In Kramer v Stone [2024] HCA 48, the High Court dismissed an appeal from Kramer v Stone [2023] NSWCA 270; 112 NSWLR 564 concerning the criteria for establishing liability under “proprietary estoppel by encouragement,” an equitable remedy based on an expectation of future property ownership induced by representations that the respondent relied upon to their detriment.
Ms. Kramer (the first appellant) inherited a farm property located at Upper Colo, New South Wales (“the Farm”) from her mother, Dame Leonie (the deceased), as specified in her Will. From 1975, the Farm was managed by David Stone (the respondent) under an oral agreement with the first appellant’s father, Dr. Kramer, for approximately 40 years.
Dr. Kramer died in 1988, leaving his wife, the deceased, as the sole owner of the Farm. Shortly after Dr. Kramer’s passing, the deceased unexpectedly promised the respondent that she and Dr. Kramer had agreed the Farm would go to him upon her death. The concurrent finding in [2023] NSWCA 270; 112 NSWLR 564; [2021] NSWSC 1456 established that the deceased was aware that the respondent would rely on this promise when she made it.
There was no evidence that the deceased took any actions after making the promise that encouraged the respondent to rely on it. Stone v Kramer [2021] NSWSC 1456 concluded that the deceased had probably forgotten her promise. Relying on the promise, the respondent acted to his detriment by maintaining farming operations for around 23 years following the promise.
The respondent experienced financial detriment by receiving only an irregular and minimal income from the Farm and non-financial detriment by living in poor conditions on the Farm. The deceased passed away in April 2016. In her will, the deceased bequeathed the respondent $200,000 and the Farm to the first appellant.
Stone v Kramer [2021] NSWSC 1456 determined that the deceased’s promise created an estoppel that entitled the respondent to appropriate equitable relief. Instead of the $200,000, Stone v Kramer [2021] NSWSC 1456 found the Farm was held in trust by the appellants (executors of the deceased estate) for the respondent. Kramer v Stone [2023] NSWCA 270; 112 NSWLR 564 dismissed the executors’ appeal.
In Kramer v Stone [2024] HCA, the High Court, in a majority decision, dismissed an appeal from Kramer v Stone [2023] NSWCA 270; 112 NSWLR 564. The High Court stated there are four components necessary for establishing equitable estoppel arising from a promise:
- (i) There must be a clear and unequivocal promise;
- (ii) a reasonable person in the promisor’s position should have anticipated or intended, or the promisor must have genuinely expected or intended that the promisee would rely on the promise by taking some action, omission, or course of conduct;
- (iii) the promisee must have relied on the promise by acting or choosing not to act in a manner that would be expected; and
- (iv) Due to the promisee’s reliance, the promisee would experience detriment if the promise is not fulfilled.
In dismissing the appeal, the High Court affirmed that the respondent had established these components. The High Court dismissed the appellants’ submission that to establish an equitable estoppel by encouragement, the promisor must have engaged in actions after the promise that further encouraged the promisee in their reliance or that the promisor must have been aware that the promisee was relying on the promise.
The joint judgment went on to observe that:
“[I]t is the conduct of the representee induced by the representor which is the very foundation for equitable intervention. … It is not the breach of promise, but the promisor’s responsibility for the detrimental reliance by the promisee, which makes it unconscionable for the promisor to resile from his or her promise.” Kramer v Stone [2024] HCA 48 at [91]
The High Court allowed the appeal, resulting in the respondent’s statement of claim being dismissed with costs.