The doctrine of proprietary estoppel operates to disentitle an inducing party from departing from an assumption which she has caused another party to adopt. An equity arises where:
- A (the inducing party) plays a role in the adoption by B (the relying party) of an assumption as to the existing legal rights of B or as to the future conduct of A;
- B alters his position in reliance upon his assumption about his presently existing rights or in reliance upon his assumption in relation to his future acquisition of property rights;
- It was reasonable for B to adopt and act on the assumption in the way that he did, and A, with knowledge about B’s assumption, ought reasonably to have expected B to change his position in reliance upon that assumption;
- B has, or will, suffer an identifiable detriment if A departs from the induced assumption upon which B acted to alter his position; and
- it would be against the conscience of A for A, by her action or inaction, to depart from B’s assumption.
If these elements are established, equity intervenes to create an enforceable obligation. It compels A to do what is necessary to prevent B from suffering detriment as a result of the action B took in reliance upon his assumption. The enforceable equitable obligation vindicates B’s assumption and holds A responsible for the formation of B’s assumption. It is not necessary to show that B had an assumption that a pre-existing legal relationship or duty will exist. The relevant assumption in proprietary estoppel is that a proprietary interest will be granted by A.
Proprietary estoppel is an “offensive” (rather than a “defensive”) equity. It is a cause of action in its own right. Relief is not limited to removing or reversing the detriment suffered by B. It is also not limited to enforcing the minimum equity to do justice to B. The Court has to determine the form of relief based upon what is required for “conscientious conduct”. Equity could require A, the estopped party, to make good the assumption that was detrimentally relied upon.
The two branches of proprietary estoppel
The authoritative decisions in Australian equity law recognise two distinct branches of proprietary estoppel. In spite of commentary that argues the demarcation between the two branches no longer applies in Australia, the NSW Court of Appeal in Co Q v E has affirmed the following distinction.
- proprietary estoppel by encouragement. A makes sufficiently clear promises or assurances that induce an assumption in B that B has, or will receive, a proprietary interest. B then acts in reliance upon that assumption. A’s subjective state of mind is irrelevant if B acted reasonably in relying on assumption formed from the promises or assurances.
- proprietary estoppel by acquiescence. B improves land in the mistaken assumption that it is his own. A is aware of B’s mistaken assumption, but deliberately stands-by in silence and allows B to detrimentally rely upon his mistaken assumption without doing anything to undeceive B and to correct his mistaken assumption. Equity will apply a “profit-stripping” remedy to prevent A from obtaining a profit from B’s mistake in which A acquiesced.
The “inducement” and “assumption” elements that differentiate promised-based estoppel and acquiescence-based estoppel have caused controversy.
First, there is uncertainty about the substantive difference between a promise or assurance which induces an assumption in promised-based estoppel, and the acquiescence that induces an assumption in acquiescence-based estoppel.
The act of encouragement in promised-based estoppel—the promise or the assurance—need not be express, and may be wholly or partly implied from conduct or inferred from silence or inaction. Despite the absence of an explicit promise that a representee will receive an interest in land, the conduct of the party estopped can encourage an assumption in the representee’s mind. That conduct may include abstaining from acting. Whether conduct constitutes a promise or assurance that founds promised-based estoppel is to be judged objectively according to the impact that whatever is done may be expected to have on a reasonable relying party, with the known characteristics of the actual relying party.
Silence or inaction—wilful passivity—is said to found “inducement” in acquiescence-based estoppel. Here, the conduct of A which attracts equity’s intervention is her wilful passivity in light of B acting to his detriment on the basis of a mistaken belief. B acts not on any explicit promise by A, but instead on his mistaken belief which A abstained from setting right and left B to persevere in his error. It is said that, in acquiescence-based estoppel, A’s subjective state of mind is critical. If A had not promised anything to B, she would not have acted unconscionably unless she knew that B was mistaken as to his legal title and stood-by in silence while B acted to B’s detriment.
The facts of a case may involve “pure passivity”–where no promise or representations are ever made and the inducement solely inheres in A dishonestly standing-by in silence after becoming aware of B’s unilateral (self-induced) mistake as to his rights. However, the character of a “promise or assurance” that founds inducement in a claim of promise-based estoppel—if that “promise or assurance” is implied or inferred—may well overlap with conduct that constitutes a wilful passivity necessary in acquiescence-based estoppel. The distinction between an implied promise and wilful passivity appears to be of no moment where a relevant promise can arise from (a) ambiguous acts of encouragement that are not clear promises plus (b) acquiescence over a period of time.
After an extensive consideration of authorities, Ward CJ in Eq observed in obiter that Australian law may have moved beyond a strict demarcation between the two branches of proprietary estoppel. Her Honour agreed with the dictum of Oliver J in Taylors Fashion that acquiescence or encouragement may take a variety of forms: pure acquiescence or standing-by in silence; and stimulating, or not objecting to, some change of legal position on the faith of a unilateral assumption as to the future conduct of one party. Her Honour’s agreement with Oliver J’s dictum is of precedential value. Applying a recent formulation, the inducement element in a proprietary estoppel claim may be satisfied where any of the following circumstances are present:
- a unilateral (self-induced) mistake as to present rights if the other party dishonestly stands by;
- a unilateral (self-induced) expectation as to future conduct if the other party knows of the expectation and stands by;
- a promise as to future conduct; and
- acts of encouragement that are not clear promises as to future conduct.
Second, the ambit of a claim in proprietary estoppel by acquiescence is traditionally limited to mistakes as to present entitlement to property. Equity’s reach in acquiescence-based estoppel does not extend to “mispredictions of future events” (mistaken beliefs about the future acquisition of property rights). The language of “supposing a property to be his own”; “as to his legal rights”; “the mistaken assumption that it is his own” has been invoked to suggest that the assumption in acquiescence-based estoppel must be a mistake of present fact, as distinct from a belief as to the future or an incorrect prediction.
In consequence, proprietary estoppel by acquiescence is a narrower doctrine than both proprietary estoppel by encouragement and promissory estoppel. Both of those doctrines can operate in relation to mistaken assumptions about future ownership of property as well as mistakes as to present rights.
It was ultimately not necessary for Ward CJ in Eq or the NSW Court of Appeal to decide whether acquiescence-based proprietary estoppel is confined to mistaken assumptions concerning presently existing rights as to property, as opposed to mispredictions about future acquisition of property rights. However, Ward CJ in Eq made the following observations:
- the existence of the limitation on estoppel by acquiescence has more often been assumed than decided;
- formulations of proprietary estoppel by acquiescence in case law and Meagher, Gummow and Lehane state that the estoppel will operate upon assumptions as to future conduct, without a stated limitation for the acquiescence line of authorities. The distinction between the two forms is on the absence of a representation or promise, rather than the temporal content of B’s assumption;
- the existence of estoppel by acquiescence confirms that equity may grant relief notwithstanding the absence of a representation or promise, where A seeks by her action or inaction to depart from a belief concerning property rights adopted by B, on which B has detrimentally relied to the knowledge of A;
- a core case of estoppel by acquiescence may be one of unilateral mistake as to present legal entitlement, but equity’s reach is not necessarily so confined. If the sole reason for the temporal limitation is the absence of an explicit promise, as a matter of principle the dictum of Oliver J in Taylors Fashions about the overlap between acquiescence and promises (discussed above in this article) ought to be noted; and
- strong criticisms exist opposing the extension of the acquiescence doctrine to mispredictions about the future acquisition of property rights.
The criticisms of extending the acquiescence doctrine are found in Professor McFarlane’ treatise on the Law of Proprietary Estoppel. McFarlane argues that acquiescence cannot generate liability in relation to future conduct, because: (1) only promises can ground an estoppel based upon an expectation that B will acquire property rights in the future; (2) the limitation was crucial to the decision in Ramsden v Dyson, from which the doctrine of proprietary estoppel by acquiescence derived; and (3) it would be contrary to principle to permit acquiescence (cf an explicit promise) to ground a belief in respect of future conduct.
In contrast, Barkehall-Thomas argues:
- though Australian law on proprietary estoppel developed from old English decisions, the doctrine in Australia has evolved by reason of Waltons Stores. In Sidhu and Giumelli the High Court did not depart from language of “assumption” used by Brennan J in Waltons Stores. The foundational principle in Australian estoppel is whether equity will permit an unconscionable departure by A from an assumption of fact or law, present or future, which A has caused B to adopt;
- there is no need for a distinction between acquiescence-based proprietary estoppel and promise-based proprietary estoppel to be retained. A unilateral mistake by B as to either his present rights or his future acquisition of property rights can support a proprietary estoppel claim, if he relied upon an assumption which was induced by A, and A knew of his assumption and of his reliance.
Modern Australian authority in proprietary estoppel claims has emphasised B’s prima facie entitlement to enforcement of his expectation. Placing a temporal limitation on an assumption may run contrary to equity’s role in attributing responsibility to A for creating (with knowledge) the risk that B acts to his detriment. Equity cleanses the conscience of A by requiring A to answer for the detriment. The entitlement to enforcement of an assumption militates in favour of equity enforcing an assumption as to the future conduct of A, even if assumption was created by acquiescence and not an express promise.
The substantive distinction between the two branches of proprietary estoppel has long been noted and assumed, but not always elucidated. The distinction between an imprecise estoppel by encouragement and an estoppel by acquiescence is not often clear. The subtleties of the two branches reveals that any difference between the two may be one of semantics, and that Australian equity law may no longer adhere to a strong distinction. Nonetheless, the recitation of principle by the NSW Court of Appeal in Q v E Co (although the Court was not called upon to apply the distinction on appeal), and by Ward CJ in Eq in Bassett v Cameron suggest that the distinction, and its accompanying doctrinal uncertainty, will persist until a unitary concept of proprietary estoppel is adopted.
This case note is authored by Ian Liu, Lawyer of KCL Law and serves as a guide only and is not intended to constitute, and is not a substitute for obtaining, legal advice.
 Sidhu v Van Dyke (2014) 251 CLR 505,  (French CJ, Kiefel, Bell and Keane JJ); Walton Stores v Maher (1988) 164 CLR 387, 428–429 (Brennan J); Andrew Robertson, The Form and Substance of Equitable Estoppel in Andrew Robertson and James Goudkamp (eds), Form and Substance in the Law of Obligations (Hart Publishing, 2019).
 Doueihi v Construction Technologies Australia Pty Ltd (2016) 92 NSWLR 247, – (Gleeson JA, with whom Beazley P and Leeming JA agreed).
 Pascoe v Turner  1 WLR 431, 436; The Honourable Justice Julie Ward, Fragmenting Equities, Keynote Plenary for the Law Society of Western Australia, at .
 Donis v Donis (2007) 19 VR 577, 582 (Nettle JA as his Honour then was).
 Susan Barkehall Thomas, Proprietary estoppel by acquiescence—Does it survive in Australia, Australian Property Law Journal 29 (2021) 1.
  NSWCA 220 – (Meagher, Leeming and Payne JJA); Carter v Brine  SASC 204 at – (Blue J).
 The promise or assurance must be unambiguous and must appear to have been intended to be taken seriously. It must have been a promise which one might reasonably expect to be relied upon by the person to whom it was made. However, the promise or assurance need not be at the level of certainty or specificity that would be required to establish a contractual obligation: DPJM Pty Ltd v Blackthorn Resources Ltd  NSWCA 348 at  (Meagher JA).
 Promised-based proprietary estoppel is said to descend from the Dillwyn v Llewelyn line of authorities.
 Acquiescence-based proprietary estoppel is said to descend from the Ramsden v Dyson line of authorities.
 E v Co Q  NSWSC 442 at – (Ward CJ); Priestley v Priestley  NSWCA 155 at . Ward CJ in E v Co Q recognised the desirability of distinguishing between a “representation (of an existing or past fact)” and “a voluntary promise (about the speaker’s future conduct)”.
  NSWCA 220 .
 E v Co Q  NSWSC 442 at –, in particular at  (Ward CJ in Eq).
 Susan Barkehall Thomas, Proprietary estoppel by acquiescence—Does it survive in Australia, Australian Property Law Journal 29 (2021) 1, at 23.
 This orthodox position appears to have been affirmed in Co Q v E  NSWCA 220 at –.
 E v Co Q  NSWSC 442 at  (Ward CJ in Eq); Bassett v Cameron  NSWSC 207 at  (Ward CJ in Eq).
 Co Q v E  NSWCA 220 at  (Meagher JA).
 I am indebted to the concise explanation by Dr Barkehall Thomas in Proprietary estoppel by acquiescence—Does it survive in Australia, Australian Property Law Journal 29 (2021) 1, at 12. E v Co Q  NSWSC 442 at – (Ward CJ in Eq).
 Susan Barkehall Thomas, Proprietary estoppel by acquiescence—Does it survive in Australia, Australian Property Law Journal 29 (2021) 1, at 13.
 Susan Barkehall Thomas, Proprietary estoppel by acquiescence—Does it survive in Australia, Australian Property Law Journal 29 (2021) 1, at 14–15, 24
 Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1, at 67–8 (Nettle J).
 Donis v Donis (2007) 19 VR 577, 582 (Nettle JA as his Honour then was); The Honourable Justice Julie Ward, Fragmenting Equities, Keynote Plenary for the Law Society of Western Australia, at .
 Susan Barkehall Thomas, Proprietary estoppel by acquiescence—Does it survive in Australia, Australian Property Law Journal 29 (2021) 1, at 9.
 Cf Priestley v Priestley  NSWCA 155 at  (Macfarlan JA).
  NSWSC 207 at  (Ward CJ in Eq).