The High Court’s recent decision in Sidhu v Van Dyke means that if you have relied on a promise and the other party has resiled from that promise to your detriment, you will need to prove that you relied on that promise and suffered a loss as a result.
Where detrimental reliance is proved, the High Court has indicated that a starting point for determining a remedy is to make good a representor’s promise.
Sidhu and Van Dyke commenced a romantic relationship in 1997 while Van Dyke was married to the brother of Sidhu’s wife. Van Dyke and her husband lived in Oaks Cottage, a house on an un-subdivided property owned by Sidhu and his wife as joint tenants. Van Dyke’s husband learned of the relationship and they separated in 1998. Van Dyke and Sidhu ended their relationship in 2006 and Sidhu refused to convey Oaks Cottage and the property on which it stood (“the Oaks Property”). Over the course of their eight and a half year relationship, Sidhu had made a number of representations to Van Dyke, including:
- that he was planning to subdivide the property and would transfer ownership of Oaks Cottage to her in which she could raise her child;
- that she did not need to obtain a divorce and property settlement from her husband, and she subsequently forewent that opportunity;
- that she should continue to pay what she could afford as rent to Sidhu’s wife, on the understanding that although Oaks Cottage would be her property, they should continue to “keep things low key” with Sidhu’s wife;
- a signed note confirming that during the years 1996 to 2000, he had expressed to her that he was willing to gift her Oaks Cottage;
- an email which proposed terms for a transfer of the property at a price based on valuation by agents but with Mr. and Mrs. Sidhu agreeing to bear the financial burden of defraying that price; and
- a handwritten statement in which Sidhu said that his wife agreed that when Oaks Cottage was rebuilt after it had burnt down, the transfer of the property on which the house was rebuilt would be done as soon as possible.
In reliance upon these representations, Van Dyke:
- did not seek full-time employment on the understanding that Oaks Cottage would be hers, and as a result lost the opportunity to earn wages which she might have earned;
- carried out unpaid work in relation to the maintenance and renovation of Oaks Cottage and the improvement and maintenance of the un-subdivided property and an adjoining rural property owned by a company in which Mr. and Mrs. Sidhu owned shares; and
- was actively involved in the subdivision of the property.
The High Court’s decision
The High Court found that the Court of Appeal had erred in basing its decision on a ‘presumption of reliance’, in which it had found in Van Dyke’s favour that if inducement by a promise can be inferred from Van Dyke’s conduct, then she was presumed to have relied on the representation to her detriment unless the defendant established otherwise. The Court of Appeal had found that Mr. Sidhu had failed to rebut this presumption.
The High Court unanimously held that Van Dyke bore the onus of proof in relation to establishing detrimental reliance, the same as the other elements of equitable estoppel. In any event, Sidhu’s appeal was unanimously dismissed on the basis that the evidence at trial established Van Dyke had acted to her detriment in reliance on Sidhu’s representations.
It was held that although there will be cases where it would be inequitable to insist on the representor making good the promise, where the unconscionable conduct consists of resiling from a promise which induces the other party to perform (or not perform) acts to their detriment, the usual value of the relief will be the fulfilment of the promise. Van Dyke was entitled to equitable compensation in an amount of the assessed value of the Oaks Property.
Consequences for individuals and businesses making equitable estoppel claims
This decision means that if you are seeking to stop another party from breaking a promise they made to you, you will not be able to argue for a ‘presumption of reliance’ to your detriment, but will instead need to prove detrimental reliance. Where detrimental reliance is proved, the High Court has indicated that a starting point for determining a remedy is to make good the representor’s promise.
If you have broken a promise on which the other party has relied to their detriment, any argument for an alternate remedy should comprise strong reasons as to why the normal rule (i.e. enforcing the promise) should not apply, which may include the relatively large amount of damage you would sustain if you had to make good on the promise, and the detriment sustained by the other party if the promise was not enforced.