ESTOPPEL BY CONDUCT AND ELECTION

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1 ESTOPPEL BY CONDUCT AND ELECTION by The Honourable Mr Justice K. R. Handley AO BA, LLB (Sydney), Honorary Bencher, Lincoln's Inn, Visiting Fellow, Wolfson College, Cambridge A Judge of the Court of Appeal of New South Wales "He who guards his lips guards his soul, but he who speaks rashly will come to ruin." Proverbs 13:3 "Of making many books there is no end, and much study wearies the body." Ecclesiastes 12:12 THOMSON * SWEET St IVIAXWELL.

2 CONTENTS Foreword Preface Table of Cases Table of Statutes v vü xix Ivii CHAPTER 1 INTRODUCTION Common law estoppel 1 Equitable estoppel 1 Development of estoppel by representation 2 Estoppel by representation 3 The elements of estoppel by representation 3 Causation 4 Detrimental change of position 5 Estoppel by representation: evidentiary or Substantive 6 Equitable estoppel creates rights 9 Estoppel by representation in conflict of Iaws 9 Focus of estoppel by representation on representee 10 Representor required in equity to make representation good 11 Rationale of estoppel by representation 12 Estoppel by representation part of the law of misrepresentation 13 Estoppel by representation resolves conflicting versions of fact 14 Election between estoppel and truth 15 Court has no discretion and estoppel cannot be bought out 15 Effect of estoppel by representation on title 17 Estoppel by another name 18 Introduction of unconscionability 19 No single overarching principle 20 Judicial activism: negligence and estoppel 21 Estoppel in public law 22 Estoppel in other Systems 23 ix

3 CHAPTER 2 REPRESENTATIONS Introduction 25 Statement of fact 25 Statement of intention 27 Statement of opinion or belief 28 Promise or Statement as to the future may imply representation of existing fact 29 Justification of distinction 31 Dextra Bank and mispredictions 31 Statement as to the future cannot support useful estoppel 32 Statement of law 33 Statement of mixed fact and law 34 Statement of law as opinion 36 Representation by exercise or assertion of rights 37 Waiver of contractual term 38 Waiver based on estoppel 40 Waiver of contractual notice 40 Acceptance of invalid notice 42 Anticipatory breach 43 CHAPTER 3 COMMUNICATION Introduction 45 Communication essential 45 Communication by word 46 Communication by physical objects or structures 47 Communication by conduct 47 Communication by silence 49 Implied communication in direct dealings 50 Estoppel by negligence in breach of duty to speak 51 Duty of owner to speak 53 Landlords have no general duty to speak 54 Duty to correct known mistake 54 Duty to speak where representation continues 55 Duty of customer to bank 55 No general duty to public to speak 56 Silence where no duty to speak 57 Failure to answer enquiry 59 Mistake in signing documents: non estfactum 60 Mere facilitation does not create duty 61 Bailment, custody, or access do not create duty 62 Limited authority creates duty 63

4 CHAPTER 4 CONSTRUCTION OF REPRESENTATIONS Construction: law and fact 67 The representation must be unambiguous 68 Representation implied from silence 70 When ambiguity a badge of fraud 71 Complex or qualified representation 72 Representation partly express and partly implied 72 Oral representation 73 CHAPTER 5 CAUSATION: INDUCEMENT, CHANGE OF POSITION AND DETRIMENT Introduction 75 Intention of representor 75 Intention determined objectively 76 Estoppels that fail on intention grounds 77 Representee's belief must be reasonable 79 Reliance 80 Inducement 81 Materiality 82 Change of position 83 Change of position must be substantial 84 Inaction as change of position 85 Relevant detriment 86 Detriment must be material 86 Onus of proof 87 Proof of inducement 87 Receipts do not normally support estoppel 88 Receipts supporting estoppels 88 Bills of lading supporting estoppels 90 Invoices supporting estoppels 91 Delivery orders 92 Bank Statements 92 Money paid by mistake: estoppel and change of position Avon CC Limits on defence of estoppel 94 Defence of change of position 94 Estoppel available pro tanto in mistaken payment cases 96 Miscellaneous changes of position 97 CHAPTER 6 PARTIES TO AN ESTOPPEL The representee 99 Representations to the public 100 Privies of representee ' 0 * Indorsee of bill of lading not bound by estoppel of shipper 102 xi

5 The representor 102 The Crown as representor 103 Vicarious liability 103 Privies of representor 104 Persons acting in more than one capacity 105 Minors 106 Death or unsoundness of mind 106 CHAPTER 7 ESTOPPEL BY DEED History 109 Estoppel by deed 109 Extent of estoppel 110 Feeding the estoppel 111 Estoppel against disputing validity of grant 111 Limits on such estoppel 112 Grantor not estopped on other questions 113 Deedpoll 113 CHAPTER 8 ESTOPPEL BY CONVENTION Introduction 115 Development of estoppel by Convention 117 Contractual Convention 118 Texas Bank 118 Later developments 120 Johnson v Gore Wood & Co 121 Detriment in estoppel by Convention 122 Legal limits of estoppel by Convention 122 Convention depends on communication 124 Factual limits 124 Assumption of fact or law 125 Origin of mistake irrelevant 127 Scope of estoppel 127 Termination of Convention 128 Illegality 128 Texas Bank and the irrelevance of unconscionability 129 Texas Bank in the Court of Appeal 130 Subsequent developments with unconscionability 130 No decision that unconscionability essential 131 Convention in statutory instrument 132 File wrapper estoppel in patent law 132 xn

6 CHAPTER 9 ESTOPPELS IN RELATIONSHIPS I. PRINCIPAL AND AGENT 135 Introduction 135 Holding out as agent 135 Holding out by conduct 136 Ostensible authority 136 Holding out by agent 138 Holding out as principal 138 Partnership 138 Continuing representations 139 II. MlSCELLANEOUS 139 III. LANDLORD AND TENANT 139 Introduction 139 Estoppel by payment of rent 140 Attornment 140 Acts of landlord 141 Parties entitled to and bound by the estoppel 141 Limits of estoppel 142 Eviction by title paramount 143 Feeding the estoppel 143 The rule in equity 144 Other applications of feeding the estoppel 145 The mortgage cases 145 Surrender by Operation of law 146 Change of landlord or tenant 148 IV. BAILOR AND BAILEE 148 Estoppels between bailor and bailee 148 Goods in bulk 149 Säle ofgoodsact Limits of the estoppel 150 V. LICENSEES OF INTELLECTUAL PROPERTY 151 Estoppels between licensor and licensee 151 Assignment 151 Exclusive licence 151 Limits of the estoppel 152 VI. TRUSTS 152 Possession under trust 152 VII. BANK AND CUSTOMER 153 Customer not estopped by bank Statements 153 CHAPTER 10 ESTOPPELS IN TRANSACTIONS I. CORPORATE TRANSACTIONS 155 Share certificates etc 155 Position of original allottee 156 CompaniesActl985 I 56 xiii

7 Change of position 156 Certification of transfer 157 Transfers of shares 157 Representations as to the validity of Company securities 158 II. OTHER ESTOPPELS 158 III. INSURANCE 159 Marine: constructive total loss 159 Marine: valued policy 159 Marine: other estoppels 160 Other insurance 160 IV. INSOLVENCY 161 CHAPTER 11 PROPRIETARY ESTOPPEL Introduction 163 Estoppel by standing by 163 Estoppel by encouragement 164 Proprietary estoppels are equitable causes of action 165 Estoppels by standing by 166 Estoppel by standing by between landlord and tenant 167 Estoppel by standing by compared with estoppel by representation 168 Estoppel by standing by based on equitable fraud 169 Basis of estoppel by encouragement 169 Estoppel by encouragement not based on implied contract 170 Taylors Fashions 171 Two kinds of acquiescence 173 Estoppels by encouragement in domestic or personal relationships 174 Gran t v Edwards 175 ReBasham 175 Lloyds Bank v Rossett 176 The 1989 Act 176 Need for broad approach 177 Hong Kong Land: negotiations subject to contract 178 Waltons Stores 180 Waltons Stores: estoppel by encouragement and the equities of the owners 181 Gillett v Holt: testamentary promises enforceable as estoppels by encouragement 183 Limits of estoppel by encouragement 183 Scope of relief 184 Availability of personal remedy 188 Effect on successors in title 188 The encouragement principle applies to other property 189 Conclusion jg9 xiv

8 CHAPTER 12 QUASI-ESTOPPEL AND EQUITABLE DEFENCES Consent to breach of trust 191 Defence of consent of general application 191 Evans v Benyon 193 Spellson v George 194 Trustee not entitled to put beneficiary to election 194 Acquiescence as equitable defence 195 CHAPTER 13 PROMISSORY ESTOPPEL Introduction 197 Hughes 198 Birmingham Land 199 Promissory estoppel not inconsistent with Jorden v Money 199 Early developments 200 Promissory estoppel an equitable cause of action 201 Promissory estoppel defensive 203 The nature of the promise 203 Knowledge of rights 205 Estoppel not restricted to contractual rights 206 Rights need not pre-exist 207 Intention to affect legal relations 207 Change of position and detriment 208 Causation 209 He who seeks equity must do equity 211 Finality of promissory estoppel 211 Confusion with estoppel by encouragement 212 Promissory estoppels and the direct enforcement of gratuitous promises 214 Can promissory estoppel answer a legal defence? 215 Critique of promissory estoppel as answer to defence 218 Promissory estoppel cannot create or revive another cause of action 219 Waltons Stores 220 Waltons Stores: promissory estoppel overextended 224 Foran v Wight 225 Promissory estoppel not extended 225 Effect on successors 226 CHAPTER 14 ELECTION Introduction 229 Election between inconsistent rights 229 Equitable election 231 Confusion between different types of election 232 Waiver involves election 232 xv

9 Election does not depend on estoppel 233 Election final 234 Knowledge of the facts 234 Extent of knowledge (election to affirm existing rights) 235 Extent of knowledge (election to create new rights) 236 Multiple grounds for election 236 Elector's knowledge may make conduct unequivocal 237 Imputed election: Peyman v Lanjani 237 Imputed election: onus of proof 238 Kendali v Hamilton and Scarf v Jardine (the conflict) 238 Kendall v Hamilton and Scarf v Jardine (the reconciliation) 240 Peyman v Lanjani 241 Young v Bristol Aeroplane Co Ltd 242 Other line of authority 242 Australian authority 242 Imputed election does not require knowledge of the power 244 Voidable transactions 244 Forfeiture of leases 245 Anticipatory breach 246 Other examples 248 Communication 249 Communication: election to create new rights 249 Communication: election to affirm existing rights 251 Delay 252 Alternative rights against different persons 254 Choice where rights not inconsistent 255 Election between remedies 255 Election in procedure 257 CHAPTER 15 ESTOPPELS AND ELECTION IN PROCEEDINGS Introduction 259 Legal proceedings as election between inconsistent rights 259 Election where claimant has alternative and inconsistent rights against different defendants 260 Election at trial subject to appeal 260 Service 261 Arbitration 262 Scott v Avery clause 263 Judge as arbitrator 263 Judge-Arbitrator decisions depend on estoppel 264 Conduct of arbitrations 264 Jurisdiction 265 Estoppels, time bars and other statutory defences 266 Other cases 267 Ocean carrier cases 268 Estoppel against other defences 270 Representations in proceedings 271 xvi

10 Pleadings 271 Amendment of pleadings 272 Amendments barred by prejudice 273 Elections during proceedings 274 Verwayen 275 Interlocutory proceedings 278 Kammins 278 Estoppels, elections and judicial discretions 279 Waiver of legal professional privilege 280 Trial 282 Litigant bound by conduct at trial 283 Relief governed by pleadings 284 Exceptions 284 Disqualification of tribunal 285 Appeal 285 Substantive estoppels and elections 286 CHAPTER 16 AFFIRMATIVE ANSWERS Introduction 289 Representee's knowledge of truth 289 Proof of knowledge 290 Knowledge of agent 290 Wilful blindness 291 Outsiders dealing with companies 291 Withdrawal of representation 292 Compulsion 292 Fraud, misrepresentation or non-disclosure of representee 293 Reasonable reliance 294 Cross estoppels, election and contract 294 Breach of duty 295 Public policy (Statute and general law) 295 Public policy (private law) 296 Estoppel where contracting out permitted 298 No estoppel as tojurisdiction 299 Nullity of marriage 0 Bankruptcy Bills of sale 301 Public policy (public law) 301 CHAPTER 17 PRACTICE AND PROCEDURE The Civil Procedure Rules Pleading generally 3^5 Pleading estoppel by representation or Convention 305 Pleading resjudicata under the former procedures 306 Pleading estoppel by deed 3^6 305 xvii

11 Pleading estoppel by representation under the former procedure 307 Position under CPR 308 Pleading promissory or proprietary estoppel 308 Amendment 308 Raising estoppel on appeal 309 Index 311 XVlll

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