The High Court, in the decision of Kramer v Stone [2024] HCA 48, considered the elements necessary to establish equitable estoppel arising by encouragement from a promise. In particular, whether liability arising from the estoppel required encouragement of conduct subsequent to the promise or actual knowledge of the acts of reliance on the promise. The High Court considered whether the estoppel would afford equitable relief in circumstances where a person is induced to act to their detriment by representations and an assumption as to future ownership of property.

The issues on appeal did not require consideration of the differences between the categories of estoppel, although the High Court distinguished between circumstances that gave rise to estoppel by encouragement from a promise and estoppel by acquiescence.

Background

Dame Leonie Kramer promised a share farmer, David Stone (who shared some of the costs and income derived from the farm), that he would inherit the farm on her death. In reliance on that promise, Stone lived and worked on the farm for an additional 23 years. In the absence of such promise, the Court considered that Stone would have terminated the share farming agreement and pursued employment that returned a higher level of income and a lifestyle free from the hardships endured on the farm. On her passing Dame Leonie did not leave Stone the farm in her will and the dispute with the executors arose from his claim to a proprietary interest.

At first instance the New South Wales Supreme Court held that the circumstances gave rise to an estoppel against the estate, thereby requiring title to the farm to be held on trust for Stone. The Court of Appeal dismissed the executors’ appeal. The executors subsequently appealed to the High Court asserting that the Court of Appeal erred in two respects in failing to recognise that:

• the equity in such cases arises after making the voluntary promise, meaning that the promisor must subsequently engage in conduct that further encourages the promisee to rely on the promise; and
• constructive knowledge of the detrimental reliance is insufficient to establish unconscionability, at least where knowledge is the only matter which would support a finding of unconscionability.

High Court Decision

In dismissing the appeal, the High Court reaffirmed the elements constituting equitable estoppel, particularly in the context of an encouragement from a promise, having regard to established authorities such as Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 namely:

• there must be a “clear and unequivocal” promise made by the promisor to the promisee;
• a reasonable person in the promisor’s position must have expected or intended or the promisor did expect or intend that the promisee would rely on such promise through an act, omission or course of conduct (i.e. the encouragement for the promisee to act);
• the promisee relied upon the promise through an act or omission in the general manner that would have been expected, which it would not have done in the absence of the promise; and
• consequently, the promisee will suffer detriment in the event the promise is not fulfilled.

The High Court found that to be entitled to equitable relief for estoppel by encouragement from a promise:

• there is no additional requirement for the promisor to have further encouraged the promisee’s reliance subsequent to their promise; and
• it is not necessary for the promisor to have actual knowledge of the promisee’s acts of reliance on the promise. Such a requirement “erroneously conflates” the principles of estoppel by encouragement from a promise with the principles concerning estoppel by acquiescence, the latter extending to a party’s failure to act where such action could spare the other party from detriment.

In light of the above, the majority of the High Court considered that the circumstances satisfied the elements of equitable estoppel as:

• Dame Leonie made a “clear promise” that Stone would inherit the farm upon her death;
• in making such promise, a reasonable person in Dame Leonie’s position would have expected, which she did expect, that Stone would rely upon the promise by not pursuing any other employment;
• Stone continued to work on the farm for 23 years in reliance on the promise; and
• Stone suffered detriment through reliance on the promise as he had not sought more remunerative employment, failed to develop new employment skills and restricted his social and domestic life.

The judgment is available here.