Promissory estoppel as a sword?

In Walton’s Stores (Interstate) Ltd v Maher (164 CLR 387) the majority of the Australian High Court took the view that promissory estoppel could be used to found a cause of action. M and W were in negotiation for the grant of a six year lease by M to W of some business premises. The agreement was that once there was a binding lease agreement, M would demolish property on his land and erect a new building to W’s specifications. W’s solicitors submitted a draft lease and M’s solicitors made amendments. Time was pressing if the work was to be completed according to the envisaged schedule. M’s solicitors explained this and that their client did not want to carry out demolition works until the lease had been entered into. They asked whether their amendments were accepted. They were told that they could assume that the amendments were accepted unless they heard to the contrary. W’s solicitors sent M’s solicitors a form of lease incorporating their amendments. Since W’s solicitors did not come back to them with any objection to the amendments, M executed the lease and returned it to W’s solicitors. They got on with the demolition and construction work. In the meantime, W reviewed its commercial strategy and had second thoughts about proceeding. It told its solicitors to ‘go slow’. Even when it became aware of the work being done by M, it did nothing to warn him that there was no binding agreement or of its change of mind. It only revealed its change of heart when the works were nearly half complete.

The Australian High Court unanimously affirmed the order of the court below that W pay damages to M. The majority of the High Court took the view that W was estopped from reneging on an implied promise to complete. W had induced M’s belief that exchange was a mere formality, known of M’s reliance and detriment and done nothing to warn M of the true state of affairs. It was unconscionable for W to be allowed to retreat from the belief that it had induced. Promissory estoppel is invoked as the cause of action. An alternative route to the same conclusion followed by two members of the High Court relied on estoppel by conduct (estoppel in pais): W was estopped from denying that a contractually binding exchange had taken place.


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