Estoppel by Convention

[Ripped-Off]

Would an argument based on Estoppel by Convention succeed in the following scenario......

Party A (the payer) and Party B (the worker) enter into a contract. The contract does not specify what supporting information Party B is to provide to Party A when requesting payment, in order to prove that the work has been done. Party B, therefore, provides photographs to Party A to prove the work was done and provides further information to show where the photgraph was taken, enabling Party A to check if necessary.

This method is used for around 6 months. Party A doesn't check but makes payment anyway, until he realises the cost is becoming far more than he had anticipated.

Unexpectedly Party A says "I don't like this system anymore, it takes me too long to check the photos. Instead we will go out together and look at your work from now on" knowing full well that the earlier work is now covered and inaccessible.

Party B agrees but says "What about the work I have done for the past 6 months, it's covered up now, how can we check that?"

Party A says "Well we will use the work you do from now on to retrospectively value what you have done before and make an adjustment to your next payment if necessary".

Party B protests, vehemently. "If we do that, we won't pick up all of the work that I did and I'll lose out."

"Tough", says Party A. "We can check the work that is not yet covered up, but the work that is covered will have to be judged retrospectively based on what we see elsewhere whilst we are walking around. We can value the work on a pro rata basis".

Based on the new system Party A thinks that he has overpaid Party B and does not make any further payments. Party B is adamant that the new pro rata system does not accurately reflect what he did in the preceding 6 months. Party B is furious and threatens Court action based on an argument of Estoppel by Convention.....that is, he thought the original method had been impliedly agreed between them and he cannot now go back to his earlier work to prove that it was done. All he has is a photo.

[R0b]

Re: Estoppel by Convention

Would an argument based on Estoppel by Convention succeed in the following scenario......

Party A (the payer) and Party B (the worker) enter into a contract. The contract does not specify what supporting information Party B is to provide to Party A when requesting payment, in order to prove that the work has been done. Party B, therefore, provides photographs to Party B to prove the work was done and provides further information to show where the photgraph was taken, enabling Party A to check if necessary.

This method is used for around 6 months. Party A doesn't check but makes payment anyway, until he realises the cost is becoming far more than he had anticipated.

Unexpectedly Party A says "I don't like this system anymore, it takes me too long to check the photos. Instead we will go out together and look at your work from now on" knowing full well that the earlier work is now covered and inaccessible.

Party B agrees but says "What about the work I have done for the past 6 months, it's covered up now, how can we check that?"

Party A says "Well we will use the work you do from now on to retrospectively value what you have done before and make an adjustment to your next payment if necessary".

Party B protests, vehemently. "If we do that, we won't pick up all of the work that I did and I'll lose out."

"Tough", says Party A. "We can check the work that is not yet covered up, but the work that is covered will have to be judged retrospectively based on what we see elsewhere whilst we are walking around. We can value the work on a pro rata basis".

Based on the new system Party A thinks that he has overpaid Party B and does not make any further payments. Party B is adamant that the new pro rata system does not accurately reflect what he did in the preceding 6 months. Party B is furious and threatens Court action based on an argument of Estoppel by Convention.....that is, he thought the original method had been impliedly agreed between them and he cannot now go back to his earlier work to prove that it was done. All he has is a photo.

The first problem I see with this is that estoppel is based on a shield and not a sword, and on that basis Party B would not be able to bring a claim founded on estoppel by convention. There are case law in Australia which states that estoppel can be both used as a shield and a sword but as you will know, it is of persuasive authority only. I think it was Denning in some cases argued that estoppel may be used as a sword but was usually the minority in a judgment and we all know how controversial Denning is.

Mears Ltd v Shoreline Housing Partnership 2013 - Court of Appeal
Mears Ltd v Shoreline Housing Partnership 2015 - High Court

May be of use as regards to estoppel by convention.

[Openlaw15]

Re: Estoppel by Convention

The first problem I see with this is that estoppel is based on a shield and not a sword, and on that basis Party B would not be able to bring a claim founded on estoppel by convention. There are case law in Australia which states that estoppel can be both used as a shield and a sword but as you will know, it is of persuasive authority only. I think Denning has in some cases argued that estoppel may be used as a sword but was usually the minority in a judgment and we all know how controversial Denning is.

Rob, I am not aware of even the relatively liberal Denning supporting an estoppel as the nature of Estoppel...means stop not start, so it is analogous to a shield to stop a sword rather that a sword to strike a shield. As for the Aussie case it may be property so a proprietary Estoppel may be used there as sword notwithstanding a shield, in any event there must also be detrimental reliance too. The facts in Ripped-off's scenario also suggest that the contract has retrospective effect but a person cannot agreem in concert with the other for terms that have since passed as contract relates to the future not the past. Consideration needs to be present in the future not the past.

[R0b]

Re: Estoppel by Convention

Rob, I am not aware of even the relatively liberal Denning supporting an estoppel as the nature of Estoppel...means stop not start, so it is analogous to a shield to stop a sword rather that a sword to strike a shield. As for the Aussie case it may be property so a proprietary Estoppel may be used there as sword notwithstanding a shield, in any event there must also be detrimental reliance too. The facts in Ripped-off's scenario also suggest that the contract has retrospective effect but a person cannot agreem in concert with the other for terms that have since passed as contract relates to the future not the past. Consideration needs to be present in the future not the past.

Well I could be wrong on Denning, as it has been a while since I looked into estoppel but I am sure there have been a few cases not too long ago where Estoppel was said that it could be used as a sword, but then shot down by the appeal courts. As for the australian cases, I think it is now well founded as to estoppel being a sword and not just a shield, again I cannot remember the details exactly but was mentioned as reference than anything in particular.

As for Ripped-off's scenario - if you read the judgment of the 2015 Mears case it is quite similar to the issue at hand, Akenhead did go on to say that there was an estoppel by convention and representation although strongly noted it cannot be used as a sword but only as a shield. Akenhead has given useful guidance on the use of estoppel by convention, so is worth the read.

[Openlaw15]

Re: Estoppel by Convention

Well I could be wrong on Denning, as it has been a while since I looked into estoppel but I am sure there have been a few cases not too long ago where Estoppel was said that it could be used as a sword, but then shot down by the appeal courts. As for the australian cases, I think it is now well founded as to estoppel being a sword and not a shield, again I cannot remember the details exactly but was mentioned as reference than anything in particular.

As for Ripped-off's scenario - if you read the judgment of the 2015 Mears case it is quite similar to the issue at hand, Akenhead did go on to say that there was an estoppel by convention and representation although strongly noted it cannot be used as a sword but only as a shield. Akenhead has given useful guidance on the use of estoppel by convention, so is worth the read.

It was a 2001 case at the Court of Appeal....where an estoppel as cause of action was attempted....by a lower court authority, but the judges rejected any basis for an estoppel. So, the only persuasive authority is the 1988 Aussie case you alluded to, but the facts in the Australia were about land, ie property...as I had thought. I will look up the Mears case though as any modern guidance of Estoppel especially its apparent extent, ie by convention, representation, is well worth an update.

[CLL1]

Re: Estoppel by Convention

Would an argument based on Estoppel by Convention succeed in the following scenario......

Party A (the payer) and Party B (the worker) enter into a contract. The contract does not specify what supporting information Party B is to provide to Party A when requesting payment, in order to prove that the work has been done. Party B, therefore, provides photographs to Party B to prove the work was done and provides further information to show where the photgraph was taken, enabling Party A to check if necessary.

This method is used for around 6 months. Party A doesn't check but makes payment anyway, until he realises the cost is becoming far more than he had anticipated.

Unexpectedly Party A says "I don't like this system anymore, it takes me too long to check the photos. Instead we will go out together and look at your work from now on" knowing full well that the earlier work is now covered and inaccessible.

Party B agrees but says "What about the work I have done for the past 6 months, it's covered up now, how can we check that?"

Party A says "Well we will use the work you do from now on to retrospectively value what you have done before and make an adjustment to your next payment if necessary".

Party B protests, vehemently. "If we do that, we won't pick up all of the work that I did and I'll lose out."

"Tough", says Party A. "We can check the work that is not yet covered up, but the work that is covered will have to be judged retrospectively based on what we see elsewhere whilst we are walking around. We can value the work on a pro rata basis".

Based on the new system Party A thinks that he has overpaid Party B and does not make any further payments. Party B is adamant that the new pro rata system does not accurately reflect what he did in the preceding 6 months. Party B is furious and threatens Court action based on an argument of Estoppel by Convention.....that is, he thought the original method had been impliedly agreed between them and he cannot now go back to his earlier work to prove that it was done. All he has is a photo.

An estoppel by convention may arise where both parties to a transaction act on an assumed state of facts or law, the assumption being either shared by both of them or made by one and acquiesced in by the other. In this scenario, the parties are then precluded from denying the truth of the assumption, if it would be unjust or unconscionable to allow them (or one of them) to go back on it: see Chitty on Contracts (31st edition incorporating the second supplement, Sweet & Maxwell) at paragraph 3-107.

[R0b]

Re: Estoppel by Convention

It was a 2001 case at the Court of Appeal....where an estoppel as cause of action was attempted....by a lower court authority, but the judges rejected any basis for an estoppel. So, the only persuasive authority is the 1988 Aussie case you alluded to, but the facts in the Australia were about land, ie property...as I had thought. I will look up the Mears case though as any modern guidance of Estoppel especially its apparent extent, ie by convention, representation, is well worth an update.

Just for FYI re Denning, I was not referring to the 2001 COA case but Evenden v Guildford City AFC 1975. Denning had initially said in Combe v Combe, sword not a shield then in Re Wyvern Developments Templeman J suggested that it was no longer the case and could create a cause of action not just a defence. Denning in Evenden v Guildford appeared to follow the line of Templeman. As we now know this has been overruled but Re Wyvern appears to be good law still and I can only presume that it is because it is a very specific situation based on the facts of the case.

But applying the High Court case in Mears v Shoreline, it might seem to be a good chance of success

[Openlaw15]

Re: Estoppel by Convention

Just for FYI re Denning, I was not referring to the 2001 COA case but Evenden v Guildford City AFC 1975. Denning had initially said in Combe v Combe, sword not a shield then in Re Wyvern Developments Templeman J suggested that it was no longer the case and could create a cause of action not just a defence. Denning in Evenden v Guildford appeared to follow the line of Templeman. As we now know this has been overruled but Re Wyvern appears to be good law still and I can only presume that it is because it is a very specific situation based on the facts of the case.

But applying the High Court case in Mears v Shoreline, it might seem to be a good chance of success

Well it's property law case and a simple contract agreement is very different to commercial developers use of estoppel as 'cause of action'/ sword.. So, yes it's facts which appear to match the Aussie case, ie both were about property, so would then be a proprietary estoppel and not promissory estoppel.

[Ripped-Off]

Re: Estoppel by Convention

Thanks guys and gals.

I had the Mears case in mind when I wrote it. Only trouble is HHJ Akenhead appears to have allowed estoppel as the sword because it would have been far more expensive for Mears to prove their case without reliance on the estoppel argument, para 65 of the judgment.

In this scenario, it wouldn't be so much the expense of proving the work was done, but it would be virtually impossible where work was concealed or rendered inaccessible.