Amalgamated Investment v Texas Bank Ltd [1982]

Court of Appeal

Facts: Banking dispute. Texas Commerce Int Bank's (T) subsidiary made loans to Amalgamated Investment's (A) subsidiary and they worked on the assumption that A was guaranteeing the loans, when in fact the wording of the contract meant that only loans made by T itself (main company) were to be guaranteed by A.

Issue for the Court: What are the limits of estoppel? Can estoppel by convention be used as a basis for a cause of action when it is incorporated into a pleading on another ground?

Held: The Court of Appeal held that, on the facts, the guarantee did indeed cover the loan made by T’s subsidiary. In obiter, the court noted that, in any event, A was estopped from denying that the guarantee applied. T could have relied on estoppel by convention as a de facto cause of action.

Denning MR Number of cases of estoppel over the years

o   Has evolved into several different categories.

§  Propriety Estoppel

§  Estoppel by representation of fact

§  Estoppel by acquiescence

§  Promissory Estoppel

o   Has been sought to be restricted – e.g. that can’t bring cause in action.

·      General principle

o   When parties to a transaction proceed on the basis of an underlying assumption

§  Whether due to misrepresentation or mistake

o   On which both have conducted their affairs

§  Neither party is allowed to go back on that assumption

·      When it would be unfair or unjust to do so

Brandon LJ

·      Estoppel founded not on representation of fact by representor to representee.

o   But on agreed statement of facts and truth which has been assumed

§  By convention of the parties

·      As the basis of a transaction into which they are about to enter.

o   When parties act on the transaction under these agreed facts

§  Both will be estopped from against the other questioning the truth of the statement of facts so assumed.

·      This is estoppel by convention.

·      Argument that estoppel can’t be used as a sword, only a shield.

o   Is all really a matter of semantics.

§  Party can’t in terms found a claim upon estoppel.

·      He may, as a result of relying on estoppel

o   Succeed using a different cause of action that would fail were it not for the reliance on the estoppel.

💡 Levelup: This case illustrates that while estoppel by convention cannot itself constitute a cause of action, it can substantiate a cause of action by preventing a party from denying a shared assumption. This principle allows a party to succeed on a cause of action by relying on the estoppel to support its claims based on the common assumptions made during the transaction.