Kramer v Stone: Using Proprietary Estoppel to enforce an unfulfilled promise

The recent High Court decision in Kramer v Stone [2024] HCA 48 confirmed the position accepted by the Courts in Australia on proprietary estoppel and clarified some of its key elements.

Proprietary Estoppel – Overview

Proprietary estoppel is a legal principle that may apply where:–

1. a party (Promisor) makes a “clear and unequivocal” promise to another party (Promisee) – for example that the Promisee has or will obtain an interest in the Promisor’s property,
2. encouraging or expecting or intending the Promisee would rely on that promise – or in circumstances where a reasonable person in the Promisor’s position must have expected or intended the Promisee would rely on that promise,
3. such that the Promisee actually relied on that promise by acting or omitting to act in the manner expected or intended, and
4. detriment is suffered by the Promisee if the promise is not fulfilled.

Using the principle of proprietary estoppel, the Court can step in to prevent the Promisor from unjustly reneging from the promise made to the Promisee about the ownership of the property in question.  As the majority of the High Court stated in Kramer v Stone “Unlike the recognition of a gift, or the enforcement of a testamentary promise under a valid will, or the enforcement of a contractual promise, it is the existence of detriment arising from reasonable reliance upon an unfulfilled promise that completes the recognition of the estoppel and moulds the remedial response“.

Facts in Kramer v Stone 

In Kramer v Stone the respondent, David Stone, was a farm worker.  Since 1975 when he was aged 22, he worked on a 100–acre farm property that lies on the Colo River in Upper Colo, New South Wales, which was owned by Dame Leonie Kramer and her husband Dr Harry Kramer since 1969.

In the early 1980’s, Dr Kramer made two promises, verbally, to David:–

1. The first was to the effect that Dr Harry would give David a life interest in the farm so that David could work the farm as his own for his life, provided that Dr Harry’s family (he, Dame Leonie and their two daughters, Hilary and Jocelyn) would retain the use of a cottage on the farm property.
2. The second, which was made after Dr Harry had been diagnosed with cancer, was that Dr Harry would leave the farm to Dame Leonie in his Will but that Dame Leonie would then leave the farm to David in her Will and that David would “be free to do whatever you like with it”, again on condition that Dr Harry’s family would have the use of the cottage.

Dr Harry died in 1988.  Shortly after that, Dame Leonie promised to David that the farm would pass to David upon her death together with a sum of money.

David continued to work on the farm for the next 30 years in the belief that he would inherit that property under Dame Leonie’s Will.  The Court accepted that in the absence of that belief, “David would have decided that the farming operation was too hard going and would have terminated the share farming agreement and successfully pursued a more remunerative occupation“.  David worked on the farm all those years for a reduced income and did not pursue a different occupation in which he would have enjoyed a better economic reward by way of higher or more commensurate income and savings and provision for his old age.

Dame Leonie died in April 2016.  However, in her final Will, made on 11 November 2011, Dame Leonie left the farm to Hilary.  The farm property was valued at the time of the grant of probate in December 2016 at $1.5 million and David was left a gift of $200,000 under Dame Leonie’s Will.

The Court processes in Kramer v Stone 

David brought proceedings in the Supreme Court of NSW against Hilary and Jocelyn (as executors of Dame Leonie’s deceased estate).  The Court ordered that the farm property was held on constructive trust for David by the executors of Dame Leonie’s deceased estate.  The trial judge held that Dame Leonie acted unconscionably in conflict with representations that had been made to David by Dr Harry and her to the effect that the farm property would be left to David, in return for David continuing throughout Dame Leonie’s lifetime to work on the farm.  The executors’ appeal from this decision to the Court of Appeal was dismissed.

The executors’ further appeal to the High Court was also dismissed by a majority judgment (Gageler CJ, Gordon, Edelman and Beech-Jones JJ, with Gleeson J dissenting in part) in which the Court cited the requirements for equitable estoppel set out by Brennan J in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387.  Those requirements are set out at the top of this article, above.

Conclusion

The High Court’s decision in Kramer v Stone serves as a reminder about the enforceability of promises that induce a party to act on them to their detriment, even in the absence of any formal documentation or written agreement.  Through this decision, the Courts have once again demonstrated their commitment to preventing unjust outcomes in situations where parties act to their detriment in reliance on promises made.  Parties disappointed in their property expectations should not however, expect this to be an automatic remedy.

Such cases are heavily dependent on the facts and the ability of the parties to marshal together all the relevant evidence, which, Kramer v Stone demonstrates, could span many decades.  They require careful marshalling, preparation and consideration of all the facts and evidence needed to strike an equitable balance between the parties’ rights.  It may be critical to undertake a thorough fact–finding and evidence–gathering exercise as early as possible.

We offer and provide a full range of expert services to assist you with these and all other issues that arise in such areas of disputation and to help you navigate through the available processes, which could get stressful, complex and expensive.  Do not hesitate to reach out to our team of experienced professionals who can advise and assist you.