Equitable Estoppel: A Guide to Broken Promises and the Law

In commercial, property and business dealings, parties often act on promises or assurances about future legal relations, frequently made informally without written agreement. When a party later withdraws from such a promise, the consequences for the relying party can be significant.

Equitable estoppel prevents a party from resiling from a representation where doing so would be unconscionable. The doctrine applies when one party makes a representation, the other reasonably relies on it, and would suffer detriment if the representation is not honoured. Courts invoke it to prevent injustice where formal legal requirements are absent but reliance has nonetheless occurred.

Equitable estoppel typically arises in the context of existing relationships, such as between business partners, landlords and tenants, contractors, employers and employees, or family members. Common examples include:

• Investing in property improvements based on a promised lease
• Contributing capital or commencing work on the expectation of a shareholding
• Providing care or support in reliance on a future entitlement to property

If the party who made the promise later departs from it, leaving the relying party in a worse position, equitable estoppel may provide relief by restraining the promisor from acting inconsistently with the assumption.

What is Equitable Estoppel?

Equitable estoppel prevents a party from acting inconsistently with a promise or representation that has induced reasonable reliance and caused or will cause detriment. It holds parties to their word where, although no formal agreement exists, it would be unconscionable to allow them to depart from what was said or implied.

The doctrine does not enforce promises as such; rather, it responds to unconscionability. To succeed, it must be shown that the promise induced reliance that was reasonable in the circumstances and that the reliance has led, or will lead, to material detriment if the promisor is not held to their representation.

The Six Elements of Equitable Estoppel

The doctrine of equitable estoppel, as outlined by the High Court in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, requires the establishment of the following elements:

1. Assumption or Expectation of a Legal Relationship

The representee must have adopted an assumption or expectation that a legal relationship existed or would come into existence, often arising from promises or representations as to future legal relations. The assumption must be clear and unambiguous. Courts are unlikely to intervene where the expectation is vague or merely aspirational.

2. Inducement or Encouragement by the Other Party

The assumption must have been induced or encouraged by the other party, either through express representations, conduct, or a combination of both. Equitable estoppel will not arise where the assumption is formed independently of the promisor’s conduct.

3. Reliance on the Assumption or Expectation

The representee must have acted, or refrained from acting, in reliance on the assumption or expectation. This reliance may include:

• Incurring expenditure.
• Making strategic decisions.
• Forgoing alternative opportunities.
• Changing position to their detriment.

Importantly, the reliance must have been reasonable in the circumstances.

4. Knowledge by the Other Party

The party inducing the assumption must have known, or intended, that reliance would be placed on the expectation.

5. Detriment

The representee must have suffered detriment as a result of the reliance. Detriment may be financial, practical, or otherwise. Commonly, detriment arises where significant time, effort, or resources have been committed in reliance on the promise.

6. Failure to Avoid Detriment

The promisor must have failed to take steps to prevent the representee from suffering detriment.

In such cases, a court may intervene to prevent the promisor from departing from the expectation, by granting appropriate equitable relief.

Common Misconceptions

“A promise cannot be enforced unless it is in writing”

This is not always the case. An oral agreement is generally no less enforceable than a written one-but its terms and elements are usually much harder to prove. Equitable estoppel routinely applies where formal written agreements are absent, particularly where parties rely on informal assurances arising out of preexisting relationships.

“There is no written evidence of the promise”

While documentary evidence is advantageous, courts often accept circumstantial evidence such as:

• Emails and text messages.
• Witness testimony.
• The conduct of the parties in performance or part of an agreement.
• The broader commercial or relational context.

How We Can Assist

Parties who have suffered detriment because another has resiled from a promise should obtain legal advice at the earliest opportunity. Claims involving equitable estoppel are highly fact-dependent and turn on the particular circumstances of each case.

Litigation is costly and time consuming.

Good early legal advice can assist in:

• Identifying and preserving evidence.
• Assessing the prospects of success.
• Engaging in negotiations to resolve the dispute.
• Commencing proceedings where necessary.

The team at RCR Lawyers regularly advises and represents clients in equitable estoppel matters across commercial, property, and business contexts. For further information or assistance, please contact Michael Sing or Sakshi Bhati or call RCR Lawyers on 07 3009 8444.