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Last Updated: 9 March 2024
The Doctrine of Part Performance
277
The Doctrine of Part Performance: Where Should the Line be Drawn?
Peter Devonshire*
Land is a cornerstone of economic wealth. Agreements for the disposition of land or an interest in land have a unique pedigree. Historically, such agreements have been subject to certain basic formality requirements. This can be traced to the Statute of Frauds 1677, which provides that no action shall be brought:1
on any Contract or Sale of Lands Tenements or Hereditaments or any interest in or concerning them ... unlessse the Agreement upon which such Action shall be brought or some Memorandum or Note thereof shall be in Writeing and signed by the partie to be charged therewith or some other person thereunto by him lawfully authorized.
These requirements have been adopted throughout the Commonwealth.2 In New Zealand this is found in the Property Law Act 2007, which states:3
(1) A contract for the disposition of land is not enforceable by action unless –
(a) the contract is in writing or its terms are recorded in writing; and(b) the contract or written record is signed by the party against whom the contract is sought to be enforced.
If these formalities are not complied with,4 the agreement is unenforceable. Importantly, the agreement is not void. This leaves the door open for Equity.5 If the promisee6 can establish sufficient acts of part performance under the contract, equity may intercede and grant
* Professor, Faculty of Law, University of Auckland.
for fraud”. See further Rochefoucauld v Boustead [1896] UKLawRpCh 180; [1897] 1 Ch 196 (CA).
specific performance of a contract that is otherwise unenforceable.7 Although clearly inconsistent with the intent of the statute, the doctrine of part performance is expressly reserved by section 26 of the Property Law Act 2007.8
The following sections will consider the underlying principles of part performance and their application in modern doctrine. Part II traces the development of part performance through the cases, concluding with the House of Lords’ judgment in Steadman v Steadman.9 Part III assesses the New Zealand approach to part performance with particular reference to the leading authority of TA Dellaca Ltd v PDL Industries Ltd.10 Part IV discusses the relationship between part performance and equitable estoppel. Part V contrasts the New Zeland position on part performance with the more restrictive approach adopted by the Australian courts. Some concluding remarks are found in Part VI.
II The Development of Part Performance
Part performance arises when a party has acted in pursuance of a contract in circumstances where it would be unconscionable for the counter-party to resile from his or her obligations by relying on the absence of certain formalities. A common scenario is where a promisee seeks to enforce a parol contract for the sale of land.
In TA Dellaca Ltd v PDL Industries Ltd,11 Tipping J commented on the tension between part performance and the intent of the statute:12
[T]hroughout the 300 years since the Statute of Frauds was enacted there has been a tension between adherence to the letter and policy of the statute, yet not allowing it to become an instrument of fraud itself. It was to avoid that consequence that equity developed the doctrine of part performance. It was thought in the Courts of Chancery that if a party to a contract had stood by while the other party took steps in the performance of the otherwise unenforceable but not void contract, it would be a fraud in equity for him to later shelter behind the statute to avoid performing reciprocal obligations.
law relating to part performance.”
The reference to “fraud in equity” denotes equitable fraud. Equitable fraud does not require actual dishonesty or deliberate wrongdoing.13 “Fraud” in this context can be generally equated with unconscionable conduct. The threshold may be met if a party exploits a defect in formalities to avoid obligations to another who has acted in pursuance of that agreement.14 In Nocton v Ashburton,15 Viscount Haldane LC explained:16
In Chancery the term “fraud” thus came to be used to describe what fell short of deceit, but imported breach of a duty to which equity had attached its sanction ... What it really means ... is not moral fraud in the ordinary sense, but breach of the sort of obligation which is enforced by a Court that from the very beginning regarded itself as a Court of conscience.
As part performance is inconsistent with the express intention of the legislature it is understandable that, historically at least, the threshold for part performance was relatively onerous. This is exemplified in the leading case of Maddison v Alderson.17The facts in brief are that the appellant, Elizabeth Maddison (“M”) was employed by Thomas Alderson (“A”) as a housekeeper from 1845 until A’s death in 1877. By 1860, A was unable to pay her wages and there were significant arrears. A induced M to remain in his service without further payment in return for a small annuity and a life estate in a property which he expected to inherit from his uncle. Three years later, the property passed to A on the death of his uncle. A subsequently executed a will granting a life interest to M. However, the will was not attested and therefore void.
M was therefore relying on a parol contract to enforce a disposition of land. An agreement in this form was unenforceable under the Statute of Frauds. In proceedings between M and A’s heir, M argued that her conduct was a sufficient act of part performance to take the case out of the Statute of Frauds. This submission was accepted at trial, but
... generally refers to no more than the unconscionability of asserting particular legal rights. So a proposed reliance on a particular legal right is often said to amount to fraud in equity, or to equitable fraud, when all that is meant is that the proposed reliance is inequitable, that is, contrary to the equitable principles and rules that have been held to be appropriate to transactions of the particular kind that is in question.
ICF Spry The Principles of Equitable Remedies: Specific Performance, Inunctions, Rectification and Equitable Damages (9th ed, Law Book Co, Pyrmont, 2014) at 259.
17 Maddison v Alderson (1883) 8 App Cas 467 (HL).
rejected by the Court of Appeal. This was affirmed by the House of Lords. Lord Selborne LC reviewed the authorities and concluded that M’s continuation in A’s employment without payment was not, in itself, evidence of a contract with respect to land.
His Lordship elaborated that if a contract is found, the equity to have the contract enforced must be established by acts of part performance in the execution of the contract. Such conduct may render it unconscionable for the promisor to invoke the Statute of Frauds as a defence to completing a contract that has been partly performed.18 However, the evidential bar for part performance was high:19
All the authorities show that the acts relied upon as part performance must be unequivocally, and in their own nature, referable to some such agreement as that alleged ...
In concurring reasons, Lord O’Hagan was even more uncompromisingin defining the threshold for part performance:20
It must be unequivocal. It must have relation to the one agreement relied upon, and to no other.
In many ways, Maddison v Alderson was a judgment of the times. Part performance was an unsettling concept that challenged certainty in dealings with land.21 Their Lordships were not impervious to the moral complexions of the case, but were clearly of the view that a strict application of the law was required.22Sometimes it takes a different era, a more nuanced judicial method and a compelling set of facts to overturn precedent. Kingswood Estate Co Ltd v Anderson23 was such a case.24 Anderson, an elderly widow and her invalid son, were tenants in the same house for 45 years. As a tenant in that
18 At 475–476.
19 At 479.
property, she enjoyed certain statutory protections. The landlord wished to move Anderson and her son in order to develop the site. To obtain possession, the landlord was required to satisfy the court that suitable alternative accommodation was available. To this end the landlord offered, and Anderson accepted, alternative accommodation. Anderson agreed to move from her protected tenancy to another residence owned by the landlord on the understanding that she could remain there for the rest of her life. The agreement was oral and not reduced to writing. Two years later the landlord brought proceedings for possession.
The landlord’s claim was dismissed at first instance and on appeal to the Court of Appeal. All three Lords Justices found that there was part performance of an oral contract with respect to land.25 Both Willmer and Upjohn LJJ rejected the narrow view that a contract can only be withdrawn from the operation of the Statute of Frauds if acts of part performance are referable to the contract alleged and no other title. Adopting a broader interpretation, Upjohn LJ stated:26
The true rule is in my view stated in Fry on Specific Performance ... “the operation of acts of part performance seems only to require that the acts in question be such as must be referred to some contract, and may be referred to the alleged one; that they prove the existence of some contract, and are consistent with the contract alleged.”
This is a significant shift in emphasis. A key reason the appellant failed in Maddison v Alderson was that her conduct in working without wages could be explained in different ways and did not point unequivocally to the alleged contract. In contrast, part performance can be more readily inferred from the modern perspective of conduct attributable to “some contract” which “may be ... the alleged one” and is merely “consistent with the contract alleged”.27 The implications of this approach in defining the modern doctrine will now be assessed.Kingswood Estate Co Ltd v Anderson was followed in Wakeham v Mackenzie.28 The plaintiff, a widow, vacated her council flat and moved into the home of a widower (“B”) as his companion and housekeeper. The plaintiff contributed to some expenses but her services were unpaid. In return, B agreed to leave the house and its contents to her. He failed to do so. The plaintiff’s claim for specific performance was granted on the basis that her conduct was part performance of an oral contract relating to land.29
26 At 188.
Anderson, above n 23, quoted in text accompanying above n 26.
In Wakeham v Mackenzie the plaintiff’s personal sacrifice or opportunities foregone were not as profound as the claimants in Maddison v Alderson and Kingswood Estate Co,30 but the relevant enquiry is whether there is a course of conduct that is referable to an alleged contract. The nature and extent of the plaintiff’s conduct may, however, be relevant for determining whether it would be unconscionable for the counter-party to resile from his or her contractual promises.
The law in this area was further developed by the House of Lords in Steadman v Steadman.31 Five reasoned judgments offered differing perspectives, but their overall tenor was to confirm a relaxation of the requirements for part performance. The case should be understood in context. At issue was an agreement between parties whose marriage had been dissolved. There were several aspects to the dispute, including rights in respect of the former matrimonial home and arrears of maintenance for the wife and child. At the doors of the court, the parties reached a settlement. The arrears of maintenance were compromised and the wife agreed to sell her interest in the matrimonial home to her husband for
£1,500. All the terms were agreed orally, including the arrangement for transferring the home. The husband subsequently paid the arrears of maintenance and his solicitor forwarded a deed of transfer to the wife for conveying the home. The wife refused to complete, arguing that an oral agreement with respect to land was unenforceable.
It should be noted that this was a composite agreement comprising several terms, including the transfer of land. In the House of Lords, the majority of their Lordships found that acts of part performance did not have to be referable to the agreement for the disposition of land.32 Therefore, payment of the arrears of maintenance as well as preparing the deed of transfer were each sufficient acts of part performance of an oral agreement.
There was also support for the view espoused by Upjohn LJ in Kingswood Estate Co v Anderson that acts of part performance must relate to some contract and may be referred to the alleged one and be consistent with the contract alleged.33 In this regard, the medium of proof was the ordinary civil standard of a balance of probabilities.34 This contrasts with the restrictive historical requirement, discussed above, that part performance must be unequivocally referable to the alleged contract.
III The Modern Debate in New Zealand
The principles enunciated in Steadman v Steadman were considered in an early New Zealand decision,35 Boviard v Brown,36 where purchasers sought specific performance of a contract for the sale and purchase of land. The purchasers’ conduct in sending a transfer to the vendor’s solicitors, advising insurers and arranging financing, were clearly steps taken pursuant to an oral contract. In these circumstances the vendor could not resist reciprocal obligations by invoking the formality requirements of the Contracts Enforcement Act 1956. The following year, in Boutique Balmoral Ltd v Retail Holdings Ltd,37 specific performance of an oral contract for the grant of a lease was refused when the acts of part performance were merely in anticipation, and not performance, of the contract.
These and other judgments were considered by Tipping J in TA Dellaca Ltd v PDL Industries Ltd,38 one of the leading New Zealand authorities on part performance.
The defendant was the lessee from the Crown of commercial property. The defendant vacated the property and subleased it to the local council. The defendant was approached by the plaintiff who was seeking warehouse space in the area. Terms were agreed in a telephone call on 22 January 1990 and the plaintiff confirmed the details in a fax to the defendant. The plaintiff followed this up the following day with a phone call to the defendant. The defendant had at that stage dictated a letter which had yet to be typed out. The defendant’s secretary read the contents to the plaintiff. This letter was never signed by the defendant or sent to the plaintiff. Nevertheless, this provided sufficient assurance to the plaintiff who proceeded on the basis that there was a concluded agreement.The Council’s lease had a short time to run but the plaintiff was anxious to occupy the property and commence renovations. To achieve this, the plaintiff entered into possession as a sublessee from the Council. Significantly, at this stage the plaintiff’s interest derived from the Council, not the defendant. The plaintiff then undertook renovations to the property and voluntarily surrendered a lease on other premises it occupied. The plaintiff also contacted an insurance broker for a quote.
However, when the plaintiff forwarded a formal agreement to the defendant, the latter advised that it had received a valuation indicating that the property was worth considerably more than the amount offered by the plaintiff. The defendant refused to proceed unless the plaintiff’s offer was increased. The plaintiff was unwilling to do so and commenced
proceedings for specific performance on the basis that the contract was
enforceable by virtue of the plaintiff’s acts of part performance.
Setting the framework for his discussion, Tipping J asked whether there was an oral agreement on 22 January 1990 and whether it was unenforceable in the absence of a signed note or memorandum thereof. If so, could this be overcome by the doctrine of part performance?39
In an expansive review of the law in this area, Tipping J clarified a number principles. His Honour observed that there are two schools of thought regarding the required conduct for part performance. The narrower approach contemplates acts in performance of the oral contract. The wider approach includes acts in reliance, but not necessarily in performance of, the oral contract. His Honour adopted the narrower view,40 adding that the act of part performance may be either in compliance with a contractual obligation or pursuant to a right granted by the contract.41
Tipping J was particularly mindful of the tension between the intention of the legislature in imposing formality requirements for certain transactions and the potential for such provisions to become an instrument of fraud.42 Part performance seemed to fit between the two. His Honour cautioned against part performance providing relief against statutes by reference to broader doctrines, such as estoppel.43
Notwithstanding these concerns, due weight must be given to the fact that the Property Law Act specifically preserves the court’s powers in respect of part performance. This bolsters the court’s inherent equitable jurisdiction and should inspire a degree of boldness, particularly where the promisor has stood by while the promisee acts to his or her detriment.
Summarising his views, Tipping J propounded a framework for determining whether part performance has been established:44
but for the Act?
(a) clearly amounts to a step in the performance of a contractual obligation or the exercise of a contractual right under the oral contract; and
39 At 94.
40 At 99 and 108.
41 At 107. See, similarly, Regent v Millett [1976] HCA 40; (1976) 133 CLR 679 at 683–684 per Gibbs J. Compare Boutique Balmoral Ltd v Retail Holdings Ltd, above n 37, at 225.
42 At 109.
43 At 108.
(b) when viewed independently of the oral contract was, on the probabilities done on the footing that a contract relating to the land and such as that alleged was in existence.
At first blush, without rigorously applying these principles, it might be thought that the plaintiff in Dellaca had established a case for part performance. It is instructive to see how the court took a different view. What is apparent is that the facts and surrounding circumstances must be carefully assessed because acts of part performance may ultimately prove to be illusory.Tipping J found that the parties had orally agreed to enter into a contract of sale, thereby satisfying the first question. It was therefore necessary to determine whether the contract was enforceable notwithstanding an absence of writing. The defendant submitted that part performance was established by several acts. First, by entry into possession. However, the taking of possession did not, on a balance of probabilities, demonstrate the existence of a contract such as that alleged because the plaintiff had taken possession prior to the contract date. Moreover, at that stage the property was subject to a lease to the council. The plaintiff therefore took possession as sub-lessee and not as purchaser.
Second, the work undertaken on the property was not an act of part performance because the contract date for possession had not yet arisen. The plaintiff’s conduct was in reliance of the contract, but not in execution of it or in the exercise of a contractual right thereunder. This applied the distinction, discussed above, between the narrower and wider approach to acts of part performance and Tipping J’s preference for the former.
Third, the plaintiff’s request for an insurance quote for the property and the plaintiff’s enquiry regarding the defendant’s solicitors, were insufficient. Independently of the oral contract, neither amounted to an act of part performance. Their status was equivocal. They were more in anticipation of the contract than in fulfilment of it. Finally, the surrender of a lease of other premises was regarded as conduct in reliance of the oral contract and not in part performance of it.
In the result, the oral contract was not supported by acts of part performance and the agreement was unenforceable due to the absence of formalities prescribed by the Property Law Act. Having reached this conclusion, it was unnecessary to consider the final question, namely whether it would be unconscionable for the defendant to rely upon the Act.
There is no doubt that the law has moved on significantly since Maddison v Alderson. Insistence on conduct unequivocally referable to the alleged contract was a restrictive gateway to part performance. The relaxation of this test in Kingswood Estate Co v Anderson and Steadman v Steadman lays the foundation for the modern doctrine. TA Dellaca Ltd v PDL Industries Ltd reflects these developments and Tipping J’s formulation is now the
established test for part performance in New Zealand.45
Whilst Dellaca propounds a more liberal test for part performance, Tipping J indicated that a degree of restraint was required, particularly as it undermines the express provisions of a statute. This is reinforced by some narrow distinctions. For example, it has been noted that the relevant acts must be in performance of a contract and not merely in reliance of it. The latter may produce harsh and irremediable results, as where the promisor stands by while the other party acts to his or her detriment in the belief that a binding agreement is in place. Here, the ability to achieve justice inter partes is largely thwarted as this is not an appropriate setting for estoppel.46 As one learned commentator observed:47
It is a curious proposition that courts of equity must permit the unconscientious use of the statute by a defendant up and until such time as the acts of part performance themselves point unequivocally to a contract for the sale of land.
Again, the promisee may initiate a course of conduct that falls short of performance of a contractual obligation. For example, in Boutique Balmoral Ltd v Retail Holdings Ltd,48 the plaintiff sought an order for specific performance of an oral contract for a lease of business premises. The plaintiff relied on acts of part performance, including certain payments to the plaintiff’s solicitor in respect of the transaction.49 Mahon J rejected this submission and observed that payment to the plaintiff’s own solicitors was not an act in performance of any contract, but was merely in preparation for an act of part performance. The position would be different if funds had been remitted to the defendant’s solicitor.50This contrasts with Nguyen v SM & T Homes Ltd,51 where the vendors sold their residence at auction. The highest bidder gave the vendors’ agent a cheque for the deposit which was placed in their trust account to the credit of the vendor. When the vendors refused to transfer the property, the purchaser brought proceedings for specific performance. The vendors argued that the payment to their agent was not a sufficient act of part performance because they had never received these funds. Clearly, on the facts, the point had been reached where payment could be imputed to the vendors on the simple rule of agency. In rejecting the vendors’ submission, the Court of Appeal treated this payment as an
29 NZULR 397 at 401.
act of part performance which, viewed independently of the contract, was consistent with the existence of an agreement for the sale of land to the purchaser.52
Two years after Dellaca v PDL Industries, Tipping J delivered the judgment of the Court of Appeal in Fleming v Beevers.53 In the latter, the plaintiff (Miss Fleming) and the defendant (Beevers) lived together in a de facto relationship from 1976 until July 1989, when the defendant died unexpectedly. The plaintiff and defendant owned a property in Queenstown which they had purchased in March 1989. The plaintiff sought specific performance of an oral agreement whereby each agreed to leave to the survivor their respective half interest in the Queenstown property.54 The plaintiff executed a will in November 1988 leaving her estate to the defendant.55 When the defendant predeceased the plaintiff, he had not executed a will in her favour and by the terms of a will in 1979, left everything to his three sons by a previous marriage.
For the duration of their relationship, the plaintiff and the defendant kept their financial affairs separate. They contributed equally to joint expenses and in purchasing the Queenstown property each paid exactly one half of the purchase price and related disbursements. The title was conveyed into their names as tenants in common in equal shares.56 There was discussion with their solicitor regarding the disposition of their respective interests when one died. The solicitor offered to immediately take instructions from the defendant to prepare a new will. He declined, advising that he would arrange this with his own solicitor. However, he had not done so when he died 5 months later.
In the High Court it was held that the arrangement between the parties fell short of a binding legal agreement and the plaintiff’s claim was dismissed. The Court of Appeal reversed this decision. The judgment of the Court of Appeal was delivered by Tipping J. It was found that the parties had entered into a composite agreement of which the disposition of land was an integral element. It was unnecessary for acts of part performance to pertain to that aspect alone. Therefore, part performance of other parts of a composite agreement can be regarded
52 At [34]–[36].
as part performance of the transaction as a whole, including the land aspect.57
The alleged acts of part performance were reduced to the following steps taken by the plaintiff: (i) signing the agreement to purchase the Queenstown property, (ii) raising the money which constituted one half of the purchase price, and (iii) signing a will leaving all her property to the defendant. The third was rejected because it was undertaken prior to the parties’ agreement.58 However, it was held that acts (i) and (ii) constituted part performance of the composite oral contract and the plaintiff was granted specific performance.
It may be questioned whether the result is entirely consistent with the scheme of the Dellaca test. To establish part performance the first issue is whether there was a sufficient oral agreement that would be enforceable but for the Act. If so, further enquiry will determine whether there has been part performance of that oral contract. It is debatable whether the court should proceed to consider alleged acts of part performance if the first question is unresolved. In Fleming v Beevers the existence of an oral agreement was, at best, ambivalent.59
The most obvious concern was that throughout their relationship the parties’ finances were maintained on a separate basis. The deemed acts of part performance identified in (i) and (ii), could equally be taken at face value as an arrangement to acquire separate interests as tenants in common.60 Moreover, it is quite possible that the defendant never intended to follow through with a new will because he had no wish to change the terms of his earlier will.
The contract was affirmed from acts of part performance, a process that effectively reversed the sequence propounded in Dellaca. This suggests that the enquiry may be less structured than first appears and the elements of an agreement may simply be part of the overall matrix of facts. This approach is more aligned with the views of Lord Reid in Steadman v Steadman, where his Lordship stated:61
You must not first look at the oral contract and then see whether the alleged acts of part performance are consistent with it. You must first look at the alleged acts of part performance to see whether they prove that there must have been a contract and it is only if they do so prove that you can bring in the oral contract.
Finally, in Fleming v Beevers the Court considered the distinction between composite and single term contracts for the disposition of land. It was held that the arrangement between the plaintiff and defendant gave rise to a composite agreement. However, the factual basis for this finding would have benefited from elaboration, if only as guidance for future decisions.
For a single term contract, acts of part performance must relate to that provision alone – logically so because there are no other relevant terms. An obvious and important difference from a composite agreement is that part performance can be established by reference to any of the terms, whether or not relating to land.
Tipping J summarised his finding in Fleming v Beevers:62
The composite nature of the contract in this case is evident from the fact that the parties agreed: (a) to buy the land together; (b) how the purchase price was to be financed; (c) how the title was to be taken between them;
(d) that Mr Beevers would guarantee Miss Fleming’s mortgage; (e) that she would indemnify him; and (f) that each would leave to the other his or her interest by will.
On balance this was a composite agreement, if only because of the arrangement with respect to the wills. Items (a) to (e) are sub-parts of the same transaction.63 Only (f) was distinct and can properly be regarded as a separate event. It would have therefore been preferable to present the elements of the composite agreement in this way in order to discourage artificial distinctions being drawn between aspects of the same transaction. If this is not observed, courts may too readily find that there is a composite agreement and thereby tip the scales in favour of the party seeking to establish part performance.64It may be concluded that the Dellaca test, in line with modern English authorities, has liberalised the requirements for part performance. In addition, Fleming v Beevers suggests a degree of fluidity in applying the relevant principles. To this extent there are indications that part performance is evolving into a purposive doctrine of uncertain breadth.
If the plaintiff’s conduct is ambiguous, the standard for establishing that acts of part performance are consistent with the alleged contract relating to land are not particularly onerous. This is illustrated in Street
v Fountaine.65 The issue was whether the defendants had granted the plaintiffs a licence or an equitable easement over their lands. This originated in the 1990s when a group of farmers established a scheme for providing stock water to their properties. Water was collected and transmitted by pipes to various farms within the scheme. In the early 1990s the infrastructure was upgraded and the original collection point was moved to a different location. The collection point and pipe system were on the lands of the first and second defendants. The arrangement resulted from an oral agreement and there were no registered documents.
The plaintiffs, represented by ST, claimed that the defendants’ land was burdened by an equitable easement granting the plaintiff a right of access to maintain and repair the facilities. The defendants argued that the plaintiffs had a mere licence that was revocable at will. The High Court dismissed the plaintiffs’ claim for an easement66 but this was reversed by the Court of Appeal. It was held that the first defendant had granted rights that possessed all the characteristics of an easement. Various steps had been taken by the plaintiffs67 in the performance of a contract for an easement. This included the installation of the new infrastructure and commissioning a survey for that purpose. With regard to the nature of the agreement, the Court concluded that the work was substantial and permanent. This was more consistent with the grant of an easement than a licence:68
These steps are more consistent with performance of an agreement to grant an easement rather than an agreement to grant a licence. As the Street Trustees submit, it is unlikely that such extensive arrangements would have been taken absent a permanent entitlement to place infrastructure on the land, and use and maintain it.
This finding makes practical sense but it is not free from difficulty. There was no dispute that the parties had entered into an agreement. However, it was unclear whether the agreement was contractual or merely an understanding that did not create binding legal obligations.69 In the present setting, the latter could be characterised as a licence,70 which typically confer only limited rights, such as permission to occupy, terminable at will by the grantor.The value of the work and the degree of permanence persuaded the Court that an easement was intended. It was assumed that a person in the plaintiffs’ position would not undertake a major project unless permanent rights were granted.71 There are, of course, other inferences
70 At [44].
71 As noted in the quotation in the text accompanying above n 68.
that can be drawn from the parties’ conduct. Transactions are sometimes entered into on an informal basis without the intention of being bound by any particular terms unless or until a formal agreement is executed.
IV Part Performance and Equitable Estoppel
The legacy of the House of Lords’ judgment in Steadman v Steadman was twofold. First, it affirmed the direction taken by Kingswood Estate Co v Anderson and Wakeham v Mackenzie in relaxing the test for part performance. Second, it contributed to the view that the law in this area was in an unsatisfactory state – so much so that the Law Commission recommended that part performance with respect to land should be repealed in England and Wales.72 With the passing of the relevant legislation73 it was no longer possible to enter into a binding oral agreement for the sale or other disposition of an interest in land. Thereafter, contracts failing to comply with the requirement of writing and signature were void, not merely unenforceable.74At the same time it was recognised that injustice could be caused if there was no redress in situations that were formerly governed by part performance. In that regard the Law Commission expressed confidence that other legal constructs could be invoked. It was opined that equity would not leave English law in such a parlous state and that “the courts would use doctrines of estoppel to achieve very similar results where appropriate to those of part performance.”75
However, this belies the fact that while part performance and equitable estoppel share certain principles, they are not co-extensive. As the High Court of Australia observed in Pipikos v Trayans,76 there are notable differences between the two, including the manner in which the parties can rely on the respective doctrines, the requirement of detriment and the nature of the equity being enforced.77 This is compatible with Tipping J’s views in Dellaca v PDL Industries, where his Honour was particularly mindful of the different scope of estoppel in this context:78
At no stage however has it been held that equity will relieve against the consequences of the statute on general principles of estoppel. The doctrine of part performance has been much more tightly framed and controlled than that. This must be right because equity has never claimed any general power to dispense with the observance of statutes on the basis that a party is estopped from relying upon a right which Parliament has for better or worse given.
76 Pipikos v Trayans, above n 14. 77 At [58]–[61] and [94].
78 TA Dellaca Ltd v PDL Industries Ltd, above n 10, at 108 per Tipping J.
The elements for determining equitable estoppel have been described in the following terms:79
the quality and nature of the assurances which give rise to the claimant’s expectation; the extent and nature of the claimant’s detrimental reliance on the assurances; and the need for the claimant to show that it would be unconscionable for the promisor to depart from the assurances given.
The test for part performance similarly imports the requirement of unconscionability. However, it is relatively settled both in Australia80 and New Zealand81 that detrimental reliance is not a condition for part performance. In Dellaca v PDL Industries, Tipping J was clear on the point:82
It is not enough that the plaintiff has acted to his detriment pursuant to a parol agreement. The plaintiff’s act or acts must have been taken in the performance of the parol agreement.
It has been observed that there are a range of remedial options to protect the plaintiff’s detriment. If detriment is a necessary element of part performance, specific performance would only be granted if some lesser form of relief was inadequate. However, this is not the case. Once part performance is established, specific performance is usually granted83 without further enquiry.84 In fact, some of the classic categories of part performance, such as entry into possession,85 confer a benefit and not a detriment to the plaintiff.86 The court’s reluctance to examine the plaintiff’s position is reflected in a dearth of cases where damages are granted in lieu of specific performance for dispositions of land.
Ironically, a plaintiff seeking specific performance of an informal agreement may be in a stronger position to a party claiming damages for breach of a binding contract. In the former, the plaintiff is not obliged to allege detrimental reliance and is readily granted specific relief if part performance is established. In contrast, while detriment to the plaintiff is irrelevant for determining whether a breach of contract has occurred, its monetised value is the basis on which loss is quantified.
V Back to the Past
Australia has consistently applied the House of Lords’ reasoning in Maddison v Alderson. The application of a strict test for part performance is evident in the early case of McBride v Sandland,87 where Isaacs and Rich JJ stated that the following elements were necessary to raise the equity:88
the act relied on must be unequivocally and in its own nature referable to “some such agreement as that alleged”. That is, it must be such as could be done with no other view than to perform such agreement ... by “some such agreement as that alleged” is meant some contract of the general nature as that alleged ... the proved circumstances in which the “act” was done must be considered in order to judge whether it refers unequivocally to such an agreement as is alleged.
More recently, in Regent v Millett89 the High Court of Australia again affirmed Lord Selborne’s test in Maddison v Alderson as a correct statement of the law. At the same time, a limit has been set. This principle has not been taken to the extreme of requiring that the acts of part performance must be referable to the contract alleged and no other title.90The New Zealand and Australian approach to part performance differ in some material respects, but there is a hinterland between the two where each may produce the same or a similar outcome. This is evident in the context of parties in occupation of land who assert rights as a lessee.91 The circumstances in which the claim arises will guide the enquiry. Possession may be acquired in different ways and at chronologically different stages. If a party’s claim is based on the grant of possession, this may point to a contract conferring rights of occupation. The inference may be less apparent if a party remains in possession upon the expiry of a lease. Here, possession may be explained as holding over under the terms of the original lease. Although the lessee may continue to observe the lease
terms, there is no underlying tenure and unless there is an agreement to enter into a new lease, the interest may be reduced to a tenancy at will.
A comparison of Lighting by Design (Aust) Pty Ltd v Cannington Nominees Pty Ltd92 and Mahoe Buildings Ltd v Fair Investments Ltd93 is instructive both in their treatment of these issues and the similarity in approaches. In the former, the lessee sought to enforce the terms of an oral contract in respect of an unregistered lease of commercial premises. In the latter, the lessor alleged acts of part performance in order to invoke the terms of a lease that had been renewed informally.
The basic facts in Lighting by Design, were that in 2004 the lessee entered into a commercial lease (“the Parkworld Lease”) for 7 years. The agreement was never registered or protected by a caveat. In 2006 the lessor sold the reversion to the respondent. The respondent was advised that the Parkworld Lease was unenforceable and decided to re-let the property at the current market rate. However, the appellant was not advised of the respondent’s intentions and the respondent’s agent continued to deal with the appellant as if the lease was in effect. In that regard the agent sent the appellant invoices, utility statements and council rates for payment. The appellant was also requested to provide details of its insurance coverage. All were described as obligations “under the terms and conditions of your Lease”.94 Even more tellingly, the respondent increased the rental payments pursuant to a rent review clause in the Parkworld lease. In February 2007 the respondent wrote to the appellant stating that the parties were not bound by the Parkworld lease and the appellant would be required to vacate the premises on 28 days’ notice unless it was prepared to enter into a new lease at an increased rental. In response, the appellant commenced proceedings claiming, inter alia, that a new contract arose by the conduct of the respondent’s agent in enforcing the terms of the Parkworld lease. The appellant argued that its compliance with these conditions constituted part performance of an agreement which was enforceable notwithstanding lack of writing.The Full Court of the Supreme Court of Western Australia, by a majority,95 allowed the appellant’s appeal. Whilst acknowledging that Australia had not followed the more liberal approach of the House of Lords in Steadman v Steadman, their Honours found that there were sufficient acts of part performance by the appellant96 to satisfy the more restrictive Maddison v Alderson test. The status of a lessee who continues in possession after expiration of the lease was equivocal. However, this may constitute part performance of a new agreement if combined with
payment of rent or other costs for a greater amount than reserved in the original lease.97 This must be contrasted with a party who goes into possession, as opposed to continuing in possession. In the former case, the mere act of paying rent may be sufficient evidence of part performance of an agreement to enter into a lease.98
It appears from the majority’s judgment that the various steps taken by the appellant were also consistent with an agreement to lease for a substantial term, as distinct from a tenancy at will or a periodic tenancy.99 While this is a legitimate factor in weighing the evidence, it should not be expressed any higher to limit the scope of part performance. Whether the acts in question are substantial is not necessarily required to establish if conduct is in performance of an agreement although it may contribute to the finding that such conduct is consistent with the general nature of the alleged contract.
Pullin JA’s dissenting judgment in Lighting by Design illustrates the divergence between unequivocal acts of part performance and conduct which on the probabilities is consistent with the alleged contract. On a strict application of the former, the appellant’s conduct in remaining in possession and meeting financial obligations under the lease fell short of the required evidential standard:100
Those acts may be referable to an agreement of the sort contended for, but they are not unequivocally referable to such an agreement. The relevant acts were equally referable to a tenancy at will or a periodic tenancy.
This contrasts with the approach of the Court of Appeal in Mahoe Buildings Ltd v Fair Investments Ltd. This time it was the lessor who sought to enforce an oral agreement in respect of land. The parties had entered into a 4-year lease which granted the lessee a right of renewal. At the end of the term the lessee remained in possession without formally exercising this right. In a telephone conversation the parties orally agreed to a renewal of the lease. The lessee paid rent at an increased rate and remained in possession for approximately 1½ years. When the lessee vacated there were arrears of rent and unpaid rates. The lessor commenced proceedings claiming these outstanding amounts and such further amounts owing up to the date that the premises were re-let. The lessor’s ability to recover these amounts was dependent on the existence of a binding lease.
100 At [52].
Applying Tipping J’s test in Dellaca, the Court of Appeal held that there were sufficient acts of part performance of the lessor’s obligations under a renewed lease.101 The relevant acts were:102
Items 1 and 4 are exemplars of part performance. Arguably, commissioning a valuation and incurring the related expense (item 3) was more in anticipation of a new contract than performance of it. The decision not to seek other tenants (item 2) is passive and merely reflects the primary decision to renew the existing lease to the current lessee. The core acts described in items 1 and 4 were similarly identified as the critical acts of part performance in Lighting by Design.103 Whilst the requirements of part performance may be found on either model, Pullin JA’s dissenting speech is a reminder that the bar is considerably higher if the court adopts the conservative test of conduct unequivocally referable to the alleged contract.This is fitting prelude to Pipikos v Trayans,104 where the High Court of Australia reviewed the historical position of Australian courts in respect of part performance. In three reasoned judgments the Court affirmed the restrictive approach propounded in Maddison v Alderson. Their views are typified by Edelman J who spoke of the need to keep the doctrine within narrow limits and warned that105
[P]art performance should not be shorn of ... [the] well-established constraint of unequivocal referability.
The case arose from a dispute between family members. In 2002 Trayans (the respondent) and her (then) husband. George, purchased a property (“the Clark Road property”). The property was subject to a registered mortgage in favour of a lender. A house and other improvements were built on the land. In 2004 George and his brother, Leon, the appellant, agreed to purchase a property (“the Taylor Road property”). Trayans, George, the appellant and his wife, Sophie, contributed equally to the balance of the purchase price and incidental costs. In the same year, the parties purchased a parcel of land (“the Penfield Road property”), subject to a registered mortgage. On this occasion, the appellant and Sophie paid the deposit and the balance of the purchase price.
101 It was emphasised that the relevant acts of part performance are those of the party seeking to enforce the agreement (Mahoe Buildings Ltd v Fair Investments Ltd, above n 45, at 287).
102 At 287.
In 2008 there was default on the Clark Road and Penfield Road properties. Again, the appellant paid the arrears.
In 2009, at the appellant’s request, the respondent signed a handwritten note which acknowledged that the appellant was the owner of half of the Clark Road property pursuant to an agreement between Leon and George. Three years later, the appellant instituted proceedings to enforce his alleged interest in this property.
Although the note signed by the respondent did not meet the formality requirements of section 26 (1) the Law of Property Act 1936 (SA),106 the appellant claimed that he was entitled to a decree of specific performance as a result of certain acts of part performance. The latter comprised: payment of the deposit and balance of the purchase price for the Penfield Road property; a cash payment to George; a payment on the Clark Road mortgage; and attempts to enforce the handwritten note, leading to the lodging of a caveat and instituting proceedings.
At trial it was held that neither the alleged agreement nor the requirements for part performance had been established.107 On appeal, the Full Court of the Supreme Court of South Australia108 overturned the first finding but accepted that there were insufficient acts of part performance. The High Court of Australia unanimously dismissed the appellant’s appeal.
The appellant submitted that Lord Selborne’s unequivocal referability test should be relaxed, notwithstanding that the Australian courts had, to this point, consistently followed Maddison v Alderson. This was resoundingly rejected. After reviewing the English and Australian authorities, the plurality concluded:109
[T]here can be no doubt that in Australia Lord Selborne’s statement of the law in Maddison v Alderson is unshaken by the course of authority in this Court.
Applying these principles, the acts of part performance relied on by the appellant were consistent with some transaction other than the Clark Road property, and there was insufficient evidence of a partially completed sale that should be fully executed.110 Insofar as the House of Lords’ judgment in Steadman v Steadman represents a broadening of the doctrine of part performance, it was not to be followed.111 The joint reasons of Nettle and Gordon JJ echoed this view, with particular focus on its relationship to the Statute of Frauds:112
110 At [56].
111 At [66].
112 At [121] per Nettle and Gordon JJ. See also Edelman J at [157]–[158].
[T]here is little reason to doubt that the comparatively stringent requirement continues to serve the objective that it was created to achieve: to prevent recurrence of the mischief which the Statute was enacted to suppress.
On the particular facts, the outcome is perhaps unsurprising. The arrangements were between family members, a setting where parties may accommodate each other and provide mutual assistance without reference to commercial considerations. In Pipikos the existence and terms of any agreement could not be readily ascertained and the transactions were open to different interpretations.113 For example, the appellant’s payment of the Clark Road mortgage arrears could be regarded as a loan. Payment of the deposit and the balance of the purchase price for the Penfield Road property was also consistent with a loan “or an unequal contribution to the brothers’ partnership, that either way, would eventually be brought to account between them”.114 Certainty was elusive, particularly when judged against the “unequivocally referable” test.115It is moot whether the appellant would have fared any better on the New Zealand model. The existence and nature of the agreement is ambiguous116 and therefore it is uncertain whether the parties believed their acts were a step in the performance of a contractual obligation. Even if they intended to create legal relations, it is unclear whether the rights under the various transactions were proprietary or merely personal.117 This serves as a reminder that while the Dellaca test prescribes a lower threshold for part performance, it is not devoid of rigour.
The individual arrangements in Pipikos were not, in themselves, sophisticated. However, each transaction was capable of different interpretations and the appellant could not establish that some or all of the events were interconnected and consistent with an agreement for an interest in land. On a counterfactual, the claimant is in a stronger position if the overall transaction can be construed as a composite agreement. If there are several contractual terms, it is not necessary for acts of part performance to be referable to the land. Compliance with other terms may
be treated as fulfilling the agreement as a whole.118 This reasoning is of course irrelevant if the parties have entered into a single term contract.119
It has been noted that the Dellaca test is less stringent than the Australian doctrine based on Maddison v Alderson. In addition, a party seeking to enforce an oral contract for land has a greater range of options in New Zealand, where the distinction between single-term and composite agreements is prominently observed.120
VI Conclusion
It has been seen that part performance has fared differently in England, Australia and New Zealand. It might be thought that the abolition of part performance in England clarifies the formality requirements for land. However, this is not necessarily the case. Greater uncertainty arises because general concepts may be left to fill the void, whereas relief from the Statute of Frauds is narrowly circumscribed by the doctrine of part performance.Australia has consistently applied Lord Selborne’s reasoning in Maddison v Alderson.121 From a modern perspective, the outcome of this case seems harsh. It is, however, a separate question as to whether the underlying legal principles are unsound. Hard facts – particularly as presented in Maddison v Alderson – can distort these perceptions. The restrictive approach to part performance must be understood against the legislative intent of imposing basic safeguards for the disposition of land. Part performance is an exception,122 to the scheme of the Act and should not become a vehicle for undermining it. With this in mind, the unequivocal referability test strikes an appropriate balance in restraining the abuse of statutory formalities.
Moreover, this test is not absolute. Read in context, acts of part performance must be referable “to some such agreement as that alleged”.123 There is no further requirement that the acts must be referable
Most of the reported cases relate to what one might term single- term contracts for the disposition of land. It is not, therefore, surprising that one finds in the judgments dicta relating the part performance to the stipulation relating to land.
to no other title.124 To that extent, there is latitude in assessing the relevant contractual behaviour.
Overall, the Australian approach is more compatible with the Statute of Frauds than New Zealand’s Dellaca test. Under the latter, part performance is satisfied by conduct which, viewed independently of the oral contract, is consistent with the alleged agreement.125 This is a relatively low threshold, particularly when placed in context:126
The other concept behind the doctrine of part performance ... concerns proof. The acts of part performance are treated for probative purposes as a satisfactory substitute for the statutory requirement of writing.
It might be anticipated that only cogent evidence would suffice as a proxy for the Statute of Frauds but in practice the threshold for part performance is not particularly demanding. For example, part performance has been established by conduct such as instructing solicitors with respect to a transaction,127 opening and servicing a bank account,128 informally giving a cheque as a deposit for an oral agreement for the sale of land,129 using a right of way and contributing to its maintenance,130 and taking steps to purchase a property which could
Fleming v Beevers, above n 44, at 392.
equally be explained as an arrangement to acquire separate interests as tenants in common.131
The New Zealand approach to part performance must be viewed with caution. A failure to adequately protect one’s legal rights may seem incomprehensible to a commercial judge, but it may reflect the realities of the case. Sometimes people are unwise. Courts must be wary of imputing sound commercial judgment to those who knowingly enter into informal arrangements. It is not the function of part performance to shore up the defects of such transactions.
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URL: http://www.nzlii.org/nz/journals/OtaLawRw/2022/4.html