Date: Wed, 9 Apr 2003 20:32:56 +0100

From: Paul MacMahon

Subject: Estoppel in the HL

The result in Actionstrength depends on the proper approach to s4 of the Statute of Frauds. The courts have subverted the Statute of Frauds ever since it was passed. In relation to contracts for the sale of interests in land, they have realised that it is often unreasonable to refuse to recognise a informal transaction, especially where one of the parties has relied on its effectiveness to her detriment. That explains the doctrine of part performance (repealed in England in 1989) and a large chunk of what is called in England 'proprietary estoppel'.

This case is a particularly good example of the injustices which can result from the remnants of the Statute. Assuming that Actionstrength's version of events is accurate, two commercial parties made what should have been a perfectly good bargain. Actionstrength carried out its side of the agreement. St-Gobain was able to renege on that deal by invoking what, to my mind, is an unnecessary form requirement. Lord Bingham more or less admits this at para 9.

I agree with Jason that the reasoning of their Lordships seems (at best) rather strained. But this is a symptom of deeper confusions about the mysterious and versatile idea of 'estoppel'. And it is hard to see how their Lordships could have reached the conclusion that the oral guarantee was enforceable. As Lord Hoffmann (para 26) explains, to allow estoppel to operate in this way would be to make a laughing stock of s4 of the Statute of Frauds. Repeal (or amendment) is for Parliament.

Jason suggested that a reliance-based remedy could result from the application of estoppel. While I understand that this is possible in the USA (Jason may enlighten me about Canada), there is almost no support for it in England. Even in Australia, where it once seemed that the High Court was moving towards the compensation of reliance loss in estoppel cases, the courts almost always force the estopped party to make good the other party's assumption (the High Court has more or less admitted this in Giumelli v Giumelli). This is a fundamental issue, which goes to the heart of the nature of estoppel. But as far as their Lordships were concerned, the only possible effect of the estoppel (and the only one that was claimed by Actionstrength) was the enforcement of the guarantee.

As an aside, I wonder whether there is any possibility of a claim in unjust enrichment succeeding on these facts. Actionstrength continued to help build a factory for St-Gobain. That looks like an enrichment to me. It did so under the mistaken belief (induced by St-Gobain) that St-Gobain was under a liability to guarantee payment by the main contractor. The obvious response to such an attempt at 'leapfrogging' is to say that the subcontractor cannot be allowed to evade the risk of the main contractor's insolvency (a risk which, in this case, eventuated). But could such an argument succeed when St-Gobain had assured Actionstrength (albeit orally) that they would assume the risk of Inglen's insolvency? This may be a bit far-fetched - I look forward to someone demolishing the possibility of such a claim.

Paul MacMahon

Student,
New College,
Oxford

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