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would not proceed unless they were assured that they were true or correct,
in which case the need for an estoppel would never arise.
The rule that the parties may agree to proceed on the basis of an untrue
or incorrect convention dates back many years. Williams J. in M’Cance v.
London & North Western Railway Co. said:
It is laid down in my brother Blackburn’s Treatise on the Contract of Sale,
p. 163, that “when parties have agreed to act upon an assumed state of
facts their rights between themselves are justly made to depend on the
conventional state of facts, and not on the truth.” Applying that rule to the
present case, we think that both parties are bound by the conventional
state of facts agreed upon between them.16
The rule that the truth of the convention is irrelevant is supported by the
fact that estoppel by convention is not based on one party making a representation
that is believed and acted on by the other party. In Prime Sight
Limited (A Company Registered in Gibraltar) v. Edgar Charles Lavarello (Official
Trustee of Benjamin Marrache a Bankrupt), the Privy Council said:
The law is correctly analysed by Spencer Bower at page 197:
“… an estoppel by convention need not involve any misleading of a representee
by a representor, nor is it essential that the representee shall be
shown to have believed in the assumed state of facts or law. The full facts
may be known to both parties; but if, even knowing those facts to the full,
they are shown to have assumed a different state of facts or law as
between themselves for the purposes of a particular transaction, then a
convention will be established. The claim of the party raising the estoppel
is, not that he believed the assumed version of facts or law was true,
but that he believed (and agreed) that it should be treated as true.”17
Another, perhaps stronger way to say the same thing is that when the parties
agree on a convention that will form the basis of the transaction, they
are “deeming” that convention to be true for that purpose. In Ryan v. Moore,
Bastarache J. said:
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 … . Emphasis added.
In other words, the parties do not merely “assume” that the facts (or principles
of law) are true, so that the estoppel will cease to apply if they know
that the facts are not true; they deem the facts to be true. The truth of the
facts and their knowledge of that truth are irrelevant to the estoppel. The
current edition of Spencer Bower’s textbook says:
8.64 An estoppel by convention need not involve any misleading of A by
B, nor is it essential that B believe in the assumed state of facts or law.
The full facts may be known to both parties; but if, even then, they are
shown to have assumed a different state of facts or law as between themselves
for the purposes of a particular transaction, then a convention will