“Estoppel by deed is a rule of evidence founded on the principle that a solemn and unambiguous statement or engagement in a deed must be taken as binding between parties and privies, and therefore as not admitting any contradictory proof.” [1]
The doctrine is based on the principle of solemnity of a deed, which means that unambiguous statements or becoming a party to a deed, must be binding on the parties.
Estoppel by deed is a common law doctrine which does not apply in equity. Thus, when considering estoppel by deed the Court will apply the same rules of construction that are applicable for commercial contracts. That is, what a reasonable businessperson placed in the position of the parties would have understood the contract or deed to mean.[2]
In circumstances where there are equitable grounds to rescind or rectify the deed[3], it may be possible to answer the estoppel. In other words, estoppel by deed may be avoided if it can be shown that a party has a right to rectification or a right to rescission on equitable grounds.
For example, a common mistake of fact may create a right to rectify a deed, such as when a deed acknowledges receipt of money that has not in fact been paid. That said, careful consideration is still required because not every acknowledgement of receipt, where payment has not in fact been made, has been included in a deed by mistake. The reason to include the recital to a deed may simply be that the parties have deliberately “…adopted the fiction of an antecedent payment as a convenient formula for defining an executory obligation to make a real payment in the future”. Which means the inclusion, “…is nothing more than a fiction deliberately adopted as a means of defining future obligations.”[4]
It is therefore necessary to consider whether a recital in a deed may have been adopted deliberately as a “…convenient formula for defining some executory obligation.” In those circumstances there is no mistake, as Williams J explained in White v Data Transfer Services & Ors (No. 2):
“Where parties have deliberately adopted the incorrect statement in the deed, there is no mistake that the deed has resulted in the failure of the deed to conform to the parties’ true agreement. Thus, rectification in equity is not available: Simic v New South Wales Land and Housing Corporation [2016] 250 CLR 85; [2016] HCA 47 at (103).”
If there is no mistake, “…the fact that the payment acknowledged in the deed has not in fact been made does not destroy the estoppel…”[5].
Summary
Therefore, a party will not be allowed to adduce evidence in contradiction of a recital unless when applying the normal rules of construction for a commercial contract or on equitable principles, a right to rectification or rescission of the deed exists.
When assessing whether a right of rectification or rescission exists, the Court will consider the reasons to include statements of fact that are in fact fictional, and if such statements are deemed to have been adopted as a convenient mechanism for the parties to define future obligations, the doctrine of estoppel by deed will prevail.
[1] Greer v Kettle [1938] AC156 per Lord Maugham
[2] Ecosse Property Housing Pty Ltd v Gee Dee Nominees Pty Ltd [2017] 261 CLR 544; [2017] HCA 12 at (16)
[3] Per Lord Maugham, Greer v Kettle at (171-172)
[4] Hemlich and Taylor v Thorp & Stathdee [1997] 3 NZLR 86 per Fisher J at (94), approved in Cousens v Grayridge [2006] VSCA 96 at (58)
[5] at 119.
David Collins is Special Counsel in our Dispute and Litigation team. For further information about estoppel by deed or enforcement of contracts generally, please contact Kristy Nunn or David Collins.
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