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estoppel by representation in not requiring that the relying party should
have been misled into believing that the convention was true. In other
words, the parties could be both well aware that the convention is untrue,
and there can still be an estoppel. Estoppel by deed and contractual
estoppel are similar to estoppel by convention in that same respect, but
by contrast do not require any detrimental reliance or any unfairness.
They take effect because the party concerned has in effect promised that
it shall be so, in the former case being enforceable by virtue of being
incorporated in a deed, and in the latter as part of an ordinary contract
for consideration.10
Reliance
A key requirement for estoppel by convention is that the estopping party
relied on the existence of the convention.11 The unfairness of allowing the
estopped party to resile from the convention permits equity to uphold the
estoppel. The Supreme Court emphasized this point in Ryan v. Moore:
4 Estoppel by convention operates where the parties have agreed that
certain facts are deemed to be true and to form the basis of the transaction
into which they are about to enter … . If they have acted upon the
agreed assumption, then, as regards that transaction, each is estopped
against the other from questioning the truth of the statement of facts so
assumed if it would be unjust to allow one to go back on it … . Emphasis
added.
As an example of where reliance was lacking, in Teixeira v. Markgraf
Estate, the Ontario Court of Appeal refused to find that the gift of a cheque
was valid under estoppel by convention because the putative donee had not
acted in reliance detrimentally on the promise of the gift:
56 The appellant argues that the parties shared a common assumption
that Mary had the necessary funds in her account and that her cheque to
Arlindo would be honoured.
57 That may be true, but the assumption was made after Mary’s cheque
was delivered to Arlindo. Everyone assumed that the cheque was good.
Arlindo did not change his legal position as a result of that assumption. He
simply hoped that he would receive Mary’s gift.12
In contrast, Ryan v. Moore was applied in a decision of the Hong Kong
Court of Appeal that applied estoppel by convention to deem a trust to have
been settled. In Law Man Wai v. Kwan Sau Sim,13 Mr. Wai was the nephew
of a rich aunt (called “6th Aunt” in the decision). So was Mr. Kam. Kam was
Ms. Sim’s husband. When 6th Aunt was alive, she gave Wai millions of
HK dollars. Kam testified that 6th Aunt told him and Sim during one of their
visits that she had transferred part of her savings to Wai and that that money
was to be shared between him and Wai equally after she passed away. He
further testified that when Wai turned up later, 6th Aunt asked Wai to confirm
the transfer, which Wai did.