Equitable Estoppel - Is It Set In Stone?

In the recent case of Kramer v Stone [2023] NSWCA 270 (Kramer v Stone), the New South Wales Court of Appeal (Court of Appeal) upheld the primary decision¹ (set out in more detail below), and determined that:

• a farming property in Upper Colo was being held on constructive trust for David Stone (Mr Stone), who had farmed the property for several years pursuant to an oral share farming agreement (Agreement) which had commenced in 1975; and

• the farming property therefore would not pass to Hilary Kramer, who was left the property by her mother, Dame Leonie Kramer (Dame Leonie), in her will.

Background to matter

Mr Stone had farmed the property in Upper Colo for many years pursuant to the Agreement which had commenced in 1975.

When Dame Leonie (the owner of the farming property) died, leaving a will which left the farming property to her daughter Hilary, Mr Stone contested Dame Leonie’s will on the basis that Dame Leonie had made a representation to him that he would inherit the property on her death (the Representation).

Mr Stone claimed that he had relied on the Representation to his detriment by undertaking additional tasks on the farming property and had continued with the Agreement in circumstances where he would have otherwise terminated the Agreement and sought more remunerative work elsewhere.

The primary Judge found, and it was upheld on appeal, that:

• Mr Stone had established an entitlement to equitable relief, on the basis of a proprietary estoppel arising from the Representation made by Dame Leonie to Mr Stone;
• Mr Stone had acted to his detriment in continuing the farming operation on the property for about 23 years in the belief that he would one day inherit the property;
• Dame Leonie “ought to have known” that part of Mr Stone’s motivation in continuing the farming operation was the expectation that he would inherit the property; and
• it was unconscionable for Dame Leonie not to have left the farming property to Mr Stone in her will.

Was there proprietary estoppel by encouragement?

In Kramer v Stone, the Court of Appeal also explained that proprietary estoppel by encouragement is one of a number of discrete doctrines falling within ‘equitable estoppel’. Estoppel by encouragement is founded in an assumption as to the future acquisition of ownership of property which has been induced by a representation or promise upon which there has been detrimental reliance.

The Court referred to the decision of Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 (Waltons Stores), in which Brennan J, as his Honour then was, established the following elements common to each equitable estoppel doctrine, and which serve as a useful guide in contentions concerning equitable estoppel as follows:

• The plaintiff assumed that a particular legal relationship existed, or would exist, between the parties, and that the defendant would not be free to withdraw from this expected legal relationship.
• The defendant has induced the plaintiff to adopt that assumption or expectation.
• The plaintiff acts or abstains from acting in reliance on the assumption or expectation.
• The defendant knew or intended him to do so.
• The plaintiff’s action or inaction will occasion detriment if the assumption or expectation is not fulfilled.
• The defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise.   

Mason CJ and Wilson J further noted in Waltons Stores that an estoppel by encouragement does not arise through the mere attempt or promise to make a gift to another of a proprietary interest, but that there needs to be “something more” which amounts to unconscionable conduct on behalf of the representor.

In the case of Kramer v Stone, it is clear that the “something more” (referred to in Waltons Stores regarding estoppel by encouragement) are those matters the primary Judge found (and upheld by the Court of Appeal) above which were said to have arisen and were matters the Court could take into account, further to the Representation said to have been made by Dame Leonie to Mr Stone.

Lavan Comment

This Court of Appeal decision is a timely reminder of the importance of considering your estate and succession planning, particularly in family businesses and the representations you make to your potential beneficiaries about their shares in your estate.

While it is important for will makers to understand that they have the right to revoke or change a will at any time, they should also be aware that there are circumstances where equity may intervene to enforce a promise upon which someone has relied to their detriment, regardless of the terms of any testamentary instrument.

If you intend to make a will, or if you think that an equitable estoppel claim may affect you or your business now or in the future, please do not hesitate to contact Millie Richmond-Scott and Iain Freeman, Partners in Lavan’s Litigation and Dispute Resolution team.

¹ Stone v Kramer [2021] NSWSC 1456.