Estoppel by Encouragement – Promise Certainty, Reliance, Detriment and Unconscionability

In Slade v Brose [2024] NSWCA 197 (8 August 2024), the New South Wales Court of Appeal addressed estoppel by encouragement, in the context of a rural family arrangement and subsequent breakup.  Ward P – with whom White and Stern JJA agreed – wrote as follows (the extract below is followed by a helpful 2023 article on the issue by Roger Traves (KC):

[1]  This appeal arises out of a dispute between family members in relation to the ownership of certain farming properties in Quandialla, near West Wyalong in NSW. The appellants (Bruce and Donna Slade), together the Slades, have three daughters, Melissa Ousby, Kellie Brose (from whom they are now estranged) and Tegan Slade. Kellie is the first respondent in this proceeding. Kellie’s husband, Garreth Brose, is the second respondent. Together, I refer to the respondents as the Broses. Also relevant to the dispute (though not a party on appeal) is IJAAMOTT Pty Ltd (IJAAMOTT), a company controlled by the Slades. I will generally refer to the various family members by their first names without any intended disrespect.

[2]  Prior to the events the subject of the present dispute, there were a number of parcels of farming land being operated by the Slades (through a partnership known as the “Slade Pastoral Co”), those being Ostenleigh (the Slades’ family home), Ozone Park, Reserve, Glendlyn, Gilgowrie, Misery, Willawa, Sandridge Home and Sandridge Farm. The properties were held by either Bruce or IJAAMOTT. Not all of those parcels of land were the subject of claims in the proceedings before the primary judge. Rather, there were five blocks of land in respect of which the Broses claimed an interest in the proceedings at first instance: Ostenleigh, Ozone Park, Reserve, Misery and Gilgowrie (though only as to one-third in the case of Gilgowrie) (together, the Disputed Properties). In this appeal, only three of those Disputed Properties are in contention (Ostenleigh, Ozone Park and Reserve), as I will explain in due course.

[3]  The dispute between the Slades and the Broses, in essence, was as to whether the Slades held the Disputed Properties on trust for the Broses by reason of the Broses’ detrimental reliance on promises or representations made to them by the Slades over the period from 2013 to 2019 as to the transfer of the land and interests in the partnership to them.

[4]  After what the primary judge consistently referred to in his reasons (without further detail as to the nature of that falling out) as a catastrophic falling out between the Slades and the Broses in October 2021 and January 2022, the Slades proceeded (in what his Honour described as a “pre-emptive way”) to liquidate their rural land holdings and partnership assets (see Brose v Slade [2023] NSWSC 1025 , the primary judgment, at [44]), effectively ending what up to then had been a working relationship between the two families. It was not disputed that the parties ceased to work together in the farming business from January 2022. The Slades, as part of their transition to retirement, had moved to West Wyalong in about July 2021.

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[8]  In summary, the primary judge found that, between 2013 and 2019, the Slades made “headline representations” of future benefits to the Broses about the conduct of farming operations on “Slade family land” with the intention of encouraging them to commit themselves to a life on the farm, including the prospect of transfers of land and partnership interests to the Broses (but with the precise terms upon which those transfers were to take place left uncertain) (primary judgment at [39(a)-(b)]). His Honour found that the Slades encouraged in the Broses a belief that they would acquire most of the land upon which the Slade family farming business was conducted, and the partnership business as a going concern; and that they gave reassurances to the Broses whenever anxiety was expressed (as it often was) that they were dependent on the Slades’ continued representations (primary judgment at [39(c)-(d)]). His Honour found that the Slades’ conduct in proceeding to liquidate the rural land and assets denied the Broses the land that they had expected to acquire and required them on their own account to acquire plant and equipment to replace that of Slade Pastoral Co to which they had earlier had access ([44]).

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[198]  The Broses’ case concerning estoppel by encouragement invokes the line of authority descending from Dillwyn v Llewelyn [1862] EWHC Ch J67 45 ER 1285 and the dissenting judgment of Lord Kingsdown in Ramsden v Dyson (1866) LR 1 HL 129 (see at 170–171), ie, in the words of Handley AJA, the estoppel which may arise when an owner of property has encouraged another to alter his or her position in the expectation of obtaining a proprietary interest and that other, in reliance on the expectation created or encouraged by the property owner, has changed his or her position to his or her detriment (see Delaforce at [21]).

[199]  The Slades have pointed to the well-known formulation of the elements common to the doctrines of equitable estoppel (or which proprietary estoppel by encouragement is one) by Brennan J, as his Honour then was, in Waltons Stores v Maher (1988) 164 CLR 387 at 428 –429; [1988] HCA 7 (Waltons Stores), emphasising the first of those elements, namely an assumption or expectation that a particular legal relationship between the parties then existed or would exist (and in the case of the expectation of a future legal relationship that the defendant would not be free to withdraw therefrom the expected legal relationship), in submitting that what was required here was for the Broses to establish that they reasonably understood that the promises made to them were irrevocable.

[200]  However, it has been made clear that his Honour’s elements are not to be applied in every case in a “mechanical fashion” (see Doueihi v Construction Technologies Australia Pty Ltd (2016) 92 NSWLR 247; [2016] NSWCA 105 (Doueihi) at [166] (Gleeson JA, with whom Beazley P and Leeming JA agreed); DHJPM at [47]; Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582 at 615 –616 (Priestley JA)).

[201]  In particular, the broader view reflected in the joint judgment of Mason CJ and Wilson J in Waltons Stores has prevailed (as recognised by White J, as his Honour then was, in Construction Technologies Australia Pty Ltd v Doueihi [2014] NSWSC 1717 (at [145]–[147]), affirmed on appeal in Doueihi). It is not necessary for a plaintiff to show that he or she assumed or expected that a “particular legal relationship” existed or would exist (see Doueihi at [153]–[170]). Nor is it necessary to show that the promise was irrevocable. It is unconscionability, rather than “ticking the box” of each of Brennan J’s elements, which will be decisive (Doueihi at [166]–[167]) (see also Giumelli v Giumelli at 121 ).

[202]  True it is that there must be a careful identification of the nature of the assumption or expectation held by the plaintiff (to be assessed by reference to the circumstances of each case) (Doueihi at [186], citing Commonwealth v Verwayen (1990) 170 CLR 394 at 445; [1990] HCA 39 ; see also Thorner v Major at [56] ) but the requirement of certainty for a representation or promise in a proprietary estoppel claim is less stringent than in other kinds of estoppel. See Flinn v Flinn [1999] VSCA 109 , where Brooking JA (with whom Charles and Batt JJA agreed) concluded (at [80]) that “a promise may be definite in the sense that there is a clear promise to do something even though the something promised is not precisely defined” (see also Delaforce at [55]; Evans v Evans [2011] NSWCA 92 ( Evans v Evans ) at [116], [121] (Campbell JA, with whom Giles JA and Sackville AJA agreed); DHJPM at [54]).

[203]  In Galaxidis, Tobias JA said (at [93]) that the representation or promise is sufficiently clear “if it is reasonable for the representee to have interpreted the representation in a particular way being a meaning which it is clearly capable of bearing and upon which it is reasonable for the representee to rely”. See also the similar statement by Hodgson JA in Sullivan v Sullivan [2006] NSWCA 312 at [85] (McColl JA agreeing).

[204]  While a distinction has sometimes been drawn in practice between arms-length/commercial cases and domestic/family cases when assessing the adequacy of an assurance or the reasonableness of an expectation or assumption (see, for example, DHJPM at [104]–[105]; Cobbe v Yeoman’s Row Management Ltd [2008] UKHL 55 at [68] per Lord Walker), in the present case this does not assist the Slades since the representations were clearly in a family context (as made clear by the ongoing emphasis on succession planning).

[205]  It is also relevant to note that the expectation reasonably derived from another’s words and actions “need not depend on the words of a single conversation, but could arise from conduct over a period of time” ( Evans v Evans at [107] ). This is of particular relevance in the present case where the criticism made of the primary judge is that he found a “rolled up” representation.

[206]  Finally, and also of particular relevance to the present case, a proprietary claim does not necessarily fail simply because the representations or promises are conditional or subject to limitations (see Campbell JA in Waddell v Waddell at [53] ).

[207]  In the present case, in my opinion, the representations were sufficiently clear. From a very early time there were, as his Honour found, “headline representations” as to future benefits which, by 2015/2016, encompassed that (in an estate planning context) all the land (other than Willawa) would be theirs (not dissimilar to the statement in Gillett v Holt at 227 that “all this will be yours”).

[208]  The criticism that his Honour failed carefully to address the respective sets of representations cannot be accepted. His Honour (as noted earlier) went through each of the sets of representations. Significantly, however, his Honour also pointed out the stages when earlier representations or expectations were fuelled or solidified by later representations.

[209]  The oral assurances by the Slades to “trust us” and the Broses would get all the land put paid to any suggestion that the separate sets of representations could be compartmentalised as the Slades now suggest.

[210]  As to what someone in the position of the Broses would reasonably have understood by the various representations and assurances, I accept that a sophisticated agribusiness consultant would be expected to understand that in a commercial context that representations of the kind made to the Broses were neither binding nor irrevocable. However, in a family context it was in my opinion reasonable for the Broses to rely on the repeated assurances by the Slades that they could and should trust the Slades, keep working on the family farm, and make the partnership the business their priority; and that they would then get most of the land and the partnership business.

[211]  The fact that the context in which the 2018 and DOFA Representations were made was the contemplation of a continued partnership and an “intact” family relationship does not make the promises “aspirational”. Rather, in my view it explains the anxiety of the Broses as to whether (and when) the Slades would eventually honour their promises.

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[239]  There is no presumption of reliance; reliance is a fact to be found ( Sidhu v Van Dyke at [58] ). What is required is satisfaction from the whole of the evidence of the fact of reliance on the balance of probabilities.

[240]  Reliance in the context of estoppel by encouragement was considered by the High Court in Sidhu v Van Dyke . It is clear that it is not necessary that the relevant assumption be the “sole inducement operating on the mind of the party setting up the estoppel” ( Sidhu v Van Dyke at [71] ); it need only be a “contributing cause” (at [71]–[73] (French CJ, Kiefel, Bell and Keane JJ); [90] (Gageler J)).

[241]  In Sidhu v Van Dyke the plurality formulated the question as whether (see at [66]) on all the facts there was satisfaction on the balance of probabilities that the promises in question contributed to the respondent’s conduct (there, her conduct in “deciding to commit to her relationship with the appellant and adhering to that relationship” for a number of years). In concluding that there was a compelling case of reliance, the plurality referred, among other things to the “probabilities of human behaviour” (see at [69]). The plurality considered that the assurances made in that case had a “significant effect” upon the respondent’s decision-making process and that it was indeed more likely than not that the respondent would have acted differently, had the promises not been made. At [76], the question posed by the plurality was “whether the respondent would have committed to, and remained in, the relationship with the appellant, with all that that entailed in terms of the effect upon the material well-being of herself and her son, had she not been given the assurances made by the appellant”.

[242]  In a separate judgment, Gageler J, as his Honour then was, agreeing with the plurality’s reasons added (at [91]) that:

… the respondent needed to establish more than that she had the belief and took the belief into account when she acted or refrained from acting. She needed to establish that having the belief and taking the belief into account made a difference to her taking the course of action or inaction: that she would not have acted or refrained from acting if she did not have the belief.

[243]  His Honour then went on to frame the question of causation (at [93]) as being “[d]espite any other contributing factors, would the party seeking to establish the estoppel have adopted a different course (of either action or refraining from action) to that which [the party] did had the relevant assumption not been induced?”.

[244]  In Q v E Co [2020] NSWCA 220 ( Q v E Co ), Meagher JA (with whom Leeming and Payne JJA agreed) agreed with the proposition that the two formulations of the question (ie, whether the encouragement was a contributing cause and whether the party relying on the estoppel would have acted differently in the absence of the relevant encouragement) were one and the same (see at [88]), stating the test by reference to Sidhu v Van Dyke as the “but for” test (see at [89]).

[245]  The position thus is that it suffices if the encouragement was a “contributing cause” (as distinct from the “sole inducement” or a predominant cause); that the Broses did not need to prove “precisely” or “categorically” how they would have acted differently (see Priestley v Priestley [2017] NSWCA 155 ( Priestley v Priestley ) at [147] (Emmett AJA, with whom McColl JA agreed)); and that the question is whether, but for the relevant encouragement, the Broses would have acted differently; or, in other words, whether the encouraged assumption or representation “influenced” the Broses’ course of action (or inaction) in a “significant” or “material” way in the sense that they would have acted differently had the (induced) assumption not been held.

[246]  In my opinion, the primary judge committed no conflation error, as is here contended. His Honour was well aware that the relocation to Quandialla occurred in 2014, before the later representations were made. What his Honour nevertheless accepted was that the Broses’ later conduct in remaining on the family farm and working for the partnership was in reliance on the later 2015, 2016, 2018, 2019 representations which fuelled the expectation as to the acquisition of most of the land and the partnership interest.

[247]  Further, it is worth noting that while the relocation to Quandialla obviously occurred before the later representations (and hence cannot logically have been in reliance on them), the prospect that the Broses would take over further of the Slade farming land was clearly contemplated from the start; and significantly the representations in 2015 onwards built upon (or, in his Honour’s words, “fuelled”) that expectation.

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[274]  It is trite to note that detriment is a necessary element of a proprietary estoppel. There is no presumption of detriment; rather, detriment must be established on the balance of probabilities (see Sidhu v Van Dyke ). However, the concept of detriment in the context of proprietary estoppel is neither narrow nor technical ( Donis v Donis (2007) 19 VR 577; [2007] VSCA 89at [20] (Nettle JA, with whom Maxwell ACJ and Ashley JA agreed)).

[275]  As the Broses have noted, the question of detriment is assessed as at the time of departure from the relevant assumption or expectation (DHJPM at [72]). In the present case, therefore, detriment must be established as at October 2021/January 2022, when the Slades renounced any intention to honour the representations made at the December 2018 meeting and confirmed in the DOFA.

[276]  Insofar as the Slades complain that the primary judge did not engage in the counterfactual comparison “mandated” by Q v E Co , it is worth noting that Meagher JA did not in terms mandate the means by which the “but for” test was to be approached, and indeed identified (at [90]) a particular difficulty with the use of a counterfactual analysis of the kind that had there been posed by the appellant in the circumstances of the case. That said, his Honour did there address the counterfactual question as framed by the appellant (noting that it was consistent with the counterfactual reasoning in Sidhu v Van Dyke at [77], Priestley v Priestley at [124] and Walton v Walton per Lord Hoffman). There is no doubt that the use of counterfactual reasoning can be of assistance in determining whether detriment has been established but the fact that it was not expressly framed as such in the primary judge’s reasons does not render the finding of detriment erroneous.

[277]  Turning to the first of the four complaints made by the Broses as to the finding of detriment by the primary judge, I do not accept that his Honour erroneously conflated the various representations when determining whether there was detriment at the time that the Slades departed therefrom. What his Honour was noting (when he referred at [194] to the Broses “having moved to Quandialla”) was simply the fact that they had moved there. His Honour was not there suggesting that they had done so in reliance on representations made after the relocation had occurred. Rather, his Honour was assessing the relevant detriment by reference to the position that the Broses were in (as at 2021/2022), having moved to Quandialla and having invested their lives and resources in the Slade family farm and sacrificed secure professional careers. This was a recognition of what the Broses had done over the whole of the period up to 2021/2022.

[278]  As to the second complaint, that his Honour assessed the relevant detriment as the loss flowing from non-fulfilment of the promise or assurance, ie, by reference to the loss of the benefits that the Broses expected to receive, it is important to note that the reference to loss of the opportunity to take over the family farm (if the representations were not honoured) is coupled with loss of the opportunity to pursue their lucrative professional careers off-farm. It is clear that his Honour was there contrasting the position of the Broses in two scenarios (taking over the family farm and pursuing off-farm careers); it is the latter which represents the detrimental reliance. Had they not relied on the promises or assurances made to them, and instead pursued their off-farm careers, they would not have been in the present state of limbo and financial uncertainty. This is linked to the unconscionability of departure from the promise (as I discuss below). Thus, fairly read, I do not accept that his Honour was wrongly assessing detriment by reference to the loss of what the Broses expected to receive but, correctly, assessing their detriment by reference to the loss of the career opportunities that were foregone when they chose to remain in Quandialla working in the family partnership.

[279]  As to the third complaint (lack of a counterfactual comparison), while not expressed in terms of a counterfactual analysis, the reference at [195] of the primary judgment to the fact that (if the representations were not honoured) the Broses will have lost the opportunity “to pursue their lucrative professional careers off-farm” to my mind (as indicated above) answers the “but for” question, ie, his Honour was identifying the different action that would have been taken by the Broses as the pursuit of professional careers “off-farm”.

[280]  It is clear that, in juxtaposing loss of the opportunity to take over the family farm with loss of the opportunity to pursue lucrative off-farm careers, his Honour was accepting that, had the Slades made clear that they would not honour the representations as to the Broses acquiring all the land (other than Willawa) and the partnership business (or had they made clear that those representations were to be entirely at their whim whether to fulfil them or not), the Broses would have pursued career opportunities elsewhere (and would not have remained working on the Slade family land). The fact that his Honour referred to “careers” in the plural, even though Kellie had not given up her career as an agri-business banker, must either have been a typographical error or (perhaps more likely given the earlier references to Garreth sacrificing his career “in particular”) a recognition that Kellie did not receive any remuneration for the work she performed for Slade Pastoral Co (which was particularised as one aspect of the detrimental reliance — see [35B(iiI)] of the Second Further Amended Statement of Claim) from which loss of an opportunity to pursue a more lucrative career off-farm might perhaps be inferred.

[281]  The Broses’ decisions to remain on the property in Quandialla, to increase their share of work in the farming business, and not to pursue job offers or contracting opportunities were all particularised as part of their detrimental reliance not simply on the 2015 representations but also on the 2018 representations (see [35B] of the Second Further Amended Statement of Claim). It is not correct to say, as the Slades here seem to suggest, that the only detrimental reliance particularised in relation to the December 2018 Representations was the sale of the Townsville apartment and payment of the sum of $350,000. Though that conduct was the only detrimental reliance pleaded by reference to the June 2019 (DOFA) representations it is relevant to note that those representations were pleaded as in effect confirming (“again agreed and represented”) the December 2018 Representations pleaded at [29].

[282]  The evidence clearly supports the conclusion that, but for the representations and assurances made in 2015 and 2018, the Broses would not have done the things particularised as constituting their detrimental reliance. The fact that, by 2016, they wanted to stay on the farm and to remain at Quandialla does not lead to the opposite conclusion — rather, it is confirmation of the life-changing nature of the decision not only to move to Quandialla in the first place (in reliance on the 2013 Representations) but also the decision to remain there in reliance on the later representations (in 2015) that gave substance to the earlier promise of further land (and the oral promises that all the land would be theirs and assurances that they could trust the Slades). Further, the suggestion that the decision to stay on the farm was simply motivated by Kellie’s wish to remain there (and Garreth’s decision to stay with his wife) ignores the fact that the relevant promise or representation need not be the sole inducement (it is sufficient that it be a contributing cause) and fails to take into account that, in a practical sense, the longer that the “trust us” assurances continued and the longer the Broses invested their time and effort into the partnership business in reliance on the representations, the more difficult it no doubt became for the Broses to uproot their family (as his Honour clearly recognised by reference to the potential disruption if they were forced to move away from Quandialla).

[283]  The decision to remain, and not to take up opportunities elsewhere, over a lengthy period was in my opinion more than sufficient to amount to detrimental reliance when assessed as at October 2021 or January 2022 (when the Slades renounced their “agreement” in relation to the partnership and made clear their intention to act in accordance with the remaining milestones in the DOFA). Applying the approach of the plurality in Sidhu v Van Dyke , as a matter of the “probabilities of human behaviour”, the assurances made to the Broses must have had a “significant effect” upon the Broses’ decision-making process and the conclusion follows that it was more likely than not that they would have acted differently had the promises and assurances not been made. That is evidenced by the very fact that they considered the options of job opportunities off-farm and of operating on their own behalf but did not pursue those in light of the assurances made to them.

[284]  As to the fourth complaint (that his Honour took into account that not honouring the representations would leave the Broses in a state of limbo and financial uncertainty), at the very least that was relevant to the consideration of whether it would be unconscionable for the Slades to depart from the representations (that being the issue to which the observations at [195] seem at least partially to have addressed). The complaint that “unviability” of the land was not pleaded or particularised as part of the case on detrimental reliance goes to the question of countervailing benefits or unconscionability and will be considered in that context. Similarly, I do not read the reference by his Honour to potential disruption if the Broses were forced to relocate as suggesting a finding of some form of future detriment or loss flowing from non-fulfilment of the promises or assurances. Rather, it is a recognition of the position in which the Broses found themselves at the time of renunciation of the promises and relevant to the question whether it was unconscionable for the Slades to resile from those promises.

[285]  This brings me to the complaint by the Slades as to countervailing benefits obtained by the Broses (more relevant for the consideration as to the unconscionability of departure from the promise than to the question of detrimental reliance). I propose to address that complaint in the context of Ground 7. Suffice it here to note, however, that detriment is not to be determined by some form of precise arithmetical calculation or balance sheet-like approach in which the counterfactual opportunities are quantified and valued. That is made clear in Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560; [2014] HCA 14at [88] ; Q v E Co at [157] –[158] per Meagher JA; Soulos v Pagones [2023] NSWCA 243 at [389] –[392] .

[286]  In that sense, though the Slades deride the comparison, the analogy drawn by the Broses between the position of the claimants in Q v E Co and their own position is not inapt. In both cases, the claimants chose not to pursue business opportunities elsewhere (the value of which would have been difficult to quantify) and chose to remain involved in the family partnership in reliance on promises and assurances as to the ultimate transfer of the land or business to them. In the present case it is true (and the primary judge recognised this) that the Broses obtained benefits (and indeed significant benefits in terms of the value of the land already transferred to them) along the way from their reliance on the representations up to the time of the renunciation of those promises. But they also invested significant time and effort in remaining at Quandialla and working in the family partnership business (for the benefit to a large degree of the Slades) for many years and gave up opportunities elsewhere.

[287]  The real question is whether the countervailing benefits in effect subsumed or sufficiently made good the representations so as to make it not unconscionable for the Slades to depart from those representations. There are, of course, cases where a benefit (such as rent-free accommodation over a long period) might be treated as making good the promise or representation of an interest in property. Here, however, in the context of a farming operation conducted over a number of properties and over a number of years in reliance on the expectation that those properties (and business) would be transferred to the Broses (“all this will be yours”) there was no error in my opinion in his Honour concluding that the countervailing benefits (valuable as they were) did not assuage the equity raised by the Broses’ detrimental reliance on the Slades’ representations and the renunciation of those representations by the Slades. This was not a case where expert evidence was needed as to the ongoing viability of the farming operation if the acreage farmed was drastically reduced; nor did viability of the land need to be pleaded or particularised as an element of detrimental reliance.

[288]  Finally, on this issue, I should note that there is no little irony in the Slades maintaining that the countervailing benefits obtained by the Broses included their interest in the partnership. That is because up to very shortly before the hearing (and indeed at the time Bruce verified the cross-claim) the Slades were adamantly denying that the Broses had an equal interest in the partnership; and they used what they maintained was their majority interest in the partnership to pull the rug out from under the Broses (to use a common metaphor) when they unilaterally (and pre-emptively) chose to conduct a fire sale of the partnership assets, depriving the Broses of the ability to continue their farming operations with the use of those assets. Indeed, as the primary judge noted, it was only belated self-interest (in minimising their tax exposure) that led to the Slades conceding that the Broses had an equal interest in a (now non trading) partnership.

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[329]  For the above reasons the appeal should be dismissed. I see no reason for costs not to follow the event.

(emphasis added)

The full decision may be found here.

In addition, in 2023, Roger Traves KC wrote on this topic on the then case law:One Day This Will Be Yours – Estoppel by encouragement and acquiesence