Greatest gift that you can give to others is the gift of unconditional love and acceptance [i]
Legal principles in relation to equitable estoppel are relatively settled and are summarised in the following passage of Brennan J’s judgment in Waltons Stores[ii]:
“…[T]o 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.”
The above principles apply equally to proprietary estoppel (a form of equitable estoppel) which deals with expectations of legal relationship in relation to real property (or real estate).
Equitable estoppel, where successfully made, generally results in the law holding a promisor (the person making the promise) to his promise so as to prevent detriment to the person relying on the promise. However, the conduct is not limited to express promises and may also apply where a person remains silent with knowledge of the other person’s erroneous understanding or assumption of the state of affairs.
The High Court recently considered proprietary estoppel in relation to promises made by a lawyer in the course of his extra marital liaison. Aside from the curious facts, the High Court in its judgment attempted to clarify the position in relation to the onus of proving detrimental reliance and provides some guidance in determining the appropriate measure of damages of equitable compensation where it is not possible to transfer the property.
Sidhu v Van Dyke[iii]
In 1996, Mr Prithvi Pal Singh Sidhu (a lawyer) and his wife bought Burra Station (“the Station”), a rural property near Queanbeyan as joint tenants. Mr and Mrs Sidhu lived in one of two houses on the Station with their son. Ms Van Dyke lived in the second house (“Oaks Property”) on the Station with her husband with their child. The two families were not strangers, Mrs Sidhu was the sister of Mr Van Dyke.
By 1997, a romantic and sexual relationship commenced between Ms Van Dyke and Mr Sidhu.
In January 1998, Mr Sidhu said to Ms Van Dyke:
“I love you… I want you to have a home here with me. I am planning to subdivide Burra Station. As soon as this is done, I will make sure the Oaks is put into your name… Using my Indian family money to buy this place means I can make my own decisions as to what I do with it, and I want you to have it because I love you”.[iv]
It was not long before Mr Van Dyke learnt of his wife’s affair and by the middle of 1998, he separated from Mrs Van Dyke and later divorced her.
Mrs Van Dyke discussed property settlement concerning her husband with Mr Sidhu, who told her “you have the Oaks you do not need a settlement from [Mr Van Dyke]. You can do the divorce yourself, you don’t need a lawyer”[v]. Ms Van Dyke claimed that based on the assurance by Mr Sidhu, she did not pursue a property settlement.
Ms Van Dyke continued to reside in the Oaks Property following her divorce. While in the Oaks Property, she paid rent which was lower than the market rate, and carried out unpaid work in relation to improving and maintaining the property and the Station. Ms Van Dyke did not seek full-time employment during her stay at the Station.
From time to time, Ms Van Dyke sought and continued to receive re-assurances from Mr Sidhu that the Oaks Property would be gifted to her following the sub-division and consent from Mrs Sidhu.
In October 2005, the Local Council gave conditional approval to a subdivision of the Station. The condition was that a road be constructed to give access to the proposed lots. However, in February 2006, the Oaks Cottage burnt down. Ms Van Dyke and her child moved into a relocatable cottage. In May 2006, Mr Sidhu gave Ms Van Dyke a handwritten statement which asserted that Mrs Sidhu “agrees [that] when the house which burned in an accident is mid-February is rebuilt and as soon as it is possible to transfer the property on which the house is rebuilt, it will be done.”[vi]
Later in 2006, Mr and Mrs Sidhu refused to convey the Oaks Property to Ms Van Dyke. This led to Ms Van Dyke commencing proceedings in the Supreme Court of New South Wales.
First Instance (Ward J)
At first instance, the matter was heard by her Honour, Ward J in the Supreme Court of New South Wales. Her Honour’s findings are summarised as follows:
- promises were conditional on the subdivision being obtained[vii];
- Mrs Van Dyke’s decision not to seek a property settlement from her former husband was induced by Mr Sidhu’s promise. However, it was not “objectively reasonable” to rely on the promise as it was conditional on subdivision[viii]; and
- it was likely that Ms Van Dyke would have undertaken the unpaid work and attended to maintenance and improvement of the Oaks Property even if the promise had not been made[ix].
Her Honour was not satisfied that a claim in estoppel had been made out.
Court of Appeal (Barrett JA, Basten JA and Tobias AJA)
Ms Van Dyke appealed to the Court of Appeal.
The Court of Appeal found that Ward J erred in holding that that it was “objectively unreasonable” for Ms Van Dyke to rely on Mr Sidhu’s representations.[x]
Barrett JA (Basten JA and Tobias AJA agreeing) relied upon English decisions in support of the position that “in some circumstances the onus of proof in relation to the issue of detrimental reliance shifts from the plaintiff to the party said to be estopped.”[xi] His Honour concluded that the equivocal or inconclusive answers given by Ms Van Dyke in cross-examination were not sufficient to regard the presumption of reliance as displaced.
His Honour was satisfied that Ms Van Dyke had proved “material detriment” and was entitled to equitable relief. However, the Court was mindful of the adverse effect of an order requiring the transfer of Oaks Property to Ms Van Dyke, on Mrs Sidhu, being the co-owner. On this basis, his Honour ordered that Ms Van Dyke should instead be entitled to a sum equal to the value she would have attained if the promise had been fulfilled as at the date of the judgment.[xii] The matter was remitted back to the Supreme Court for determination of the quantum.
High Court (French CJ, Kiefel, Bell, and Keane JJ; Gaegler J (agreeing))
Mr Sidhu appealed to the High Court on two broad grounds, namely:
- the application of presumption of reliance by the Court of Appeal was contrary to the decision in Gould[xiii]; and
- the Court of Appeal erred in its assessment of equitable compensation. The assurances were conditional upon subdivision and consent from Mrs Sidhu. The Court of Appeal should have limited the relief granted by what was necessary to compensate the respondent for the loss she had suffered.
Onus of Proof – Detrimental Reliance
With regard to the first ground, the Court determined as follows:
- Australian authorities do not support the proposition that the onus in relation to detrimental reliance shifts onto the defendant[xiv];
- the approach by the English authorities as referred to by the Court of Appeal should not be applied in Australia[xv]; and
- the legal burden of proof borne by a plaintiff does not shift[xvi].
Therefore, Ms Van Dyke at all times bore the legal burden of proving that she had been induced to rely upon Mr Sidhu’s promises.
On review all the evidence, the Court concluded that Ms Van Dyke had made out a compelling case of detrimental reliance[xvii]. The Court reached its conclusion on the following grounds:
- Mr Sidhu’s promises were objectively likely to have a significant effect on the decision making of Ms Van Dyke[xviii].
- Ms Van Dyke placed good faith in the promises which played a part in her willingness to spend time and effort in maintaining and improving the Oaks Property. The belief of Ms Van Dyke as a contributing cause of her actions is “sufficient connection between the assumption and the position of detriment”. It was not necessary that the promise be the sole cause[xix].
- the fact that Ms Van Dyke continued to seek assurance and was being provided assurance by Mr Sidhu allows an inference to be made that the promises were material to Ms Van Dyke’s decision to remain living in, maintaining and improving the Oaks Property[xx].
- reliance by Mr Sidhu on the cross-examination of Ms Van Dyke in relation to her real inducement being something other than the promise by Mr Sidhu was considered not to be convincing. The Court was satisfied that the evidence was clear that the promises were vital in Ms Van Dyke’s understanding and concerns in relation to the Oaks Property[xxi].
The Court concluded that it would be unconscionable for Mr Sidhu to resile from his assurances.
Measure of Relief
The purpose of equitable estoppel is to protect a person relying on an assumption or promise from detriment or harm which flows from the promisor resiling from his/her promise. The relief may require positive steps by the promisor to perform the promise or expectation arising out of the promise.
The Court noted that in some circumstances, the value of the promise may not be the best measure of relief. Where the person relying on the promise was induced to make relatively small, easily quantifiable outlays on the faith of the assurances, then it may not be unconscionable for the Respondent to resile from his/her promise provided the person is reimbursed of the outlays[xxii].
However, as a general proposition, the Court noted:
“While it is true to say that “the court, as a court of conscience, goes no further than is necessary to prevent unconscionable conduct”, where the unconscionable conduct consists of resiling from a promise or assurance which has induced conduct to the other party’s detriment, the relief which is necessary in this sense is usually that which reflects the value of the promise.”[xxiii]
There were no adverse findings in relation to Mrs Sidhu.
The Court was satisfied, on the facts that the appropriate measure of relief should be a sum which reflects the value of the promise (which in this case effectively meant the value of the promised property). The representations were found to be categorically expressed leaving no room for doubt that Mr Sidhu would procure the subdivision of the property and his wife’s consent.[xxiv]
The High Court took this occasion to set out the following principles:
- in Australia, there is no presumption of detrimental reliance: the onus always remains on the plaintiff;
- in determining whether the promise or assumption induced the plaintiff, it is sufficient that the promise or assumption be a significant factor or contributing cause of the action undertaken by the plaintiff; and
- where performance of the promise is not appropriate, then unless reasons are provided otherwise, the Court will generally grant relief which reflects the value of the promise.
[i] Brian Tracy
[ii] Walton Stores (Interstate) Ltd v Maher (1998) 164 CLR 387
[iii]  HCA 19 (“Sidhu”)
[iv] Sidhu at 
[v] Sidhu at 
[vi] Sidhu at 
[vii] Sidhu at 
[viii] Sidhu at 
[ix] Sidhu at -
[x] Sidhu at 
[xi] Sidhu at 
[xii] Sidhu at -
[xiii] Gould v Vaggelas (1984) 157 CLR 215
[xiv] Sidhu at 
[xv] Sidhu at 
[xvi] Sidhu at 
[xvii] Sidhu at 
[xviii] Sidhu at  – 
[xix] Sidhu at  and 
[xx] Sidhu at 
[xxi] Sidhu at  – 
[xxii] Sidhu at 
[xxiii] Sidhu at 
[xxiv] Sidhu at