High Court rules for a former mistress about issue estoppel

High Court rules for a former mistress about issue estoppel

Be careful what you say, is the clear message from the High Court in a recent case. When the Family Law Act changes came through a couple of years ago to allow de facto property settlement, there was a lot of noise that mistresses may be able to claim property settlement. In the recent High Court case a former mistress was able to claim a property settlement- but by other means, by relying on issue estoppel.

Issue estoppel essentially means that because someone has made representations, and you have acted on those representations, that they are prevented- or estopped- from denying the consequences of their actions, and therefore are liable to make good.

The recent case of Sidhu v Van Dyke was a classic example of an issue estoppel case.

Facts of the case

Mr Sidhu lived with his wife in the main homestead of a 32-hectare rural property known as Burra Station, located near Queanbeyan in New South Wales. In 1996, Ms van Dyke married the brother of Mr Sidhu’s wife. Later in that year, Ms van Dyke and her husband moved into Oaks Cottage, a building located approximately 100 metres away from the main homestead on Burra Station. There they began to raise their newborn child. Ms van Dyke and her husband paid rent to Mrs Sidhu.

Both the main homestead and Oaks Cottage were located on an unsubdivided lot of land described as the Homestead Block, which was owned by Mr and Mrs Sidhu.

Towards the end of 1997, Mr Sidhu and Ms van Dyke commenced a sexual relationship. In 1998, Mr Sidhu said to Ms van Dyke:

“I love you and can tell you love me too. I want you to have a home here with me. I am planning to subdivide Burra Station. As soon as this is done, I will make sure the Oaks [Cottage] is put into your name … Using my Indian family money to buy this place means I can make my own decisions as to what I do with it, and I want you to have it because I love you. You need a home of your own to raise [your child] in. I can provide it”.

Ms van Dyke’s husband learned of the liaison between them, and in the middle of 1998 the Ms van Dyke and her husband separated and later divorced.
When Ms van Dyke told Mr Sidhu, who was himself a lawyer, that she needed to find a lawyer to assist her with her divorce and property settlement, he said to her words to the effect, “you have the Oaks you do not need a settlement from him. You can do the divorce yourself, you don’t need a lawyer.” In the divorce proceedings she did not seek a property settlement.
After the departure of Ms van Dyke’s husband, she continued to live in Oaks Cottage with her young child.
In about September 1998, Ms van Dyke asked Mr Sidhu  whether she should stop paying rent “now that the Oaks is my property”. Mr Sidhu replied: “How about you continue to pay what you can as this will help keep things low key with [my wife].”
While Ms van Dyke lived in Oaks Cottage, she paid rent to Mrs Sidhu at a rate which was lower than the market rate. Ms van Dyke also carried out unpaid work in relation to the maintenance and renovation of Oaks Cottage and the improvement and maintenance of Burra Station, and an adjoining rural property owned by a company in which Mr and Mrs Sidhu owned shares. Ms van Dyke was also actively involved in the work involved in the subdivision of Burra Station for which Mr and Mrs Sidhu applied to the local council. 
Ms van Dyke was employed part time elsewhere; she did not seek full-time employment during her stay at Burra Station. As a result, over a period of eight and a half years, she lost the opportunity to earn wages which she might have earned as a natural resource catchment officer or a ranger. These disadvantages were not quantified by evidence, but were substantial.
In 2000, Mr Sidhu, in response to expressions of concern by Ms van Dyke as to the security of her position, gave her a signed note in which he confirmed that “[d]uring the years 1996 to 2000” he had “expressed to [her] that [he] was willing to gift [her] the house in which she resided at the time (Oaks Cottage, … Burra NSW)”.
In mid-2005, Ms van Dyke again pressed Mr Sidhu for some confirmation of his “continued promise that the house would be [her] own”. This pressure elicited an email which proposed terms for a transfer of the property “at a price based on valuation by agent[s]” but with Mr and Mrs Sidhu agreeing to bear the financial burden of defraying that price.
In October 2005, the local council gave conditional approval to a subdivision of the Homestead Block into three lots. Completion of the subdivision was conditional upon the construction of roads enabling access to the lots. In a practical sense, the subdivision also depended on the consent of Mrs Sidhu and the availability of adequate finance. One of the proposed lots (“the Oaks Property”) was 7.3-7.4 hectares.
In February 2006, Oaks Cottage burnt down and the respondent and her child moved into a vacant relocatable cottage on the Homestead Block.
During May 2006, the parties discussed arrangements concerning the Ms van Dyke’s long-term accommodation at Burra Station. During the course of those discussions the appellant gave the respondent a handwritten statement in which he said that his wife “agrees [that] when the house which burned in an accident in mid-February is rebuilt and as soon as it is possible to transfer the property on which the house is rebuilt, it will be done”.
In July 2006, Ms van Dyke offered to purchase the relocatable cottage from Mr and Mrs Sidhu, but they rejected that offer, saying they could not sell it because they did not own it. On that day, Ms van Dyke left Burra Station and the relationship between Mr Sidhu and Ms van Dyke came to an end. Mr and Mrs Sidhu refused to transfer the Oaks Property to Ms van Dyke.
The subdivision did not proceed. Conditions of the approval as to the construction of roads were not satisfied by Mr Sidhu.
The law

The majority held:

“It is the conduct of the representee induced by the representor which is the very foundation for equitable intervention. Reliance is a fact to be found; it is not to be imputed on the basis of evidence which falls short of proof of the fact. It is actual reliance by the promisee, and the state of affairs so created, which answers the concern that equitable estoppel not be allowed to outflank Jorden v Money by dispensing with the need for consideration if a promise is to be enforceable as a contract.  It is not the breach of promise, but the promisor’s responsibility for the detrimental reliance by the promisee, which makes it unconscionable for the promisor to resile from his or her promise.”

Their Honours continued:

“A review of the whole of the evidence shows that the respondent had made out a compelling case of detrimental reliance. There are four broad reasons why that is so.

  1. First, there is the evidence-in-chief of the respondent. It may be noted that the primary judge considered the respondent to be a truthful witness. In the respondent’s evidence-in-chief she had said that:
  2. “As a result of the [appellant’s] repeated promise of the Oaks Property to me … I did not seek or engage in any full time paid work in the 8.5 years between January 1998 and July 2006 … [I]n the belief that I had a home in the Oaks Property, I chose instead to improve the Oaks and to repay the [appellant] in every way that I could using all the time and energy that I had for what I believed was his generous gift to me … I also lost the opportunity to obtain a property settlement from my divorce … [and] the opportunity to purchase a property for my son and me from money from my divorce settlement and salary from a full-time job.”
  3. That evidence was likely, as a matter of the probabilities of human behaviour, to be true. Indeed, it would be remarkable if the appellant’s promises did not have some influence upon the respondent’s decision to stay on and work at Burra Station. Upon the breakdown of the respondent’s marriage, she was confronted with difficult decisions relating to the course of her life and the care and maintenance of her child. The appellant’s promises were objectively likely to have had a significant effect upon the decision-making of a person in the respondent’s position. The appellant’s assurances were integral to his proposal to the respondent to put their relationship on a firm long-term footing. It is unlikely that she would have thrown in her lot with the appellant and exerted herself as she did over a period of eight and a half years if he had not made the promises which he in fact made. To the contrary, it is likely that she would have sought to maximise her own income for the benefit of herself and her infant son by seeking the most gainful form of employment.
  4. Secondly, the primary judge said:

“I have no doubt that [the respondent] placed faith in [the appellant] and in the promises he made her and that this played a part in her willingness to spend time and effort in the maintenance and improvement of The Oaks Cottage and assisted [sic] on the Burra Station property”.

  1. 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 on the basis that to establish estoppel by encouragement it is not necessary that the conduct of the party estopped should be the sole inducement operating on the mind of the party setting up the estoppel. Counsel for the appellant disputed this proposition but did not cite any authority in support of their position. The respondent’s position is amply supported by authority.
  2. In Amalgamated Investment & Property Co Ltd (in liq) v Texas Commerce International Bank Ltd, Robert Goff J said that:

“the question is not whether the representee acted, or desisted from acting, solely in reliance on the encouragement or representation of the other party; the question is rather whether his conduct was so influenced by the encouragement or representation … that it would be unconscionable for the representor thereafter to enforce his strict legal rights.” (emphasis in original)

  1. Similarly, in Steria Ltd v Hutchison, Neuberger LJ said that it is sufficient for the representee to show that “the representation was a significant factor which he took into account when deciding whether to [act as he did].” This approach conforms to that taken by the High Court as long ago as Newbon v City Mutual Life Assurance Society Ltd, where it was said that the “supposed belief” of the representee as “a contributing cause” of the representee’s conduct was a “sufficient connection between the assumption and the position of detriment”. It is the view which continued to prevail in Gould v Vaggelas.
  2. Thirdly, apart from the respondent’s direct testimony in support of her case, the primary judge accepted[81] that the respondent displayed a concern from time to time that the appellant honour his promises. While it is true that this concern was consistent with an understanding on the respondent’s part that the appellant’s promises were not contractually binding, the fact that the respondent exhibited that concern, and the fact that the appellant sought to allay that concern by giving her written assurances that the property would be transferred to her[82], tend to confirm that the appellant’s promises were material to the respondent’s willingness to remain living at Oaks Cottage and working on Burra Station as part of maintaining her ongoing relationship with the appellant.
  3. Fourthly, the principal argument for the appellant, which was that the cross-examination of the respondent showed that the appellant’s promises were not a real inducement which contributed to the respondent’s decision to conduct herself as she did over a period of eight and a half years, is not compelling.
  4. Counsel for the appellant emphasised the finding of the primary judge that the “contributions” of the appellant and the respondent to their eight-and-a-half-year relationship seemed “to be broadly matched”[83]. But the question here is whether the respondent would have committed to, and remained in, the relationship with the appellant, with all that that entailed in terms of the effect upon the material well-being of herself and her son, had she not been given the assurances made by the appellant. In this regard, the answers elicited from the respondent in cross-examination did not accept the proposition that the appellant’s promises were immaterial to her. And as has been noted, some of her answers were positively to the effect that the extent of her involvement in maintaining Oaks Cottage and Burra Station was induced by the appellant’s assurances of security. That evidence was to the effect that the promises in question were a vital aspect of the security which the appellant plainly understood was of concern to her.
  5. 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[84]. 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.”
  6. In summary, on all the evidence, it should be found that the respondent was induced to remain at the property and to continue to work for the appellant and his wife by the assurances which he made. It is unconscionable for the appellant now to resile from his assurances.” (emphasis added)
The matter was remitted to the NSW Supreme Court to assess damages to be paid.
Things to Read, Watch & Listen

What You Need to Know About Adoption in Australia

In this video, Award-Winning surrogacy lawyer and Accredited Family Law Specialist, Stephen Page reveals the key things that you need to know regarding adoption in Australia.

Same Sex Couples & Adoption in Australia

In this video, Award-Winning surrogacy lawyer and Accredited Family Law Specialist, Stephen Page covers the essential legal steps for same-sex couples adopting in Australia.

The Pope’s cruel take on surrogacy

“I’m beautiful in my way ’cause God makes no mistakes I’m on the right track, baby, I was born this way” Lady Gaga I am outraged at the steps by the Pope’s call to stop surrogacy and be critical of LGBTQIA+ people.  It is no surprise, but it still saddens me. On Monday 8 April… Read More »The Pope’s cruel take on surrogacy

Family Law Section Law Council of Australia Award
Member of Queensland law society
Family law Practitioners Association
International Academy of Family Lawyers - IAFL
Mediator Standards Board