Kramer v Stone

Case [2024] HCA 48

HIGH COURT OF AUSTRALIA

GAGELER CJ,
GORDON, EDELMAN, GLEESON AND BEECH-JONES JJ

HILARY LORRAINE KRAMER & ANOR  APPELLANTS

AND

DAVID LINDSAY STONE  RESPONDENT

Kramer v Stone

[2024] HCA 48

Date of Hearing: 11 September 2024

Date of Judgment: 11 December 2024

S53/2024

ORDER

Appeal dismissed with costs.

On appeal from the Supreme Court of New South Wales

Representation

N C Hutley SC with S H Hartford Davis and M O Pulsford for the appellants (instructed by Walker & White)

P D Herzfeld SC with H Bennett and S D D Puttick for the respondent (instructed by Lane Associates : Lawyers)

Notice:  This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

CATCHWORDS

Kramer v Stone

Estoppel – Equitable estoppel – Proprietary estoppel – Proprietary estoppel by encouragement – Where promisor made promise to bequeath property to promisee – Where promisor did not further encourage promisee to rely on promise after making promise – Where promisee acted to his detriment in reliance on promise – Where promisor did not bequeath property to promisee – Whether promisee required to prove promisor undertook subsequent acts of encouragement after initial promise – Whether promisee required to prove promisor had actual knowledge that promisee would act or had acted in reliance on promise to promisee's detriment.

Words and phrases – "actual knowledge", "clear and unequivocal promise", "constructive knowledge", "detriment", "detrimental reliance", "encouragement", "encouragement from a promise", "equitable estoppel", "estoppel", "estoppel by acquiescence", "estoppel by encouragement", "estoppel by encouragement from a promise", "imperfect gift", "proprietary estoppel", "proprietary estoppel by encouragement", "reliance", "subsequent encouragement", "unconscionable".

GAGELER CJ, GORDON, EDELMAN AND BEECH-JONES JJ.  

Introduction

  1. The respondent is a farm worker who earned an irregular and meagre income working on a farm as a "share farmer", sharing some of the costs and income derived from the farm. The farm worker was made a promise by the owner of the farm that he would inherit the farm on the owner's death. Without that promise, the farm worker would have terminated the share farming agreement, obtained employment that returned a much higher level of income, and enjoyed a new lifestyle free from some of the hardships endured on the farm. Instead, as the owner reasonably expected would occur, the farm worker relied upon the promise by continuing to live and work on the farm for another 23 years. But the owner did not leave the farm to the farm worker in her will, so when the owner died, the farm worker did not inherit the farm.

  2. The trial judge in the Supreme Court of New South Wales (Robb J) concluded that these circumstances gave rise to an estoppel against the estate of the owner, requiring title to the farm to be held on trust for the farm worker. An appeal was dismissed by the Court of Appeal (Ward P, Leeming and Kirk JJA). The questions on this appeal are whether the owner's liability arising from the estoppel required that: (i)…

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AGLC
Kramer v Stone [2024] HCA 48
Case
[2024] HCA 48
Decision Date

CaseChat Overview and Summary

The case of *Kramer v Stone* concerned an appeal to the High Court of Australia following decisions by the Supreme Court of New South Wales and the New South Wales Court of Appeal. The dispute arose from a share farmer's claim against the estate of a deceased landowner, Dame Leonie. The share farmer, David, alleged that Dame Leonie had made a promise to bequeath her farm to him, and that he had acted to his detriment in reliance on this promise by continuing to farm the property for many years. The trial judge found that an equitable estoppel arose, requiring Dame Leonie's estate to hold the farm on trust for David.

The central legal issues before the High Court were whether, to establish proprietary estoppel by encouragement, it was necessary for the promisee (David) to prove that the promisor (Dame Leonie) had undertaken further acts of encouragement after the initial promise, or whether the promisor needed to have actual knowledge that the promisee was relying on the promise to their detriment. The appellants, as executors of Dame Leonie's estate, argued that the trial judge erred in finding that constructive knowledge of detrimental reliance was sufficient, submitting that subjective knowledge was required.

The High Court dismissed the appeal, affirming the decisions of the lower courts. The Court held that neither further encouragement after the initial promise nor actual knowledge of detrimental reliance by the promisor were necessary elements to establish proprietary estoppel by encouragement. The Court reasoned that the unconscionability that underpins equitable estoppel arises from the promisor's conduct in making an assurance and the promisee's detrimental reliance on that assurance, where the promisor ought to have reasonably foreseen that reliance. The trial judge's finding of constructive knowledge, meaning Dame Leonie ought to have known that David's continued farming was motivated by his expectation of inheriting the farm, was sufficient to establish the necessary unconscionability.

Consequently, the appeal was dismissed with costs. The High Court upheld the equitable relief granted by the lower courts, which had declared that the farm was held on trust for David by the executors of Dame Leonie's estate, in lieu of a monetary gift provided in her will.

Orders

Orders of the court

Appeal dismissed with costs.

Background

Background to the litigation

The trial judge in the Supreme Court of New South Wales (Robb J) concluded that these circumstances gave rise to an estoppel against the estate of the owner, requiring title to the farm to be held on trust for the farm worker. An appeal was dismissed by the Court of Appeal (Ward P, Leeming and Kirk JJA). The questions on this appeal are whether the owner's liability arising from the estoppel required that: (i) after the promise, the owner perform some act of further encouragement of the farm worker to continue to share farm; or (ii) the owner have actual knowledge that the farm worker was relying on the promise which would be to his detriment if the promise were not fulfilled. The answers are that neither of those matters was required to establish liability arising from the estoppel. The appeal must be dismissed. The factual background and findingsThe parties and the approach to facts in this Court For the purpose of clarity only, and consistently with the approach taken by the trial judge and counsel in this Court, these reasons refer to the people involved in this matter by first names and titles. The property which is the subject of this appeal ("the Farm") was owned by Dame Leonie and her husband, Dr Harry, as joint tenants. Dame Leonie and Dr Harry had two daughters, Hilary and Jocelyn. The first appellant, Hilary, is one of the executors of Dame Leonie's estate. The second appellant is the other executor of Dame Leonie's estate. The respondent, David, was a share farmer of the Farm for almost 40 years from 1975. At trial and in the Court of Appeal there was substantial dispute between David and the appellants about some of the facts described below. In this Court, with only one exception, the parties properly did not seek to challenge the concurrent factual holdings. The only factual dispute in this Court concerned the interpretation of the scope of those holdings. In particular, the dispute concerned whether Dame Leonie had an expectation that David would rely upon an assurance that the Farm would be left to him in Dame Leonie's will by continuing, to his detriment, to share farm on the Farm. That dispute is resolved in the course of the narration of the facts below. The farming arrangements The Farm that was owned by Dame Leonie and Dr Harry is a 100-acre property that lies on the Colo River in Upper Colo, New South Wales. Prior to the acquisition of the Farm by Dame Leonie and Dr Harry, the previous owner entered a share farming agreement in 1965 with David's father by which David's father, as the farmer, shared the risks and the profits of the farming operation with the land owner. After Dame Leonie and Dr Harry acquired the Farm in 1969, David's father continued to work on the Farm, entering a formal share farming agreement with Dame Leonie and Dr Harry in 1970. In 1974, David's father left the Farm. David's father had been unable to make a sufficient living to support his wife and children and his wife wanted to live a more suburban life. In 1975, at about the age of 22, David began share farming on the Farm. David was "intelligent ... articulate [and] knowledgeable about farming matters". It is likely that David learned farming practices and techniques from his father while he was a schoolboy by helping out on the Farm and during a period of time when he had pursued an Agricultural Science course at university.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

GAGELER CJ, GORDON, EDELMAN AND BEECH-JONES JJ GLEESON J
In April 2016, Dame Leonie died. In her final will, made on 11 November 2011, Dame Leonie left the Farm to Hilary. The Farm was valued at the time of the grant of probate in December 2016 at $1.5 million. David was left a gift of $200,000. The reasoning and conclusions of the trial judge and Court of AppealThe trial judge The trial judge found that the first promise had been superseded by the second and that the second promise, which was made by Dr Harry, could not have legal effect against Dame Leonie.[17] That reasoning was not challenged. Instead, the focus of the reasoning of the trial judge and the Court of Appeal was on the legal effect of Dame Leonie's promise and David's detrimental reliance upon it. [17]Stone v Kramer [2021] NSWSC 1456 at [161]-[162]. The trial judge held that an estoppel arose which entitled David "to appropriate equitable relief to relieve him of the effect of Dame Leonie's unconscionable conduct".[18] The required elements of the estoppel that were held by the trial judge to be satisfied were: (i) a representation, in the form of an encouragement, had been made by Dame Leonie to David that she would leave the Farm to him; (ii) it was reasonable for David to rely on that representation; (iii) David had relied upon that encouragement to his detriment by continuing to share farm on the Farm for about 23 years and abstaining from terminating the agreement and pursuing a more remunerative occupation; and (iv) Dame Leonie had "constructive knowledge" of David's reliance in that Dame Leonie ought to have known that part of David's motivation for continuing to share farm was David's expectation that he would inherit the Farm.[19][18]Stone v Kramer [2021] NSWSC 1456 at [252].[19]Stone v Kramer [2021] NSWSC 1456 at [228], [234], [249]-[252]. The trial judge referred to evidence that had been given by Jocelyn that Dame Leonie had told Jocelyn that she did not propose to leave the Farm to David and would leave him $75,000 instead and that Jocelyn had urged Dame Leonie to increase that amount. The trial judge held that it would not be equitable for the court to order that the Farm be transferred to David in addition to him being entitled to keep the gift of $200,000. The trial judge declared that in lieu of the provision of $200,000 for David in Dame Leonie's will, the Farm was held on trust for David by the executors of the estate of Dame Leonie.The Court of Appeal The appellants, the executors of the estate of Dame Leonie, appealed to the Court of Appeal on eight grounds including, relevantly, ground 4, which was that the trial judge erred by concluding that it was sufficient for estoppel by encouragement that Dame Leonie ought reasonably to have assumed that part of David's motivation for continuing to share farm was an expectation that he would inherit the Farm. On this ground, the appellants submitted that an estoppel by encouragement required Dame Leonie to have had "subjective knowledge" that David had acted to his detriment.

Ratio Decidendi

Legal Principle Established

Established by: GAGELER CJ, GORDON, EDELMAN AND BEECH-JONES JJ, GLEESON J

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