Relying on a representation to your detriment? How clear does the representation have to be to be considered as binding in the law of proprietary estoppel?

The NSW Court of Appeal has again cast their judicial gaze over whether a representation must be “clear and unequivocal” in the law of proprietary estoppel by encouragement, in the decision of Penya v Penya [2026] NSWCA 73.

What does proprietary estoppel by encouragement involve?

This equitable doctrine provides assistance when there has been:

1. a representation, in the form of an encouragement, by the defendant that the claimant would receive some property interest;
2. it was reasonable for the claimant to rely on that representation;
3. the claimant had relied upon that encouragement to their detriment; and
4. the defendant had actual or "constructive knowledge" of the claimant's reliance.

This doctrine is potent, as it can overcome the absence of a written contact.

There is a second form of proprietary estoppel – that by “acquiescence” – whereby actual knowledge of reliance is a requirement, but we will put that to one side.

• Penya v Penya [2026] NSWCA 73: a factual summary

Here, Paula-Marie Penya is the only child of Paul and Therese Penya.

Paula-Marie was advancing a claim for:

1. A constructive trust (court-imposed ownership of the equitable title to the property) over the family home; and
2. An accounting remedy in respect of the proceeds of sale of the Matra Real Estate (rent roll) business owned by Paul and Therese (the family business).

Why did Paula-Marie believe she was entitled to the equitable title to the family home and to the sale proceeds of the family business?

Her primary claim was that this had been represented to her that these would become hers, and that she accordingly worked for the family business for nominal remuneration to her detriment for a substantial period.

But the requirement for a representation in estoppel to be binding is that it be “clear and unequivocal”.

• Did the representation(s) satisfy the “clear and unequivocal” test?

The Primary Judge, Williams J, determined that Paula-Marie’s claim should fail with one of the reasons being an absence of ‘clear and unequivocal promises had been made that Paula-Marie would receive the family business or the family home during her parents’ lifetime.’

What is an example of such unclarity?

Here is one conversation in March 1996 relied upon by Paula-Marie (PJ [21]):

“… Dad told me that I wouldn’t get paid anything but it didn’t matter because everything was going to be mine anyway. He said that everything that he and Mum owned including the business and the Property would be mine, but if I needed money for anything I should just let him know and he would give me money, which he could do by getting a cash advance on his credit card. He said that I was their only child and he and Mum were going to give me everything. Dad said that if I worked in the business this would be like sacrificing my wage to get a business when he retired and also the house.”

While the Primary Judge had accepted that ‘Paul and Therese did intend for Paula-Marie to inherit the whole of their estates on their death, and that there were many conversations to that effect’.

But that was not the critical question.

Instead, the critical question here was whether there had been representations ‘to the effect that the parents would transfer the family home and the family business to Paula-Marie during the parents’ lifetimes or on Paul’s retirement or on their death, by way of inheritance and as part of their respective estates.’

In terms of the business, ‘while her Honour accepted Paula-Marie’s evidence that Paul did say during a conversation in March 1996 that she would “get the business” when Paul retired, her Honour did not  “regard this as a clear and unequivocal promise that Paula-Marie would be given ownership of the business on Paul’s retirement, as opposed to being given the opportunity to step up at that time into the role of principal licensee in charge of the business that she would later inherit”’.

In terms of the family home, the Primary Judge did not feel an ‘actual persuasion’ that there had been a representation to Paula-Marie that she would receive the family home on Paul’s retirement.

In appealing to the NSW Court of Appeal, one of Paula-Marie’s grounds of appeal was that the Primary Judge applied ‘too high a standard for a ‘clear and unequivocal promise’’.

What is interesting here, from a legal perspective, is that there was some doubt that proprietary estoppel by encouragement from a promise requires the promise to be clear and unequivocal (that being the test ordinarily needed for promissory estoppel matters – a different kind of equitable estoppel): Kronenberg v Macaulay [2025] NSWCA 195 at [158].

And indeed, in the context of proprietary estoppels, there is earlier case law to the effect that the ‘promise or representation can be binding notwithstanding that it ‘would not be sufficiently certain to amount to a valid contract, or is formed on the basis of vague assurances.’

But the NSW Court of Appeal in Penya confirmed that the recent High Court’s decision of Kramer v Stone [2024] HCA 48 – a case which proceeded on the basis of proprietary estoppel by encouragement – did indeed require the representation to be clear and unequivocal, and prior reference in case law to ‘vague assurances’ as being sufficient should no longer be followed.

Accordingly, the test applied by the Primary Judge was correct, and proprietary estoppel by encouragement based on a promise requires the promise to be clear and unequivocal. And Paul-Marie’s appeal point was therefore dismissed.

• Further, had Paula-Marie actually suffered a detriment?

Paula-Marie had also lost at trial on the detriment point.

Indeed, Paula-Marie had received some cash payments (aggregating $79,000) over the years from her father, and further Paula-Marie was able to live in the family home together with her husband on a rent-free basis. Her father had moved out of the family home and had continued to pay the mortgage. All the while this arrangement allowed Paula-Marie and husband to acquire four investment properties, with a net worth of slightly more than $2 million.

Paul-Marie had failed to adduce any evidence that she would have been better off financially if she did not adopt this course.

This ground of appeal too was dismissed.

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