Recovering payments made voluntarily and with full knowledge that they may not be due. Estoppel in pais

Grundt v The Great Boulder Proprietary Gold Mines Ltd ((1937) 59 CLR 641) concerned a tribute agreement (the right to mine gold from a specified seam). The agreement allowed G to mine the ore. He was then to deliver it to the mine owner which would process it and account to G for half of the proceeds of sale. On 8 May 1935, the mine owner complained to G that he was mining in an area that was not covered by the agreement. At a meeting on 29 May 1935, G offered to stop all mining until the dispute as to the extent of the seam covered by the agreement could be settled by arbitration. The owner’s representative told him not to do this but it was still clear that there was a dispute and that the owner was not prepared to agree to G’s understanding as to the area covered by the agreement. Nevertheless, the mine owner continued to process all of the ore delivered by G and to account for a half share even though the owner was aware that G was still mining the disputed area as well as the area that was certainly covered by the agreement. There were no further discussions but in August 1936, the owner purported to cancel the tribute agreement.

The High Court of Australia held that G had indeed trespassed beyond the area covered by the Tribute Agreement and would have to account for all of the excess profit earned up to May 1935. It would not, however, have to account for the excess profit in respect of the period from May 1935 up until the time of the attempted cancellation. There was unanimity as to this outcome but a difference of opinion as to how it should be arrived at. The majority (Dixon and McTiernan J) did not think that there was any estoppel. Rather they were of the opinion that it would be inequitable to allow the mine owner to recover the excess for that period since it had continued to receive the extra ore, process it and account for the proceeds of sale. It was also relevant to note the speculative and hazardous nature of G’s work in mining the ore. Dixon J. said:

‘Payments made in respect of a disputed liability are voluntary and cannot be recovered either directly or as damages representing part of a loss.’ (679)

and a little later:

‘Equitable remedies are not available to parties who, though openly claiming a right at the time, so conduct themselves as to make it unfair and inequitable to go back and rip up a transaction or dealing in order to enforce the right against those who infringed it.’ (679)

The majority thought that there was no estoppel since the owner had always made it clear that it disputed G’s right to the ‘extra’ ore; thus there was no representation by the owners nor were the owners misled by them into an assumption that the ‘extra’ ore was covered by the agreement. Latham CJ, by contrast, thought that estoppel in pais was applicable and led to the same outcome. The judgments both of Latham CJ and of Dixon J devote a considerable amount of attention to the essential elements of estoppel in pais.

Latham CJ said:

‘Where a person obtains advantages by relying upon rights which can exist only upon the basis of an assumed state of facts, he is not permitted thereafter to rely upon other rights in relation to the same person which are inconsistent with the existence of the rights formerly asserted.’ (657)

Latham CJ thought that these requirements were met in the present case. The mine owner had rejected the offer to cease mining. G was accordingly induced to spend money to mine the ‘extra’ ore. The owners had represented that they were content ‘to regulate the relations between the tributers and itself upon the basis that the agreement applied in all respects to the ore produced from the western swing.’ (657)

Dixon J said:

‘The principle upon which estoppel in pais is founded is that the law should not permit an unjust departure by a party from an assumption of fact which he has caused another to adopt or accept for the purpose of their legal relations … One condition appears always to be indispensable. That other must have so acted or abstained from acting upon the footing of the state of affairs assumed that he would suffer a detriment if the opposite party were afterwards allowed to set up rights against him inconsistent with the assumption.’ (674)

But, in addition:

“Before anyone can be estopped, he must have played such a part in the adoption of the assumption that it would be unfair or unjust if he were left free to ignore it’ (675)


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