EQUITABLE ESTOPPEL

LAW 3710 / EQUITY AND TRUST I

SECTION 2

TUTORIAL: THURSDAY, 3-4 PM

INSTRUCTOR: DR. MUHAMMAD HASSAN BIN AHMAD

AHMAD IBRAHIM KULIYYAH OF LAWS, IIUM

DECEMBER, 2020

NAME MATRIC NUMBER

TASNEEM BT S.ANUAR @ SHAIFUL ANUAR 1818596

Introduction
Estoppel is a legal principle that prevents someone from arguing or alleging
something or asserting a right that contradicts to what they have previously said or agreed to
by law. It is meant to prevent people from being unjustly wronged by the inconsistencies of
another person's words or actions. The basic concept of an estoppel is that where a person has
caused another to act on the basis of a particular fact and circumstances, he is prevented from
going back on the words or conduct which led the other to act on that basis. In other words,
he is estopped from denying the existence of that particular fact.

The term Estoppel is derived from a maxim, “allegans contraria non est audiendus”
which implies a person alleging contradictory facts should not be heard. This is a simple
common sense and common justice as doing against the maxim will result in an unjust
outcome towards the innocent party.

Estoppel is recognised as a rule of evidence​1​. The doctrine of estoppel in Malaysia

comprises common law estoppel and equitable estoppel. Estoppel may act as a shield or a
sword depending on the circumstances and cases. This means that both plaintiff and
defendant have the right to invoke this right. Estoppel acts as a sword if it is invoked as a
cause of action. On the other hand, it works as a shield if it is invoked as a defence.

Situations to Invoke Estoppel

In Malaysia, the doctrine of unconscionability was invoked by judges in granting

estoppel and it began with the landmark case of ​Boustead Trading Sdn Bhd v ArabMalaysian
Merchant Bank Bhd​2 Unconscionability is understood as a doctrine used by the court to
correct men’s conscience against conducts and bargains that are unconscionable​3​. In other
words, the court has the power to correct a conduct when it is not in accordance with what is
just or reasonable. In this case, the appellant bought goods on credit from Chemitrade Sdn
Bhd who then entered into a factoring agreement with the respondent under which the
respondent agreed to factor Chemitrade's debts owed by the appellant to Chemitrade. Copies
of invoices were given to the respondent who then stamped the invoices with the indorsement
that any objection was to be reported to the respondent within 14 days of its receipt. The
invoices and the 14-day period were not challenged by the appellant. Several invoices were
paid by the appellant but later refused to make payment on 20 invoices. It was argued that
nothing was payable on the invoices due to the cautionary statement in the invoices.

The court held that despite a 14-day limit in the indorsement, the appellant did
nothing to object to such rule and remained silent. Not only that, the fact that the appellant
made payments on those invoices without protest would lead any reasonable man to assume
that the appellant agreed to the imposition of a 14-day limit. By protesting some seven
months later was characterised as being unconscionable and inequitable. The appellant was
subsequently barred from challenging the validity of the indorsement. Gopal Sri Ram JCA (as
he then was) stated that ‘time has come for this court to recognise that the doctrine of

1
Ali, Z., Syed Abdul kader, S., Mohamad, N. and Hamzah, H., 2016. Equity And Equitable Remedies
In Malaysia. LexisNexis, p.61.
2
2 [1995] 3 MLJ 331
3
Zahira Mohd Ihsan and Shaik Mohd Noor Alam, “Unconscionability – Statutory Prevention of
Unethical Business Practices,” Int. Journal of Economics and Management 3, no. 1 (2009): pp. 151,
http://www.ijem.upm.edu.my/vol3no1/bab10.pdf.

2
estoppel is a flexible principle by which justice is done according to the circumstances of the
case.’ This means that the doctrine of estoppel concerns to achieve justice in which it works
according to the facts and circumstances of a case. The court will look at the action of the
parties and will consider whether it is unconscionable. If it is unconscionable, the court will
grant estoppel to estop the party.

The Federal court in Boustead found that the doctrine of Estoppel is wide and the
situations which it may operate are endless. Some of the situations include:
1. to prevent the defendant from relying on Limitation act 1953
2. to enlarge or reduce the rights or obligations of a party under a contract
3. to prevent a litigant from denying the validity of an otherwise invalid trust
4. to prevent a litigant from denying the validity of a lease for want of registration
5. to prevent a litigant from asserting that there was no valid and binding contract between
him and his opponent
6. to create binding obligations where none previously existed

Types of Estoppel

There are three types of estoppel namely, estoppel by representation, promissory

estoppel and proprietary estoppel. The first one originates from common law while the
second and the third are the products of equity.

A. Estoppel by Representation
This type of estoppel is applicable in Malaysia as a rule of evidence under section 115
of the Evidence Act 1950. -------------------------------- Under the said section, it says:
“​When one person has by his declaration, act or omission intentionally caused or permitted
another person to believe a thing to be true and to act upon such belief, otherwise than but
for that belief he would have acted, neither he nor his representative in interest shall be
allowed in any suit or proceeding between himself and that person or his representative in
interest to deny the truth of that thing”.

This section deals with estoppel by representation or conduct and provides that when a person
has by his:
(a) declaration
(b) act, or
(c) omission,
intentionally caused or permitted another person:
(i) to believe a thing to be true and
(ii) to act upon such belief, then neither he or his representative shall be allowed to
deny the truth of that thing----------------------------------------------- in any suit or proceeding
between himself and such person or his representative.
From the said provision, there are three elements to be fulfilled in order to successfully
invoke estoppel by representation:
1) there must be an unambiguous representation by words, conduct or silence in
the nature to induce;
2) the representation must be of an existing fact;
3) there was reliance on the representation.

3
 To further understand this type of estoppel, we can refer to the case of ​Pickard v
Sears​ which was referred to by Raja Azlan Shah FJ in ​Public Textiles Bhd v Lembaga Letrik
4

Negara5​ a​ s “That, where one, by his words or conduct, willfully causes another to believe in
the existence of a certain state of things, and induces him to act on that belief, or to alter his
own previous position, the former is concluded from averring (claim) against the latter a
different state of things as existing at the same time” Referring to the said judgement, we can
totally understand that a person is barred from changing his position after he has by words or
conducts induced another person to believe a fact and subsequently acts according to that
belief.
In another case of ​Commissioners of the Municipality of Malacca v Sinniah6​ ​, the
plaintiff is the Commissioner of the Municipality of the Town and Fort of Malacca. The
Municipality are the owners of premises known as Quarters No. 116 Jalan Bukit China.
Malacca. The defendant was an employee of the plaintiff and the said quarters were allotted
to him by reason of his employment with the Municipality. The defendant joined service with
the Municipality on 1 July 1938. According to the record of his service, he was twenty five
years of age at that time. He could serve the Municipality up to the age of fifty five. If he was
twenty five in 1938, he must have been born in 1913 which meant that he could remain in the
employment of the Municipality only up to 1968. The only plea taken up in the defence was
that as the defendant was born in 1922, he could not be evicted, that his retirement was
wrongful, that he was entitled to remain in occupation of the quarters until he reaches the age
of fifty five.

The court held that the defendant failed to discharge the onus cast on him. Thus, the
defendant was “estopped” from denying that he was twenty-five years of age at the time
of his employment as stated in the Record of Service. The judge states “Again the
defendant is “estopped” from denying he was twenty five years at the time of his
employment. He was employed on the faith induced by him that he was twenty five”.

Sinniah case can be distinguished with the case of ​V Veeriah v General Manager,
Keretapi Tanah Melayu​7.​ ​The plaintiff was an employee of the defendant. From his record of
service, his date of birth was stated as June 26, 1916. Accordingly he was retired from the
service of the defendant pursuant to the Pensions Ordinance on June 26, 1971. The plaintiff
sought a declaration that he had been prematurely and unlawfully retired before reaching the
age of 55 and for a declaration that on June 26, 1971 his correct age was 51 years old. The
following facts were agreed: the plaintiff was in fact born on June 2, 1921 and not on June
26, 1916. His Identity Card, E.P.F. Membership Card and Citizenship Certificate all showed
his date of birth as June 2, 1921. The plaintiff had taken steps to obtain proof that he had in
fact been born on June 2, 1921 and to have his date of birth on his service record card altered
as permitted by the General Orders governing his employment. The defence contention was
that by virtue of section 115 of the Evidence Act the plaintiff was estopped from proving his
true date of birth.

The evidence showed that even before the date of intended retirement, the
defendant already believed or had reason to believe that the plaintiff was not in fact
born on June 26, 1916. Apart from that, in order to succeed on the defence of estoppel,

4
[1837] 6 Ad & El 469, 474
5
[1976] 2 MLJ 58
6
[1974] 1 MLJ 77
7
[1974] 1 MLJ 201

4
there must be ignorance on his part as to the real date of birth of the plaintiff. However,
when both parties have equal means of knowledge of the fact, which in the present case was
the plaintiff's date of birth, there can be no estoppel​8​. This is because the plaintiff had
submitted few applications to alter his date of birth but had been rejected on the ground that it
was not sent through a proper channel. This shows that the defendant has the knowledge that
the representation made by the plaintiff in the first place was wrong. Thus, there should be no
reliance of facts on the part of the defendant. The defendant also had not fulfilled the
requirement of proving that the plaintiff had made a representation with the intention to
induce the defendant to alter his position to his detriment. Thus, the defence of estoppel
failed.

Limitation of Estoppel by Representation

Estoppel by representation cannot interfere with the exercise of a statutory power or the
performance of a statutory duty by an administrative body​9​. This means that estoppel cannot
be set up to prevent a statutory body from performing its statutory duty and it also cannot
be made against statute. This is to show that public purpose served by statutory powers and
statutes is more important compared to private interest. In other words, the public purpose
prevails over the private interest.

There are numbers of cases to illustrate this principle. We can refer to the case of
Public Textile Bhd v Lembaga Letrik Negara10 ​ where the respondent had contracted to supply
electricity to the appellants. By mistake it had considerably undercharged the appellants and
because of that they claimed some amount of charge from the appellants. The High Court
gave judgment in favour of the respondent, the learned trial judge holding that respondent
was not estopped from claiming the amount although the appellants had utilised the accounts
rendered by the respondent for the purpose of costing their products. The appellants appealed
to the Federal Court. However, the appeal was dismissed by the court on the ground that the
plea of estoppel by representation cannot be pleaded against a public corporation on
which there is imposed a statutory duty to carry out certain acts in the interest of the public.

In ​Oversea Chinese Banking Corp Ltd v eastern Auto Co Ltd11​ ​ , it was held that the
parties cannot defeat the provisions of the Control Rent Ordinance by estoppel. In ​Puran
Singh v Kehar Singh​12 it was stated “that there can be no estoppel against a statutory
provision in an Enactment which legislates on a matter of general interest”. From the cases
mentioned just now, it is clear that the right to invoke estoppel by representation is limited
especially when it comes to cases involving the statutory duties as it interferes with the
interest of the public. Thus, in such cases, the public interest will prevail.

8
Prabhas Chandra. Sarkar, S. C. Sarkar, and Sudipto Sarkar, Sarkar's Law of Evidence in India,
Pakistan, Bangladesh, Burma and Ceylon, 12th ed. (Calcutta: S.C. Sarkar & Sons (Private) Ltd.,
1971). p.1033.
9
Joshua Thomson, “Estoppel by Representation in Administrative Law,” 1988,
https://doi.org/http://classic.austlii.edu.au/au/journals/FedLawRw/1998/4.pdf.
10
Ibid
11
[1961] MLJ 300
12
[1939] MLJ 71

5
 B. Promissory Estoppel
Promissory estoppel is an equitable principle meant to prevent any occurrence of
inequity or injustice caused by the action of the promisor in backing out from his promise,
which had initially led the promisee to act to his detriment.​13 In other words, the doctrine of
promissory estoppel prevents one party from withdrawing a promise made to a second party
if the latter has reasonably relied on that promise. In the first estoppel, it only allows the
representation of the existing facts, however it is different in promissory estoppel as it allows
future representation.

Denning J in the case of ​Central London Property Trust Ltd v High Trees House​14 laid
three important requirements in proving the claim under promissory estoppel. The
requirements are:
1) there must be an unequivocal promise by words or conduct
2) there is a change in position of the promisee as a result of the promise made by the
promisor
3) It will result to inequity if the promisor wish to go back on the promise

In ​William Teo’s House and Estate Agencies v. Chang Eng Swee15 ​ ​, ​the plaintiff
claimed the sum of $3,592 from the defendant arising from transactions relating to the letting
of premises. The defendant alleged that there was a general settlement of all outstanding
claims between him and the plaintiff under which he had agreed to pay and had paid the sum
of $2,000. The plaintiff agreed that he had received the sum of $2,000 but denied that it was
an overall settlement and he claimed for the remaining settlement.

The court in coming to a decision, has referred to the High trees case where the
principle is that where one party has, by his words or conduct, made to the other a promise or
assurance which was intended to affect the legal relations between them and to be acted on
accordingly, then, once the other party has taken him at his word and acted on it, the one who
gave the promise or assurance cannot afterwards be allowed to revert to the previous legal
relations. In the William case, there was a strong evidence submitted to the court that there
was an agreement for the payment of $2,000 by the defendant to the plaintiff in settlement of
all outstanding claims between them. Thus, the defendant was right in relying on the
agreement as a defence to the claim. In this case, the defendant was not estopped from setting
up the defence.

The doctrine of promissory estoppel comes with limitation. The first one is, there
must be a pre-existing legal relationship in which there has been a clear and unambiguous
promise which the promisee has relied on and would be inequitable and unjust to allow the
promisor to go back on the previous legal relation. Secondly, this doctrine can be used to
extinguish and suspend strict legal rights and can only be used as a shield not a sword.
Promissory estoppel can be used as a defence to an action to enforce rights that have been
waived.

13
Wan Izatul Asma Wan Talaat, “Enacting Promissory Estoppel into the Malaysian Law: Towards
More Certainty in Litigation”, Journal of Politics and Law, Vol. 5, No. 2; 2012,
file:///C:/Users/Acer/Downloads/16679-55646-1-PB.pdf
14
[1956] 1 ALL ER 256
15
[1965] 2 MLJ 89

6
C. Proprietary Estoppel

This type of estoppel is used in the right of land and building occupation. Proprietary
estoppel can be understood as an assurance given from one party to another that he can
acquire a right over a property, the latter has reasonably relied on the assurance and has acted
to his detriment that it is unfair and unconscionable to go back on the assurance. The doctrine
of proprietary estoppel can be used to create freehold ownership, a lease, a licence or an
easement. Proprietary estoppel has always been associated with two type of cases namely
Ramsden v Dyson​ 16​
​ and ​Dillwyn v Llewellyn17​

In Ramsden, Lord Kingsdown stated that “If a man, under a verbal agreement with a
landlord for a certain interest in land, or under an expectation, created or encouraged by the
landlord, that he shall have a certain interest, takes possession of such land, with the consent
of the landlord, and, upon the faith of such promise or expectation, with the knowledge of the
landlord, and without objection by him, lays out money upon the land, a Court of equity will
compel the landlord to give effect to such promise or expectation.” This case is very
significant as it lays down several important requirements in order to succeed in invoking
proprietary estoppel. The requirements are:

1) there must have been some encouragements made by the landlord towards the
claimant
2) the claimant must has reasonable believed that he would obtain sufficient interest in
the property
3) the claimant must have incurred expenditure or has acted on his detriment

In determining whether or not proprietary estoppel operates in a case, the court will look for
the three elements mentioned earlier and see whether a person A, believed that he had or was
going to have a right in or over B’s property; and whether B has created or encouraged the
belief; and whether A has acted in reliance on such belief. As this doctrine evolved, new
requirements have been added by case law which there must be no bar to equity such as the
contravention of any statute. This is to protect the interest of the public.

In another English case, which is the case of Dillwyn, a father gave his son land
without complying with the correct formalities. He encouraged him to build a house on it
which cost the son £14,000. However, the father died without ever transferring the legal
estate to his son. The plaintiff then claimed an equitable interest in the property from his
father’s executor. The court held that the son was entitled to a transfer of the freehold through
proprietary estoppel. Lord Westbury LC in this case said that “if A puts B in possession of a
piece of land, and tells him 'I give it to you that you may build a house on it', and B on the
strength of that promise, with the knowledge of A, expends a large sum of money in building
a house accordingly, I cannot doubt that the donee acquires a right from the subsequent
transaction to call on the donor to perform that contract and complete the imperfect donation
which was made".

It is clear in this case that the father had made an assurance that the son would receive
the land, and in reliance upon this the son had spent a considerable amount of money. The
plaintiff has fulfilled all of the three requirements mentioned in the case of Ramsden, thus it
would be unfair to deny his interest in the property.
16
(1866) LR 1 HL 129
17
(1862) 4 De GF & J 517

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 Another illustration for proprietary estoppel can be seen in one of Malaysian cases,
Amar Singh s/o Sundar Singh & Ors v Jivanjit Kaur d/o Sohan Singh18 ​ This is an appeal case
in which it was decided in 2010, in the Court of Appeal (Putrajaya). The respondent was the
registered owner of a piece of land which she inherited from her late husband, the brother of
the appellant. The land was transferred to the respondent on 13 January 1995 under the Small
Estates (Distribution) Act 1955, after the death of her husband in 1994 but the appellant
claimed that he had proprietary estoppel over that part of the land on which he had built his
house. According to him, he had built his house on the land and occupied it since 1952 as
directed by his mother, the registered owner of the land at that time. On 7 October 1998 the
respondent issued a letter of demand to evict the appellant and his sons from the claimed
portion but he refused to move out and continued to occupy the said house. The respondent
then commenced an action against the appellant for unlawful occupation of the claimed
portion of the land.

The relevant issue to be discussed in this case is whether the appellants have
established the defence of proprietary estoppel. In this appeal the appellants had not
ventilated on the actual elements of equitable estoppel they were relying upon with clarity.
The first appellant had depended on the verbal assurances of his mother and the conduct of
his late brother who were now deceased persons. Although the first appellant adduced
evidence that he had secured the permission of his parents to remain on the claimed portion,
it was also found that the land was transferred to his mother upon the demise of his father and
then conveyed to the respondent's late husband before the mother's demise. Furthermore, the
element of detriment, which is an essential ingredient of proprietary estoppel, was not
properly proved in circumstances of this appeal. The appeal was dismissed by the court.

The judge in this case made a reference to ​Inwards and others v Baker ​[1965] 1 All
ER 446 at p 448. In this case Lord Denning MR defined the concept of equity as follows:

“It is quite plain from these authorities that, if the owner of land requests another or indeed
allows another, to expend money on the land under an expectation created or encouraged by
the landlord that he will be able to remain there, that raises an equity in the licensee such as to
entitle him to stay. He has a licence coupled with equity … that the equity arising from the
expectation of land does not fail … The court can look at the circumstances and see whether
there is any equity arising out of the expenditure of money.”

Looking at the judgement, I personally agree with the finding of the court. The first
appellant depended on the verbal assurances of his mother and the conduct of his brother in
requesting for his identity card on one occasion where the reasons for which were not known.
To say that the act of requesting for an identity card as a form as confirmation that he will get
the interest of the said land is unreasonable because the intention of the owner of the land is
not clear. Thus, it is safe to say that there is no encouragement by the owner of the land. On
the issue of detriment, the appellant claimed that he had built a house on the land, so it would
not be fair for him to vacate the land. Referring to the concept of equity as defined by Lord
Denning MR in the case of Inwards as referred by the judge in this case, the expenditure on
the land must be made under an expectation and encouragement of the owner of the land. The
appellant in this case did not fulfill both of the said requirements. Thus, it is unjust to prevent
the respondent from claiming her right over the land.

18
[2010] 6 MLJ 771

8
Conclusion
Equitable estoppel plays an important and huge part in Malaysia’ justice system. The
doctrine of unconscionability forms the integral part of equity. Looking at the cases, we can
understand that the courts had relied on the doctrine of unconscionability to grant estoppel.
There is no doubt that the doctrine of estoppel is a flexible concept and should be invoked in
necessary situations to ensure justice is served so as to help the innocent and the injured
party. Such development of doctrine of unconscionability ensures justice is done even in the
most rigid circumstances.

9
References

Zuraidah Ali, Sharifah Zubaidah, Nor Asiah Mohamad and Hamimah Hamzah. Equity and
Equitable Remedies in Malaysia. Malaysia: Lexis Nexis, 2016.

Ratanlal & Dhrajlal, The Law of Evidence, 609-654,( 21st Edition, 2009), LexisNexis
Butterworth Wadhwa, Nagpur

Zahira Mohd Ihsan and Shaik Mohd Noor Alam, “Unconscionability – Statutory Prevention
of Unethical Business Practices,” Int. Journal of Economics and Management 3, no. 1 (2009):
pp. 151, http://www.ijem.upm.edu.my/vol3no1/bab10.pdf.

Prabhas Chandra. Sarkar, S. C. Sarkar, and Sudipto Sarkar, Sarkar's Law of Evidence in
India, Pakistan, Bangladesh, Burma and Ceylon, 12th ed. (Calcutta: S.C. Sarkar & Sons
(Private) Ltd., 1971). P.1033.

Joshua Thomson, “Estoppel by Representation in Administrative Law,” 1988,

https://doi.org/http://classic.austlii.edu.au/au/journals/FedLawRw/1998/4.pdf.

Wan Izatul Asma Wan Talaat, “Enacting Promissory Estoppel into the Malaysian Law:
Towards More Certainty in Litigation”, Journal of Politics and Law, Vol. 5, No. 2; 2012,
file:///C:/Users/Acer/Downloads/16679-55646-1-PB.pdf

10