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Date:
Mon, 14 Jul 2003 11:14:44 +1000
From:
Andrew Robertson
Subject:
Estoppel Question
I
don't see how Y could assert an estoppel against Z. Z was in no way responsible
for inducing Y to adopt the assumption. There was no conduct 'crossing
the line' between Y and Z. Any liability on Z's part would have to flow
from:
1.
A principle that a relied-upon promise becomes binding on all third parties
who have notice of it (and who must not then cause harm to the promisee
by acting inconsistently with it). If there were such a principle it would
mean that a negative pledge would affect all subsequent lenders who lent
with knowledge of it.
2. An application of the BFC
v Parc principle of subrogation. I don't see how the BFC v Parc principle
could apply here because Z has lent money after Y (and has not, therefore,
been enriched by the transaction between X and Y). In BFC v Parc, of course,
the party seeking subrogation lent second and thereby enriched the prior
charge holder.
Andrew
At
11:01 AM 11/07/2003 -0400, Jason Neyers wrote:
Dear
Colleagues,
I
just wanted to 'pick your brains' if you did not mind. The facts I have
in mind are as follows:
Suppose
X represents to Y that, in case of bankruptcy, any claims that Y might
have on the basis of a particular transaction will have priority over
all past and future encumbrances/debts. Y relies on that statement (detrimentally
as it turns out) and enters into the transaction with X. X's business
is suffering hardship. Z, knowing of this representation, and trying
to help X, lends X a substantial amount of money. X subsequently goes
into bankruptcy. It turns out that as a matter of positive law and statute,
Y does not have priority and will now have to share pari passu with
Z.
Should Z be estopped for insisting on its rights, and therefore be subordinated
to Y, given that although they did not make the representation, they
knew about it?
Any
opinions and guidance as to relevant estoppel cases dealing with a 'transferred
representation' or being 'affixed with another's representation' would
be most welcome.
PS:
The facts are distilled from the somewhat more complicated Ontario case
on which I am attempting to comment (see attached if interested).
Thank
you in advance,
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