Tort - Promissory Estoppel

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Promissory Estoppel - Introduction

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The general rule is that a contract not made under seal generally requires consideration. Nonetheless it is possible to prevent someone from going back on certain types of promise, even if there is insufficient consideration. In cases where the common law provides no remedy, equity will sometimes step in and make good the wrong suffered.

For example, where there is no consideration present to make a contract legally enforceable, then the equitable remedy of estoppel may be used by the courts to rectify the wrong that has occurred. In particular, promissory estoppel:

... is that where a promise is made in circumstances where the person who makes it knows it is going to be relied on by the promisee and it is in fact relied on by the promisee, then the promisor will not be permitted to resile from his promise.

Estoppel is an exclusionary rule of evidence. McDennott highlights three fund amental differences between estoppel and a contract that requires consideration in order to be deemed enforceable

(i) In cases of estoppel there is no legally binding promise.
(ii) If there is such a promise, then the plaintiff must resort to the law of contract in order to enforce it, it being the function of equity to supplement the law, not replace it.
(iii) What attracts the principle of estoppel is not the promise itself but the expectation that it creates.

Estoppel has no application where the transaction remains wholly executory on the plaintiff's part. It is not the existence of an unperformed promise that invites the intervention of equity but the conduct of the plaintiff in acting upon the expectation to which the promise gives.

If a plaintiff successfully enforces a promise on the basis of estoppel, it will not be as wholly enforceable as it would have been if it had been a promise supported by consideration. It is also noteworthy that estoppel generally suspends, but does not extinguish, rights.

Promissory estoppel may only be used as a defence and not as a cause of action - hence the oft-used expression that it may be used as 'a shield and not a sword'.

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Jorden v Money (1854) 5 HLC 185

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Lord Cranworth provided the following definition of promissory
estoppel:

.. . if a person makes any false representation to another, and that other acts upon that false representation. the person who has made it shall not afterwards be allowed to set up that which he said was false.

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Hughes v Metropolitan Railway (1877) 2 App. Cas.439

*** Forbearance to sue

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The plaintiff was the landlord of a railway building. He served notice on the defendants, the tenants, to repair the building within six months.

The company responded by offering to sell its lease interest in the building back to the plaintiff. During these negotiations, it was implied that the plaintiff would not enforce the request for repairs. However, when these negotiations broke down, Hughes sued for a transfer of the property to himself as the company had not complied with its contractual obligation to repair the property within the six-month period. The defendants claimed that the only reason they did not repair the property within the time-frame given was because the plaintiff had promised that he would not sue. The plaintiff claimed that this alleged implied promise was unenforceable as there was
a lack of consideration.

The court disagreed with the plaintiff on this occasion and refused to allow him to use the relevant contract law principles to benefit in this way. The court adopted the equitable remedy of estoppel to stop the plaintiff from going back on his promise, despite the lack of consideration.

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Central London Property Limited v High Trees [1947] KB 130

*****

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In this case the defendant had leased a property from the plaintiffs in London in 1939.

The defendant subsequently sublet the property totenants. Since this occurred around the time of the outbreak of the Second World War, many
tenants failed to rent property in London and the property remained largely vacant.

The defendant approached the plaintiff and asked if he would accept half of the rent payable. The plaintiff agreed to this, given the circumstances. However, the defendant had not provided any consideration for this new agreement and thus, based on precedent, the defendant would have had to pay the entire amount of rent payable following the war.

When the war ended the property was fully occupied once again. The plaintiff then sought to reinstate the original rent with effect from the last two quarters of 1945.

The Court found that since the cause of the
reduced rent (the Second World War) had ended, the plaintiffs were entitled to request full
rent again.

While the plaintiffs had not claimed the deficit of rent that had not been paid for
the duration of the war, Lord Denning M.R. stated that even if the plaintiff had sued for this,
he would not have been successful. Despite the fact that there was no consideration for this
new agreement, the plaintiff was estopped from going back on his word. He had represented
that he would accept half rent and the defendant acted on that statement.

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Restrictions on the Application of Promissory Estoppel

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As an equitable remedy, estoppel is only applied at the discretion of the court and not as of right. The courts are wary of upholding estoppel claims on the basis that to do so too readily could completely . undermine the common law doctrine of consideration. Consequently, the courts place restrictions on the application of the doctrine:

1. There must exist a pre-existing legal relationship between the parties

2. There must be an unambiguous representation

3. There must he reliance by the representee

4. Shield not a sword

5. Suspends rights hut does not extinguish them

6. An unconscionability must exist

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There must exist a pre-existing legal relationship between the parties

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It would seem that the estoppel can only arise where there is a pre-existing legal relationship between the parties - Combe v Combe [1951] 2 KB 215;

This approach was affirmed by the Insh High Court in Chartered Trust (Ireland) v Healy (unreported, High Court, December 10, 1985).

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Combe v Combe [1951] 2 KB 215

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The defendant had promised his ex-wife, the plaintiff, £100 per annum in financial support. He failed to honour that promise.

The Wife failed to provide any consideration for this promise but nonetheless relied on the High Trees case as an authority for the husband being stopped from going back on his promise.

However, the Court of Appeal denied her claim, holding that promissory estoppel operated only as a defence and not as a cause of action. Moreover, the Court asserted that there must be a pre-existing legal relationship between the parties.

This approach was affirmed by the Insh High Court in Chartered Trust (Ireland) v Healy (unreported, High Court, December 10, 1985).

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Chartered Trust (Ireland) v Healy (unreported, High Court, December 10, 1985).

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Adopted the approach of the Court of Appeal in Combe v Combe [1951] 2 KB 215 - There must exist a pre-existing legal relationship between the parties

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Folens v Minister for Education [1984] ILRM 265

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There must be an unambiguous representation The defendant must have relied on ".. . a definite commitment of representation" (per
McWilliam J) It must be a positive representation e.g. not a statement of intent.

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Daly v Minister for Marine [2001] 3 IR 513

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It is not the representation but the reliance on the representation that gives rise to estoppel. Yhe plaintiff received a letter from the Department stating wrongly that he was eligible under a fisheries scheme. While such a representation had been made there was no evidence of reliance estoppel could not be raised.

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Ajayi v Briscoe [1964] 1 WLR 1326

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Whether the reliance must be detrimental has been an issue of some debate. Here, an estoppel was held to exist where the party, relying on a representation "altered his position."



While other decisions such as Brikom Investments v Carr [1979] QB 467 and Walton Stores v Maher (1988) CLR 387 have supported the "no detriment" approach it.

Because the estoppel merely suspends rights, the person making the representation can withdraw that representation by serving the other party with sufficient notice

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There must he reliance by the representee

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It is not the representation but the reliance on the representation that gives rise to estoppel. Daly v Minister for the Marine [2001].

Whether the reliance must be detrimental has been an issue of some debate. Here, an estoppel was held to exist where the party, relying on a representation "altered his position." Ajayi v Briscoe [1964]

While other decisions such as Brikom Investments v Carr [1979] QB 467 and Walton Stores v Maher (1988) CLR 387 have supported the "no detriment" approach it would seem that Irish cases like North Down Hotels v Province Wide Filling Stations [1993] NI 261 and Daly (above) favour the requirement of detriment.

McDermott has stated that the difference between reliance and detriment is essentially a matter of semantics as the promisor must also act inequitably.

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Association of GPs v Minister
for Health 1995 2 ILRM 481

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O'Hanlon J in a stated that the representor "can resile from his promise on giving reasonable notice allowing the promisee a reasonable opportunity of resuming his position".

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Tool Metal Manufacturing v Tungsten Electric Co Ltd. [1955]
WLR 761

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The respondents were contractually bound to pay royalties to the appellants. They were also entitled to compensation if they manufactured more material than was allowed under the agreement. The appellants agreed to suspend their right to compensation. They
then revoked this agreement. It was held that they were stopped from doing so unless they gave adequate notice to the respondent.

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An unconscionability must exist

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An estoppel will only be upheld where it would be inequitable or unconscionable to allow the maker of the promise resile from that promise.

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D & C Builders v Rees [1965] 3 AllER 837

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The plaintiff was threatened that if he did not accept the payment of a lesser amount in full satisfaction of a debt, the defendant would pay nothing. The plaintiff was not stopped from bringing a claim for the outstanding balance as the defendant's threat was made in knowledge of the plaintiff's dire financial position and therefore were acting inequitably.

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Zurich Bank v McConnon [2011] IEHC 75

****

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The defendant had been loaned substantial sums of money by the plaintiff bank. Due to harsh economic times the defendant was struggling to make the repayments. Following a meeting with the bank regarding the matter, the plaintiff issued the defendant with a letter whereby it agreed to a "standstill"
period whereby the defendant could inter alia produce a business plan regarding repayment of the loan. The plaintiff also agreed that following production of such a business plan it would devise a revised payment schedule on the loan. The bank undertook not to take any action
against the defendant during this standstill period.

The standstill period ended and was extended and in November 2010 the bank sought repayment of the loan. In response the defendant raised the defence of estoppel on the basis that the defendant had agreed not to
pursue the debt and devise a repayment plan. However, the court did not accept that the defence could be raised in these circumstances:

This was a standstill agreement, no more and no less. A standstill was effective until 30th June, 2010. A report with suggestions as to how matters might be progressed was put forward by the defendant but was rejected by the bank by letter dated 20th July, 2010. The bank was not obliged to offer a standstill, but did so. Having done so, the bank was obliged to honour its promise and did so. I can see no basis for suggesting that there was, even arguably, any greater obligation on the part of the bank. It seems to me that the defendant's arguments fundamentally misunderstand the nature of the relationship between the bank and the defendant. The relationship was not that of partners with a common interest, sharing a risk, rather, the relationship was that of lender and borrower.

At the heart of the doctrine of estoppel is the requirement that there would be an element of unfairness or unconsionability in permitting the promissor to welch on what he has offered. Leaving aside that what the bank offered was limited to offering a standstill period, I can find nothing unfair or inequitable or unconscionable in a party that has lent money seeking to be repaid. I can see no arguable basis for suggesting that an equitable remedy would involve extinguishing the right of a bank that has lent a very large sum of money for a commercial development to be repaid.

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Kenny v Kelly [1988] IR 457

**

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A student who had successfully obtained a
place in UCD wished to defer this place for one academic year.

The student had been told that the University would grant such a deferral and on this basis he paid the fees and took the
deferral.

Barron J., in holding that that the University could not subsequently go back on its
word, asserted that " ... a promise to delay the enforcement of legal rights is of the essence of the doctrine of promissory estoppel".

The University was thus estopped from denying the
student entry.

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Revenue Commissioners v Moroney [1972] IR 372

**

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A father made an agreement with his sons to transfer his licensed premises to them in order to avoid estate duty. Despite the fact that the deed of transfer indicated that the sons would purchase the property for
£16,000, it was never intended that they would in fact pay this money. The father had represented to his sons that he would never seek payment, and it was on this basis that they signed the deed. When the father died, the Revenue Commissioners tried to claim for the estate duty payable on the £16,000. In order to succeed, the Revenue Commissioners would have to prove that the father could have successfully sued for his sons immediately after the deed was executed for the money.

Kenny J. in the High Court was of the opinion that since the father had stated that his sons would not be liable to pay and the sons had acted on the basis of that representation, this meant that the Revenue Commissioners could not pursue the debt.

While there was no consideration provided by the sons for the agreement they made with their father, the Revenue Commissioners was estopped from suing them.

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A Ward of Court

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Two residents of a psychiatric institution began a relationship.

One promised the other that if she went to live with him she could be sure of a home for the rest of her life she acted to her detriment in reliance on this as she left a permanent home to go and live with the the ward.

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Proprietary Estoppel

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Proprietary estoppel concerns promises made specifically in relation to property. In a situation where a person acts to his/her detriment based on a representation that he/she will acquire an interest in property, the person may be able to acquire that interest m the property by way of a proprietary estoppel. It must be shown that the representation would have influenced the reasonable man. - Cullen v Cullen [1962] IR 268 More recently, Smith v Halpin [1997] 3 ILRM 38

Delaney has explained that:

The basis of the doctrine of proprietary estoppel is to prevent a person from insisting on his strict legal rights where to do so would be inequitable having regard to the dealings which have taken place between the parties.

The rationale for the doctrine is the prevention of unconscionable behaviour and contains three core elements:

(1) Assurance need not necessarily have been expressed but it must be made with the intention that it be relied upon. Thus, in CD V JDF [2006] it was said that "there must actually be a promise or at least a reasonably clear direct representation or inducement of some kind."

(2) Reliance is established once it is proven that the representation was found to influence the judgement of a reasonable man -- Brinkom Investments v Carr (1979] QB 467

(3) Detriment -- usually shown by proof that money has been spent money on the land or built premises upon it - loose concept. In the words of Walker LJ in Gillett v Holt [2000] 2 AllER 289: The detriment need not consist of expenditure of money or other quantifiable financial detriment, so long as it is something substantial. The requirement must be approached as part of a broad inquiry as to whether repudiation of an assurance is or is not unconscionable in all the circumstances.

The detiiment does not have to involve the expenditure of money. In McCarron v McCarron [1997] unreported, SC, the court held that:

in a suitable case it may well be argued that a plaintiff suffers as severe a loss or detriment by providing his own labour or services in relation to the lands of another and accordingly should equally qualify for recognition in equity.

In comparison to promissory estoppel, proprietary estoppel may be used as a cause of action (Crabb v Arun District Council [1975] AllER 865) and it may arise even when there is no preexisting legal relationship between the parties (In the matter of JR [1993] ILRM 657).

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Cullen v Cullen [1962] IR 268

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The plaintiff told his wife that he was going to transfer his property over to her. On faith of this representation, the wife and her son built a portable house on this land. The plaintiff sought an injunction preventing hts wtfe and son from so doing, but Kenny J. held that he was estopped.

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Smith v Halpin [1997] 3 ILRM 38

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A father told his son that the family home " .· . . is yours after your mother's day". In other words, if A makes a representation to B that he is not going to rely on the strict terms of the contract between them, then B who relies on that representation may be able to use that promise as a defence to an action for breach of contract where B fails to comply with the contract because of Ns representation. The son, in acting on rehance of thts statement, built an extension onto the house and as a result was entitled to keep the house upon his mother's death.

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Re Basham [1986]

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The doctrine of proprietary estoppel was described in as occurring:

... [w]here one person, A, has acted to his detriment on the faith of a belief, which was known to and encouraged by another person, B, that he either has or ts gomg to be given a right in or over B's property, B cannot insist on his strict legal rights it to do so
would be inconsistent with A's belief.

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CD V JDF [2006]

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It was said that in proprietary estoppel "there must actually be a promise or at least a reasonably clear direct representation or inducement of some kind."

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Brinkom Investments v Carr [1979] QB 467

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I proprietary estoppel, reliance is established once it is proven that the representation was found to influence the judgement of a reasonable man - Brinkom Investments v Carr (1979] QB 467

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Gillett v Holt [2000] 2 AllER 289

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Walker LJ:

The detriment [grounding a claim in proprietary estoppel] need not consist of expenditure of money or other quantifiable financial detriment, so long as it is something substantial. The requirement must be approached as part of a broad inquiry as to whether repudiation of an assurance is or is not unconscionable in all the circumstances.

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Crabb v Arun District Council [1975] AllER 865

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Proprietary estoppel may be used as a cause of action and it

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In the matter of JR [1993] ILRM 657

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Proprietary estoppel may arise even when there is no preexisting legal relationship between the parties

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A unified doctrine?

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A unified doctrine has been proposed in Australia where in the case of Walton Stores v Maher (1988) CLR 387; the High Court identified a common theme
between the two forms of estoppel:

Equity comes to the relief of a plaintiff who has acted to their own detriment on the basis of a representation made by the other party and where it would be unfair or unjust to allow the other party to renege from that representation.

In Ireland, it would appear that such an approach is not favoured. In Re JR [1993] ILRM 657.


Delaney has commented that "we are unlikely to see a unified doctrine of estoppel emerging in the near future in this jurisdiction or in England." While Mee has observed that "there has been nothing resembling a carefully considered (or even conscious) decision to merge the estoppels in Ireland."

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In Re JR [1993] ILRM 657

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The representor had asked the representee to come and Jive with him, assuiing her that she would be looked after and would have a home for the rest of her life. The representor even referenced "their house" in his will. Subsequently, the representor was made a ward of court and an order was sought to effect the sale of the house because it was in such a dilapidated state.

Notwithstanding these facts, the court allowed the house to be sold and made provision for the representee to live in the new house for the rest of her life on the basis that it would be inequitable to deny her rights to live in the house given her reliance.

Costello J maintained the distinction between the two forms of estoppels stating that an estoppel would not create an interest in land but, rather, the representee would obtain a personal right against the representor.

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Legitimate Expectation

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The doctrine of legitimate expectation refers to a situation where a person relies on a statement of a public body, or alternatively on past practices of that body.

Legitimate expectation arises in a public law context only where the person who has raised the expectation is the State, or an arm thereof.

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Abrahamson v Law Society of Ireland [1996] I IR 403

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McCracken J. explained:

While there is no doubt that the doctrine of legitimate expectation is similar to and probably well founded upon the equitable concept of promissory estoppel ... it has in fact been extended well beyond the bounds of that doctrine. Promissory estoppel is largely defensive in its nature and has been described as 'a shield and not a sword'. Its use is basically to ensure that a person who has made a representation that they will not exercise some legitimate right is in fact bound by that expectation and cannot exercise the right. Furthermore, it is usually, although not exclusively, related to matters of
private right, rather than public law.

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Triatic Limited v Cork County Council [2006] IEHC 111

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Negotiations between the public authority and a number of developers regarding certain property did not conclude with an agreement. The developers brought an action on the basis of legitimate expectation for the costs incurred.

Laffoy J was of the view
that the doctrine of legitimate expectation was not appropriate in these circumstances:

There is a large grain of truth in the suggestion made on behalf of the defendant that in this case the plaintiff is seeking to extend the notion of legitimate expectation to insulate it from ordinary commercial risks which are inherent in negotiations ... The dealings between the parties in this case were essentially commercial in nature and that the doctrine of legitimate expectation could only came into play because one of the parties in the commercial negotiations was a public body.

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Daly v Minister for the Marine [2001] 3 IR 513

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The plaintiff received a letter from the Minister for Marine in respect of the entitlement of the owner to sell the vessel and to avail of a Dept scheme.

The letter had been mistakenly sent to the plaintiff. The plaintiff claimed
"legitimate expectation" and "promissory estoppel." Highlighting the difference between promissory estoppel (in particular, the requirement of detrimental reliance) and legitimate expectation, the court held:

It is the fact that it would be unconscionable for one party to be permitted to depart from a position, statement or representation upon which the other party has acted to his detriment that justifies the courts in intervening to restrain from doing so. If the recipient of a promise or representation is to be dispensed from any obligation to demonstrate reliance, the doctrine would be more than exceptionally generous. It would be a virtually ungovernable new force affecting potentially not only equity but the laws of contract and property and, as here, the exercise of administrative powers.