Making a promise you can’t keep? Think again!

In a perfect world, a promise is made with the intention of it being kept. However, in the real world, that is not always the case – promises are made (and broken) all the time. When significant promises are made, such as the promise of a house or piece of land, a broken promise can cause significant detriment to the person who relied on that promise and planned their life around receiving the property the subject of the promise.

The equitable doctrine of proprietary estoppel is a legal remedy that prevents one party (the promisor) from detrimentally resiling from a promise made to another person (the promisee) when the promise concerns a property or piece of land. For the remedy to be available, there must be a clear and unequivocal promise made by the promisor, on which the promisee relies to their detriment.

Kramer v Stone [2024] HCA 48

Background

Proprietary estoppel was considered in the recent High Court decision of Kramer & Anor v Stone [2024] HCA 48 (Kramer). Kramer involved a dispute in relation to a 100-acre farm in Upper Colo, NSW which was owned by Dame Leonie Kramer. The farmland was managed by David Stone pursuant to an oral share-farming agreement entered into with Dame Leonie and her late husband.

Dame Leonie orally promised David that he would inherit the farmland on her death (together with a sum of money). David relied upon this one promise, and as a result, continued to farm the farmland for a further 23 years, whilst earning a substandard income and living in substandard accommodation. Had David not been promised the farmland, David’s intention was to terminate the oral share-farming agreement far sooner and seek employment with better income.

On Dame Leonie’s passing, it was discovered that the farmland had been gifted to Dame Leonie’s daughter under her will, and David only received a sum of money. This was despite the earlier promise made by Dame Leonie to David.

Outcome

Kramer confirmed that the requisite elements of a proprietary estoppel claim are as follows:

1. A clear and unequivocal promise made by the promisor to the promisee;

2. That a reasonable person in the promisor’s position would expect the promisee to rely on the promise;

3. The promisee relied on the promise; and

4. If the promise was not fulfilled, the promisee would suffer detriment.

The promisor is not required to have actual knowledge of the promisee’s reliance, nor is the promisor required to have displayed or engaged in conduct after the promise has been made which would further induce any reliance. Simply, the promisor must have only expected or intended the promisee to rely on the promise.

Upon discovery of the gift under Dame Leonie’s will, David successfully sued the executors of Dame Leonie’s estate. The executors appealed the decision all the way to the High Court. The appeal was subsequently dismissed, as it was found that (a) all elements of proprietary estoppel were satisfied (b) that a promise had been made and (c) the reliance placed on that promise was reasonable in all circumstances.

The Court also confirmed that relief granted must remedy or prevent the detriment incurred. Such relief will differ on a case-by-case basis and is subject to the Court’s wide discretion, as well as the facts of each case.

Takeaway

Whether a once-off promise, or various promises made over a period of time, these promises can have significant ramifications should the promisor attempt to unilaterally resile in circumstances where the promisee has relied on the promise or promises to their detriment.

The decision in Kramer reinforces that proprietary estoppel remains a valuable tool to mitigate or otherwise prevent detriment or unfairness that could be suffered by a promisee if a promisor was allowed to unilaterally resile from a promise.

Our team has extensive experience in relation to proprietary estoppel claims. If you require assistance, please contact Michael Wirth (Partner, Sydney) or Stephanie Piantadosi (Lawyer, Adelaide).