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Date: Wed, 9 Apr 2003 12:06:14 -0400 From: Jason Neyers Subject: Estoppel in the HL
Dear Colleagues, For those interested in estoppel, the HL has just released a new decision on the topic, see http://www.parliament.the-stationery-office.co.uk/pa/ld200203/ldjudgmt/jd030403/action-1.htm. The alleged facts of the case were as follows: Actionstrength (the sub-contractor) agreed with Inglen (the main contractor) to provide construction staff for use in connection with the construction of a factory for St-Gobain. When it became apparent that Inglen would fail to pay the sums due to Actionstrength, Actionstrength contemplated rescinding the contract. In order to keep the construction moving along, St-Gobain promised to if Actionstrength would keeping supplying their services, St-Gobain would pay any amounts that Inglen owed to Actionstrength. After completing the factory and being unable to obtain payment, Actionstrength sued St-Gobain on the guarantee. The courts found that the guarantee was unenforceable since it violated the statute of frauds. At issue in the HL was whether Actionstrength could use estoppel to enforce the guarantee. The HL unanimously, with 5 concurring judgments, held that Actionstrength could not rely on estoppel since the requirements of the doctrine were not met (i.e. that Actionstrength assumed that St-Gobain would honour the guarantee or that the guarantee was valid; that that assumption was induced or encouraged by St-Gobain; and that Actionstrength relied on that assumption). Lord Hoffmann and Lord Walker were also concerned that to allow the use of estoppel with its remedy of specific enforcement would undercut the policy of the statute. Personally, I find the reasoning relating to the whether the requirements were met to be deeply flawed (especially the analyses of Lord Bingham and Lord Clyde). I also think that the policy argument in relation to the Statute of Frauds largely depends on one's view as to the appropriateness of the remedy for an estoppel: if one assumes that a reliance-based doctrine should have a reliance-based remedy, the policy argument largely falls away or is at least considerably lessened. I would be interested in people's thoughts. Happy Reading,
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