Estoppel by representation is a rule of evidence

The common law doctrine of estoppel by representation is a rule of evidence. Where it is sucessfully invoked but there is a disproportion between the gain to the representee and the detriment suffered, equity can play a part and only allow the estoppel to be relied upon to the extent of the detriment suffered by the representee.

In National Westminster Bank plc v Somer International (UK) Ltd ([2001] EWCA Civ. 970, CA (Eng)) S told the bank that it was expecting to receive between US$70,000 and US$78,000 from M, a customer of S. Some time later the bank received just over US$76,000 from a different party intended for a different customer but, by mistake, told S that the expected payment from M had arrived. It credited this money to S’ account. As a result, S sent goods worth GBP 13,000 to M. The bank then realised its mistake and sought to recover the US$76,000 from S.

The English Court of Appeal decided that it was bound by authority to the view that estoppel by representation is a rule of evidence rather than of substantive law. This would appear to suggest an ‘all or nothing’ response to a case like the present; it appears that either S could keep all of the money or none of it, that the estoppel is either made out or not.  However, even though the doctrine was a creature of the common law, there was room for equity to play a part so that, in appropriate cases, the estoppel defence was only available to the extent of the detriment suffered (para 43 per Potter L.J.).

This was such a case: there was a clear disproportion between the amount received by S and the detriment that it had incurred. It would be unconscionable for it to be able to rely on the defence for any sum greater than the value of the goods sent to M after the bank’s representation. The balance was to be repaid to the bank.

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