In this paper, I will be discussing the development of the doctrine of estoppel in Malaysia in the light of the statement below

by Brennan J in the case of Waltons Stores (Intestate) Ltd v Maher (1988) 164 CLR 394:

The element which both attracts the jurisdiction of a court of equity and shapes the remedy to be given is unconscionable conduct on the part of the person bound by the equity, and the remedy required to satisfy an equity varies according to the circumstances of the case.

Introduction and the basis for the doctrine estoppel

In simple terms, an estoppel is an equitable claim that prevents someone from denying the existence of a state of affairs in circumstances where such denial would be unconscientious. This necessarily has an impact upon those legal rights which would otherwise be exercisable by the person estopped. A simple example would be a situation where A has induced B to believe that A will not insist upon his or her strict legal rights under a contract that exists between them.1 If B relies upon the assumption that B will not be exposed to liability should B fail to perform his or her obligations exactly, the law recognises that it is unconscionable to allow A to subsequently sue B for breach of contract on those grounds. The basic idea of estoppel at common law is that where a man asserts the existence of a state of affairs, he cannot afterwards deny that which he has asserted. This has come to be adopted both in common law and equity. It is a doctrine that is flexible used mostly by the courts to prevent injustice between the parties which results from a person repudiating the foundation of a belief or assumption which he or she has induced when the repudiation will cause harm to the person holding that belief.

The doctrine of estoppel is often used in various branches of law, including company law, civil procedure, contracts, assignments and others. Based on unconscionability, the doctrine allows the courts to tailor the remedy to take into account circumstances surrounding the case.2

Distinction between common law and equitable estoppel

1 2

Muthiah v Lee Kor Fan [1966] 1 MLJ 105.

Mary George, Malaysian Trust Law (Pelanduk Publications, 1999).

At common law the focus has been upon assumptions of fact. These could arise by means of judicial decision (estoppel by record or issue estoppel), agreement by both parties (estoppel by deed or estoppel by convention), and also by representation made by one to the other (estoppel by representation). The general principle of common law estoppel was stated by Dixon J in Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641, at 674 as being that, the law should not permit an unjust departure by a party from an assumption of fact which he has caused another party to adopt or accept for the purpose of their legal relations. It is commonly said of common law estoppel that it is a rule of evidence while estoppel in equity may confer substantive rights. By this it is meant that common law estoppel is a device used merely to determine the facts upon which the legal rights of the parties will then be determined by the court, whereas, in equity, rights flow directly from the operation of estoppel in equity. This classification is a natural consequence of the first distinction if the scope of common law estoppel is confined to representations of fact, its true role is to establish which facts the court will adjudge. If the estoppel is successfully raised, then the representor will be precluded from denying the facts assumed by the representee.

Common law estoppel operates upon a representation of existing facts whereas equitable estoppel operates upon representations or promises as to a future conduct, including promises about legal relations. Thus it has been said that common law estoppels operate by reference to an assumption of fact whereas estoppels operate by reference to an assumption of rights.

Modern equitable estoppel is the result of bringing together the two significant forms of estoppel that existed in equity promissory estoppel and proprietary estoppel

Equitable estoppel (or estoppel by conduct in equity) may be considered in two main forms

(a) (b)

Promissory estoppel Proprietary estoppel

Promissory Estoppel

The doctrine of estoppel by representation is expanded in equity so as to include not only representation of fact but also representation of intention, or promise.

The basic princple is that, a person who makes an unambiguous representation by words or conduct or by silence of an existing fact, and causes another party to act to his detriment in reliance on the representation will not be permitted subsequently to act inconsistently with that representation.

Equity binds the holder of a legal right who induces another to expect that the right will not be exercised against him. In the case of Muthiah v Lee Kor Fan,3 the plaintiff by consenting to various transactions whereby the authority to mine under the sub-lease passed from the defendant to the present permit holders had led the defendant to believe that he would not take action for breach of clause 8(iii) of the sub-lease; and the plaintiff by authorising Leong Fong Yuan, who had gone to see him on behalf of the defendant on a certain day in March 1964, to implement the approved mining scheme, and by accepting a plan of the scheme from Leong Fong Yuan, by visiting the mine on the following day to see the works in progress and also by his previous conduct had represented to the defendant, the sub-sub-lessees and the permit holders that he would not take action under clause 8(iii) of the sub-lease and is therefore estopped from proceeding under clause 8(iii) of the sub-lease. No evidence that the doctrine of estoppel applied to the facts of this case. The plaintiff sub-leased his land to the defendant on the 13th of January 1961 and on the same day the defendant sub-sub-leased it to Wong Fook Choon. After working the land for some time Wong Fook Choon ceased mining operations in August 1962. The legal position then was that in or after September 1962 the plaintiff was entitled to take action under clause 8(iii) of the sub-lease to have it cancelled. Because he abstained from doing so and did not object to Wong Fook Choon transferring his sub-sub-lease to Leong Fong Yuan and Leong Kee Seong on the 17th of June 1963, the plaintiff is alleged to have represented to the defendant that he would not take action to cancel the sub-lease. Now, if during the 12 months from September 1962 the plaintiff did not take action to cancel the sub-lease, the principal lease was not in jeopardy of cancellation by virtue of the period of grace allowed under section 16(iii)(c) of the Mining Enactment. But long before the expiry of that period Wong Fook Choon transferred the sub-sub-lease to the present sub-sub-lessees and, according to the defendant, the plaintiff was happy to hear of it. This is certainly not evidence of a representation by plaintiff that he would not take action to cancel the sub-lease but of a representation made to the plaintiff to the effect that mining operations would be resumed
3

[1966] 1 MLJ 105

shortly. If in those circumstances anyone was induced to alter his position to his detriment it was the plaintiff who was induced not to take action under clause 8(iii) of the sub-lease and thereby lose the opportunity of getting someone else to work his land within a reasonable time.

Aw Yong Wai Choo and Ors v Arief Trading Sdn Bhd & Anor [1992] 1 MLJ 166 (the real test is whether in the circumstances of the case the situation has arisen where it is unjust and unfair for the plaintiff or the party with the rights to insist on his rights.)

Effect of promissory estoppel

The application of promissory estoppel is limited to a defence. It does not create a cause of action where none existed before. In the case of Liew Ah Hock v Malayan Railway,

Nevertheless, promissory estoppel may have the effect of enabling a person to insist on his right based on the assumption by both parties. Without estoppel, that right would not have existed. In the case of Cheng Hang Guan (Penang) Sdn Bhd & Ors v Perumahan Farlim

Proprietory estoppel

In relation to proprietary estoppel, it always was able to act as a sword as well as a shield and it is this feature that it has brought to equitable estoppel generally Proprietary estoppels other major difference from promissory estoppel is its operation in the realm of real property law. This estoppel operates to restrict the legal rights of landowners if they have encouraged the belief in another, or at least acquiesced in that others belief, that she or he has some entitlement over the property and that belief has been acted upon, for example, by some alteration or improvement having been made to the land. However, no proprietary estoppel claim is available if the plaintiff and defendant have a legally enforceable contract relating to the property: Giumelli v Giumelli (1999) 196 CLR 101, at 121; 161 ALR 473, at 482; Riches v Hogben [1985] 2 Qd R 292, at 301. As Young CJ in Eq observed in Barnes v Alderton [2008] NSWSC 107, at [55], contract and proprietary estoppel are mutually exclusive.

Proprietary estoppel can operate to prevent an owner of an interest in property from asserting his or her rights against another party whom he or she has allowed or encouraged to deal with that interest, or in relation to the property, as if the latter had rights to the said property. This form of estoppel traditionally arose in two ways, which are estoppel by encouragement, where the representor encouraged expenditure on his or her property by some representation or benefit; or estoppel by acquiescence, where the representor passively acquiesced to the expenditure.

Where a person (X) placed reliance and was encouraged to act in a certain way which gave rise to certain detriment as a result of that representation or encouragement by another (Z), it is unjust for Z to deny that right, especially where X has expended money because of his reliance on Zs encouragement.

To illustrate, in the case of Teng Huan v Ang Swee Chuan [1992] 1 MLJ 393; Ramsden v Dyson (1865) LR 1 HL 129 Inwards v Baker [1965] 2 QB 69

The elements of encouragement

The reliance of the plaintiff is based on the encouragement of the other party.

Cases Cheng Hang Guan (supra) Boustead Trading Sdn Bhd v Arab Malaysian Merchant Bank (1995) 3 MLJ 331

Detriment may take the form of expenditure, or even working as a house helper without pay based on the representation and encouragement of another, or an opportunity forgone in reliance of a promise.

Cases Cheng Hang Guan (supra)

New interpretation of the doctrine of estoppel

Cases: Legione v Hateley (1983) 152 CLR 406 ( clear and unequivocal representation)

Waltons Stores (Intestate) Ltd v Maher (1988) 164 CLR 394 In Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; 76 ALR 513, the High Court handed down its most significant decision on the topic of estoppel. The significance of this case was that it consolidated promissory and proprietary estoppels into the single, and broader, principle of equitable estoppel

The High Court in Australia modified the doctrine of estoppel in three important respects: (a) (b) abandoned the requirement that the parties be in a prepermitted promissory estoppel to be used as a cause of existing legal relationship; action (a sword) rather than

merely a defence (a shield); (c) the criteria upon which the court exercised its jurisdiction was unconscionability.

Boustead Trading Sdn Bhd v Arab Malaysian Merchant Bank (1995) 3 MLJ 331 (flexibility of the doctrine) see decision of Gopal Sri Ram JCA.

The doctrine of estoppel is a flexible doctrine which can be used to ensure that justice is done in various circumstances. Although the doctrine may only be used as a shield and not a sword, the doctrine may be used by both the plaintiff as well as the defendant.

Chor Phaik Har & 2 Ors v Choong Lye Hock Estates Sdn Bhd &Ors [1996] 2 MLJ 206: ( Boustead Trading (1985) Sdn Bhd v AMMB Bank and Habib Bank Ltd v Habib Bank AG Zurich [1981] 2 ALL ER 650 followed)

Held inter alia:

(1)

It is settled beyond argument that estoppel is a flexible doctrine by

which

justice is done according to the facts of a particular case. It apply the doctrine to the facts of a

was, therefore, erroneous to

case as though it were some form of legal straitjacket.

(2) Although decided cases speak of some of the features of the doctrine, such as a declaration or a representation and an inducement, these were but statements made in the context of the facts and circumstances of the particular case in which they appear. At the end of the day, the court has to answer the question: is it just that this particular litigant should, in the light of his conduct, succeed in the action given the peculiar facts of the case? If the answer to that question is in the affirmative, then the doctrine does not apply; if it is in the negative, then it does (see p 216H); Boustead Trading (1985) Sdn Bhd v Arab-Malaysian Merchant Bank Bhd [1995] 3 MLJ 331 and Habib Bank Ltd v Habib Bank AG Zurich [1981] 2 All ER 650 followed

(3)

All that a representee need do is to place sufficient material before a court from which an

inference may fairly be drawn that he was influenced by his opponent's actings . It is sufficient that 'his conduct was so influenced by the encouragement or representation ... that it would be unconscionable for the representor thereafter to enforce his strict legal rights' (per Robert Goff J in Amalgamated Investment [1982] 1 QB 84 at p 105).

(4)

It is essentially the application of a rule by which justice is done where the circumstances of the conduct and behaviour of the party to an action are such that it

would be wholly inequitable that he should be entitled to

succeed in the proceeding.'

Fiduciary Duties in Relationships Between Governments and Its Citizens-

Sagong Tasi v Kerajaan Negeri Selangor [2002] 2 MLJ 591 Kerajaan Negeri Selangor v Sagong Tasi [2005] 6 MLJ 289