The Facts
David Stone was a farm worker who resided and worked on a farm in Colo River, NSW. The owner of the farm, Dr Harry Kramer, had entered into an oral agreement with David whereby David would work and maintain the farm on behalf of Dr Harry and in return, David would amongst other things, earn a retainer and earn half of the farm proceeds every quarter.
Between 1980 and 1988, whilst working on the farm, Dr Harry and his wife ‘Dame Leonie’ made multiple promises to David including that:
- Dr Harry would give David a life interest in the farm;
- Dr Harry would leave the Farm to Dame Leonie in his will, but she would leave the farm in her will to David; and
- Dame Leonie would leave the farm in David’s name upon her passing.
David claimed that he relied on these promises for over 20 years, and in doing so, continued to work at the farm, earning a below-average income and living in “substandard conditions”. David also claimed that if it was not for the promises made to him by Dr Harry and Dame Leonie, he would have terminated the oral agreement and pursued “a more remunerative occupation”.
Points raised by the Court to consider
It was agreed that the elements of estoppel were “plainly satisfied”. The point of contention that was put before the court was that two proposed additional requirements should be included in the requirements to establish estoppel. Such additional requirements included that:
- the promisor must engage in conduct after the promise is made which further encourages the promisee; and
- the promisor must have actual knowledge that the promisee is relying on the promise.
Estoppel by Encouragement vs Acquiescence?
The Court established that the two proposed additional requirements were borrowed from the elements concerning estoppel by acquiescence.
Elements of Estoppel by encouragement
The majority of the Court refined the elements in Waltons Stores (Interstate) Ltd v Maher[1] to four requirements for an equitable estoppel to arise by encouragement, including:
- a clear promise must be made by the promisor;
- the promisor can expect the promisee that the promisee would rely on the promise;
- the promisee must rely on the promise to their detriment; and
- the remedy which the Court will order will then depend on what is necessary to alleviate the detriment suffered by the promise in relying on the promise made.
Elements of Estoppel by Acquiescence
The case of Brand v Chris Building Co Pty Ltd[2] reiterated the requirements for an estoppel by acquiescence, including:
- a person must be mistaken as to their legal rights;
- that same person must do some act, on the faith on their mistaken belief;
- a separate person must know their rights;
- that separate person must know of the mistaken person’s belief; and
- the separate person must encourage the mistaken person either directly or by abstaining from asserting their legal right.
As can be seen, the difference between the two estoppels includes the requirement of knowledge. Turning back to the case, the appellant argued that in order for a claim of estoppel by encouragement to be made, Dame Leonie was required to know that David remained a farmer on the farm as a result of her promise. This was incorrect.
Decision
The High Court dismissed the appeal and agreed with the Court of Appeal that a claim for equitable estoppel by encouragement was applicable.
Key Take Away
Knowledge of acts done in reliance on the assumed state of affairs is a necessary element of estoppel by acquiescence, however, not so of estoppel by encouragement
Further to this, it is noted that there is a difference between a person whose promise causes another’s detriment and a person who merely omits to act where action could spare the party from determinant
Estoppels whether of a proprietary or acquiescence kind are a useful additional tool to use in the absence of an enforceable contract. This case has the potential to be applied to a wide variety of different cases involving family members or friends working in someone else’s business on the expectation and understanding they will inherit the business in the future.
If you would like to discuss this article with us, please contact David Greenberg, Partner, Victoria Caldwell, Senior Associate, or Ibrahim Khalil, Paralegal on (02) 9261 5900.
[1] Waltons Stores (Interstate) Ltd v Maher (1988) 76 ALR 513
[2] Brand v Chris Building Co Pty Ltd (1957) VR 625