Proprietary estoppel – estopped party does not have to disprove reliance

The High Court has rejected the notion that the onus of proof in relation to detrimental reliance can shift to the party said to be estopped.

In Sidhu v Van Dyke [2014] HCA 19 0the Court had to consider the sufficiency of proof of detrimental reliance required to given rise to an equitable estoppel (proprietary estoppel). The appellant and his wife owned land as joint tenants. The trial judge found that the appellant had promised to give the respondent part of the land owned by him and his wife once that land was subdivided. The appellant and the respondent formed a relationship which resulted in the respondent’s husband leaving her. The respondent did not seek a property settlement from her husband because of the promises made by the appellant. The trial judge accepted that respondent had worked on the land and gave up opportunities for employment and that these activities might be sufficient to amount to detrimental reliance for the purpose of an equitable estoppel; however, Her Honour concluded that the respondent may well have done all or most of those things in any event. This conclusion was based on answers given by the respondent in the course of cross-examination. The trial judge also held that it was not reasonable for the respondent to rely on a promise of a transfer of land when performance depended on the land being subdivided and the consent of the appellant’s wife.

The Court of Appeal upheld the respondent’s contention that the trial judge erred in holding that it was unreasonable to rely on the promises. The Court of Appeal also held that the onus of proof in relation to detrimental reliance shifted to the party said to be estopped (ie the male appellant) where inducement by the promise could be inferred from the conduct of the claimant (ie the respondent). The Court of Appeal held that an award of equitable compensation measured by reference to the value of the respondent’s disappointed expectation was the appropriate form of relief, being the value of the land at the date of judgment.

The High Court rejected the notion that the onus of proof in relation to detrimental reliance shifted: reliance was a fact that had to be found and not imputed on the basis of evidence that fell short of proof of the fact; the respondent at all times bore the legal burden of proving that she had been induced to rely upon the appellant’s promises. The Court said that the real question was the appropriate inference to be drawn from the whole of the evidence. The Court also held that the evidence established reliance.

As to the relief, the High Court said that “this category of equitable estoppel serves to vindicate the expectations of the represented against a party who seek unconscionably to resile from an expectation he or she has created”. See: French CJ, Keifel, Bell and Keane JJ at [77]. Had the respondent been induced to make a relatively small, readily quantifiable monetary outlay on the faith of the appellant’s assurances, then it might not be unconscionable for the appellant to resile from his promises to the respondent on condition that he reimburse her for the outlay. However, the Court decided that this case was one to which the observations of Nettle JA in Donis v Donis (2007 19 VR 577, at 588-589 were apposite:

“[H]ere, the detriment suffered is of a kind and extent that involves life-changing decisions with irreversible consequences of a profoundly personal nature…beyond the measure of money and such that the equity raised by the promisor’s conduct can only be accounted for by the substantial fulfillment of the assumption upon which the respondent’s actions were based.”