Estate planning is not just a task to be ticked off and requires careful consideration. It is necessary to explore with a testator any promises they have made during their lifetime and how those promises might impact on their wishes. We explore the decision of Kramer v Stone [2024] HCA 48.
In the 1998 decision of Walton Stores (Interstate) Ltd v Maher, the High Court of Australia set out the essential elements of a proprietary estoppel claim:
- there must be a clear and unequivocal promise or representation;
- a reasonable person in the promisor’s position would expect or intend that the promisee would rely on the promise in some future conduct;
- the promisee has relied on that promise and directed their affairs in some way because of it;
- as a result of the promise not being fulfilled, the promisee is in a worse position than if the promise had not been made.
What can we learn from Kramer?
Dame Leonie Kramer made a final Will in 2011 leaving her rural property to her daughter Hilary and a gift of $250,000 to the respondent, David Stone. Mr Stone had farmed the property under a verbal share farming agreement since about 1975. At this time, the property was owned by Dame Leonie’s husband, Dr Harry Kramer. Evidence given was that Dr Kramer had made “out of the blue” representations to Mr Stone that while Dr Kramer would leave the property to Dame Leonie, she would then leave the property to Mr Stone. Without the promise, Mr Stone says he would have terminated the share farming agreement, obtained employment that would have returned a much higher income and enjoy a lifestyle that was free from the hardships endured on the farm.
The value of the farm at the date of death was $1,500,000. Mr Stone made a claim to enforce the promise. He was successful in his claim in the Supreme Court of NSW and later in the Court of Appeal. The executor of Dame Leonie’s estate obtained special leave to appeal to the High Court of Australia but failed in the appeal.
The Court held that the elements of equitable estoppel were plainly satisfied. Dame Leonie made a clear promise to Mr Stone that he would inherit the farm on her death. In making that promise, the Court found that a reasonable person in Dame Leonie’s position would have expected (and that she did expect), that Mr Stone would rely on the promise. Mr Stone abstained from obtaining alternative employment and he continued on the share farming agreement. Mr Stone suffered a detriment in that he was in a worse position than if the promise had not been made.
There was a distinction determined between estoppel by encouragement and estoppel by acquiescence
The Court in citing Hudson J in Brand v Chris Building Co Pty Ltd [1957] VicRp 91 explained, “The elements required for [the person asserting estoppel] to establish an estoppel by acquiescence against [another are] (1) [the person asserting estoppel] must be mistaken as to their legal rights; (2) [the person asserting estoppel] must expend money, or do some act, on the faith of their mistaken belief; (3) [the other person] must know of their own rights; (4) [the other person] must know of [the] mistaken belief [of the person asserting estoppel]; and (5) “[ the other person] must encourage [the person asserting estoppel in that person’s] expenditure of money or other act, either directly or by abstaining from asserting [a] legal right”’ (at [55]).
This is different to estoppel by encouragement because there is a significant difference between a person whose promise causes another’s detriment and a person who merely omits to act where action could spare the other party from detriment (at [59]).
Many will be critical of the decision as it can be seen to undermine the formality of a Will. The trial judge concluded that it was likely Dame Leonie had forgotten about her promise to Mr Stone.