By Dr Katy Barnett

Sidhu v Van Dyke Case Page

Napoleon Bonaparte said ‘the best way to keep one’s word is not to give it’. Perhaps the defendant in Sidhu v Van Dyke [2014] HCA 19 should have heeded those words, although the case came down not to the fact that Sidhu made and broke a promise, but to the fact that that the plaintiff, Van Dyke, relied upon the promise to her detriment (see the joint judgment at [58]).

Van Dyke had rented a cottage from Sidhu and his wife, who lived 100 metres away in the main homestead on the property. The property was jointly owned by Sidhu and his wife. Van Dyke and Sidhu commenced a sexual relationship which led to the breakdown of Van Dyke’s marriage. Sidhu told Van Dyke not to worry about getting a property settlement in the divorce, as he would subdivide the land belonging to him and his wife, and give the cottage to Van Dyke. However, when his relationship with Van Dyke ended some eight years later, Sidhu repudiated his earlier promises and Sidhu’s wife refused to consent to a subdivision. The High Court clarified that Australian law did not recognise Lord Denning’s ‘presumption of reliance’ in Greasley v Cooke [1980] 1 WLR 1306. In other words, Australian law does not presume reliance on the part of a representee (in this instance Van Dyke), and a representee is still required to make out detrimental reliance. Moreover, the burden of proof to establish detrimental reliance is always on the representee.

The Court unanimously concluded that Van Dyke had made out detrimental reliance and found that Sidhu was estopped from denying his promise to Van Dyke. But as the cottage had burned down and the subdivision had never taken place, Van Dyke was awarded equitable compensation reflecting the value of what she had lost.The nub of the case can be found at [77] of the joint judgment of French CJ, Kiefel, Bell and Keane JJ:

This category of equitable estoppel serves to vindicate the expectations of the representee against a party who seeks unconscionably to resile from an expectation he or she has created. The extent to which it is unconscionable of the appellant to seek to resile from the position expressed in his assurances to the respondent may be gauged by reflecting on the likely response of the respondent if the appellant had told her in January 1998: “I am happy for you to remain at Oaks Cottage, but only for so long as it suits me and my wife to have you here; and, while you remain on the property, you must care for it as if you were the owner of the property and do unpaid work on parts of Burra Station other than the property. Until I make the property over to you, you must pay rent sufficient to content my wife. Should you choose to leave, you will leave with nothing in return for the value of your work here.

My colleague Jeremy Gans and I were musing that for full effect, the High Court should have added, ‘PS I love you’ to Sidhu’s putative statement. This is because the emotional background to the promise is all important.

What is the status of the ‘presumption of reliance’?
The reason why the High Court had to engage with Lord Denning’s ‘presumption of reliance’ from Greasley v Cooke [1980] 1 WLR 1306 was because the New South Wales Court of Appeal had applied that case below in Van Dyke v Sidhu [2013] NSWCA 198. The Court of Appeal had done so in order to overturn the trial judge’s finding of fact at the first instance that Van Dyke did not detrimentally rely on Sidhu’s promises. The Court of Appeal found that Sidhu’s promise could be inferred from the way in which Van Dyke responded to it (by improving the land and by foregoing a property settlement in divorce and foregoing a better paid job). Applying Lord Denning’s test, reliance by Van Dyke was therefore presumed and the onus of proof shifted to Sidhu to prove that Van Dyke did not rely on the promise to her detriment.

The High Court unequivocally rejected the approach of the New South Wales Court of Appeal. First, they questioned whether Lord Denning’s approach in Greasley v Cooke in fact meant that the burden of proof should shift to the representor, particularly in light of Neuberger LJ’s reading of the case in Steria Ltd v Hutchison [2006] EWCA Civ 1551 at [129]–[130]. However, insofar as Greasley v Cooke suggested that the burden of proof should shift to the defendant, it did not represent the law in Australia.

How, then, did the High Court find detrimental reliance?
The High Court found that Van Dyke detrimentally relied on Sidhu’s promise on the basis of her evidence (see [67]). This was despite the fact that the trial judge had found the very opposite on the basis that Van Dyke’s evidence was equivocal. The plurality judgment reproduced the cross examination which led the trial judge to conclude this at [30]–[31]. However, the plurality said that they overturned the trial judge’s finding of fact for four broad reasons.

First, Van Dyke was found by the trial judge to be a truthful witness, and in her evidence in chief she said that in reliance on Sidhu’s promise, she did not engage in full-time paid work, she did not seek a divorce settlement and she chose to improve the property. The plurality stated, at [69], ‘[t]hat evidence was likely, as a matter of the probabilities of human behaviour, to be true’. It was concluded that, objectively, Sidhu’s promises were likely to have a significant impact on Van Dyke’s decision-making process.

Secondly, the plurality stated, at [71], that

Her Honour’s finding that the appellant’s promises ‘played a part in her willingness to spend time and effort in the maintenance and improvement of The Oaks Cottage and assisted on the Burra Station property’ warranted the conclusion that the respondent had discharged the onus she bore …

They held that it was not necessary to find that the promise was the sole inducement on the representee; it was sufficient to find that the representee was influenced by the promise, or that the promise was a significant factor in the representee making the decision that she did.

Gageler J agreed in all other respects with the reasons of the plurality, but added a clarification to the plurality’s second ‘broad reason’ in a separate judgment. He agreed with the plurality that Van Dyke bore the onus of establishing that she believed Sidhu’s representations and that, on the faith of that belief, she would suffer detriment if Sidhu were permitted to depart from those representations. While she did not need to establish that the belief in the representations was ‘the sole or predominant cause’ of her decisions, she did need to establish that the belief was a ‘contributing cause’. To establish that the belief was a ‘contributing cause’, it was not sufficient to show that she had taken the belief into account. She needed to establish the belief made a difference to her decision. In other words, she had to prove that she would not have acted (or refrained from acting) as she did without the belief in the representations.

Thirdly, the Court said that the trial judge accepted that Van Dyke was concerned about whether Sidhu would honour his promise. They said that the fact that Van Dyke sought to get Sidhu to put his promises in writing tended to confirm that Sidhu’s promises were a material inducement to her remaining on the property.

Fourthly, the argument that Van Dyke’s ‘equivocal’ evidence showed that she was not induced to stay at the property by Sidhu’s promise was ‘not compelling’ (at [75]).

It is notable that the High Court reversed the trial judge’s findings of fact on the detrimental reliance issue. When I was a law student and mooter, a staple case in my armoury was Abalos v Australian Postal Commission [1990] HCA 47, which held that appellate courts should not readily overturn a trial judge’s findings of fact because appellate judges had not had the advantage of seeing the witness. However, the High Court has become far more willing over the last twenty years to overturn judgments on the basis of errors of finding of fact, as acknowledged by former Justice Kirby of the High Court in pages 17 and 18 of this speech.

Sidhu v Van Dyke is an instance of a case where the High Court essentially tells the trial judge that she got the finding of facts wrong, and unrealistic presumptions derived from Lord Denning are not the correct means to get around the issue of incorrectly decided facts.

What was the relief?
Of particular interest to me was the way in which the Court framed the relief. The Court approved Dixon J’s statement in Grundt v Great Boulder Pty Gold Mines Ltd [1937] HCA 58, that ‘the real detriment or harm from which the law seeks to give protection is that which would flow from the change of position if the assumption were deserted that led to it’. They noted that in Giumelli v Giumelli [1999] HCA 10, it was held that the award for estoppel could include either enforcement of the promise or ‘the performance of the expectation generated by the promise’. They noted that courts take an approach of awarding the minimum equity to do justice, which sometimes results in relief less than the enforcement of the promise, however this was an instance where it was appropriate to give a remedy which reflected the value of holding Sidhu to his promise. Van Dyke could not get the promise enforced via specific relief. This was for a number of reasons. First, the cottage which was originally the subject of the promise had burned down. Secondly, the promised subdivision never took place because Sidhu’s wife refused to consent to it. Indeed, the New South Wales Court of Appeal noted that it would be inappropriate to award specific relief because of the impact it would have on Sidhu’s wife, a joint owner of the property.

The High Court agreed with the New South Wales Court of Appeal that the appropriate measure of relief was an award of equitable compensation measured by reference to the value of the respondent’s disappointed expectation measured by reference to the value of the promised property at the date of judgment. The New South Wales Court of Appeal had remitted the matter back to the Equity division to determine quantum and presumably this value could be used by the High Court as well.

‘PS I owe you the value of the land I promised you’
The High Court ensured that Sidhu eventually met his Waterloo, just like Napoleon. Moreover it clarified the doctrine of estoppel by stating that the approach to establishing causation of the detrimental reliance is whether the promise is a significant factor or a contributing cause in the plaintiff’s action (or lack of action). The case is also an exemplar of the High Court’s increasing willingness to overrule the trial judge’s finding of fact. I can understand why they did so in this case, as it seems extraordinary to conclude that Sidhu’s promise was not a significant factor or a contributing cause to Van Dyke’s decision to improve the property, forgo a divorce settlement and forgo full time employment. Finally, the case shows that where specific enforcement of the promise would have been appropriate but is not practically possible and would cause hardship to third parties, the court instead measures equitable compensation in lieu of specific relief on an expectation measure.

AGLC3 Citation: Katy Barnett, ‘Estopped from Denying the “Love Shack”: Sidhu v Van Dyke’ on Opinions on High (21 May 2014) <https://blogs.unimelb.edu.au/opinionsonhigh/2014/05/21/barnett-sidhu/>.

Dr Katy Barnett is a Senior Lecturer at Melbourne Law School.