Promises - Waiver, Election and Estopple Revisited by the High Court
- 23 Dec 2022
- Corporate and Commercial Law
If someone has a contractual right against you - but informs you that they will not enforce it - can they legally still go ahead later on and enforce that right against you?
The High Court has recently handed down a useful and expansive decision, covering (amongst other topics) the law of waiver, election, and estoppel: Allianz Australia Insurance Limited v Delor Vue Apartments CTS 39788 [2022] HCA 38 (Allianz).
Where appropriate, a Court can use some (or all) of these doctrines to prohibit someone enforcing an otherwise enforceable contractual right.
These doctrines, then, can be very useful in a contractual dispute.
Promissory estoppel, for example, can be used to bind people to promises they make, if you can establish it would be unconscionable for them to back out of their promise, and you would suffer a detriment if they did so, and that you were reasonably relying on that promise.
In the decision of Allianz, however, we can see that these doctrines are not without their limitations.
These doctrines are also complex. Indeed, there are various forms estoppel alone.
And the doctrines can overlap. And they are sometimes conflated. For example there are many cases which refer to the law of “election” but adopt the word “waiver” - but these are two distinct doctrines.
It is therefore useful to carefully consider the various doctrines individually to see if one or more apply to your case.
- Facts of Allianz
- Delor Vue Apartments CTS 39788 (Delor) is the Body Corporate of an apartment block in Cannovale in north Queensland.
- On 28 March 2017, Delor took out an insurance policy with Allianz, via a subsidiary.
- At the time of taking out the policy, Delor had failed to disclose certain pre-existing defects with the building. This failure to disclose by Delor would give Allianz a defence against a claim made by Delor.
- Only 5 days after taking out the policy, the building is subsequently damaged by Tropical Cycole Debbie, and the pre-existing defects in the building were revealed.
- On 9 May 2017, Allianz, however, still decided to send the following email (via their subsidiary) stating:
"Despite the non‑disclosure issue which is present, [the Insurer] is pleased to confirm that we will honour the claim and provide indemnity to [Delor], in line with all other relevant policy terms, conditions and exclusions." (the Email) (emphasis added)
- Throughout the following year, Allianz carried out further investigations and discovered even more pre-existing defects.
- Allianz then offered Delor the sum of $918,809.90 as full and final payment. Importantly, this offer expressly stated that if the offer was not accepted, the insurer would rely on s28 of the Insurance Contracts Act 1984 to disclaim liability for the breach of duty of disclosure by Delor.
- Delor rejected the offer.
- Allianz then denied the indemnity altogether, and Delor commenced proceedings.
- Proceedings: trial judge
The trial judge, Allsop CJ, held that Allianz was bound to pay the indemnity because, in their email, Allianz had in effect:
- ‘irrevocably elected not to exercise its power to rely on the defence arising from non‑disclosure;
- waived its right to rely on the defence arising from non‑disclosure;
- been estopped from resiling from its representation that it would grant indemnity; and
- failed to act with the utmost good faith [as is required by insurers]’
- Appeal to the Full Court of the Federal Court
Allianz appealed, and the Full Court rejected the appeal (McKerracher and Colvin JJ, Derrington J dissenting).
- Appeal to the High Court
Allianz appealed again.
The High Court, by majority (KIEFEL CJ, EDELMAN, STEWARD AND GLEESON JJ, with GAGELER J dissenting), disagreed with the conclusions of the courts below, and allowed Allianz’s appeal.
On the issue of estoppel, the majority held “the body corporate did not establish that it had suffered any detriment in reliance upon the insurer's representation”. As promissory estoppel requires the claimant show they would suffer detriment if the promisor tried to back out of their promise, the claim failed.
According to the majority, “by itself, waiver of a right [in contract law] is rarely irrevocable”: at [29]. The majority, too, set out a lengthy discourse on the law of election; again finding that Delor could not succeed on this basis.
On the good faith issue, the insurer was honest in their offer, setting out they would waive the defence if the offer was accepted.
Gageler J, in dissent, held that the Email did in fact amount to a waiver of Allianz’s defence in the case. According to His Honour:
“[after the Email] a year then passed, during which Delor Vue relied on the announcement to its detriment and during which SCI as agent for Allianz went on to adjust the claim in accordance with the terms of the contract of insurance, is sufficient to render Allianz's reassertion of the statutory right on and from 28 May 2018 unreasonable, indeed capricious.”
This case does provide detailed guidance on when a Court will, or will not, restrain a party from exercising a contractual right.
For advice on contractual and commercial disputes, contact Maclarens Lawyers on 96823777.
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