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Unblinkering the Unruly Horse: Public Policy in the Law of Contract

Published online by Cambridge University Press:  16 January 2009

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Extract

That much-flogged unruly horse, public policy, is still at large. It is therefore the purpose of this article to examine the nature, justification and operation of public policy and to consider whether this is an area of law ripe for reform. It clearly would be unrealistic to attempt to do this on a broad front in the space available, and so this survey will be limited mainly to the crude and superficially obvious case where a contract is tainted with criminality or where the party seeking a contractual remedy relies on his own criminal act. It will primarily be concerned with such statements of principle as “no man shall be permitted to profit from his own wrong” or “ex turpi causa non oritur actio.” This immediately raises a problem for the common lawyer, for such general statements are not readily recognisable as working law, and he will wish to reduce them to a more precise set of rules. Such an attempt will lead us, however, into the centre of a major jurisprudential debate.

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Copyright © Cambridge Law Journal and Contributors 1972

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References

1 Richardson v. Mellish (1824) 2 Bing. 229 at 252, per Burrough J.

2 Recent examples may be found in the law of contract— Gray v. Barr [1971] 2 Q.B. 554Google Scholar; in the law of probate— Re Giles (deceased) [1971] 3 W.L.R. 640Google Scholar; and in the law of tort— Burns v. Edman [1970] 2 Q.B. 541Google Scholar; Nettleship v. Weston [1971] 2 Q.B. 691 at 710Google Scholar, per Megaw L.J.

3 See Dworkin, “The Model of Rules” (1967) 35 Univ. of Chicago L.R. 14; Tapper, “A Note on Principles” (1971) 34 M.L.R. 628; Hart, The Concept of Law.

4 Op. cit., p. 26.

5 Op. cit., p. 31.

6 Op. cit., p. 40.

7 Tapper, op. cit., p. 632.

8 [1971] 3 W.L.R. 640 at 646 (italics added). The same process can be observed in the operation of the equitable principles of undue influence. See Mutual Finance Ltd. v. Wetton [1937] 2 K.B. 389Google Scholar at 394.

9 The learned judge distinguished cases where there were special verdicts of insanity, for these technically amounted to acquittals.

10 [1971] 2 Q.B. 554.

11 Per Phillimore L.J. at 587.

12 [1971] 3 W.L.R. 640 at 646.

13 Presumably Tinline v. White Cross Insurance Co. Ltd. [1921] 3 K.B. 327Google Scholar and James v. British General Insurance Co. Ltd. [1927] 2 K.B. 311.Google Scholar

14 Winfield, “Public Policy in the English Common Law” (1928) 42 Harv.L.R. 76 at 92.

15 [1919] A.C. 59.

16 Winfield, op. cit.

17 Wright, Lord, Legal Essays and Addresses, p. 69.Google Scholar Not all lawyers would accept the use of the word “void” in this context.

18 (1775) 1 Cowp. 341 at 343.

19 English Law and the Moral Law, p. 10.

20 Devlin, The Enforcement of Morals, pp. 43–44.

21 (1767) 2 Wilson 341 at 350.

22 Devlin, op. cit., p. 59.

23 [1957] 1 Q.B. 267.

24 See Devlin, op. cit., pp. 55–58.

25 See Gellhorn, “Contracts and Public Policy” (1935) 35 Col.L.R. 679 at 680, e.g., imposing tort or fiscal liability, fines, levies or imprisonment, or a combination of any of these.

26 Devlin, op. cit., pp. 55–56.

27 Shaw v. Groom [1970] 2 Q.B. 504.Google Scholar

28 St. John Shipping Corporation v. Joseph Rank Ltd. [1957] 1 Q.B. 267.Google Scholar

29 Re Mahmoud and Isaphani [1921] 2 K.B. 716.Google Scholar See also Williams, Glanville, “Legal Aspects of Illegal Contracts” (1942) 8 C.L.J. 51.Google Scholar

30 See Furmstone, “The Analysis of Illegal Contracts” (1965) 16 Univ. of Toronto L.J. 267 at 281.

31 Which he clearly regarded as synonymous with ex turpi causa and ex dolo malo.

32 See, for example, Professor Hamson's suggestion that the absence of any moral indignation at the breach of a ministerial order may have affected the Court of Appeal in Bowmakers Ltd. v. Barnets Instruments Ltd. [1945] K.B. 65Google Scholar; (1948) 10 C.L.J. 249.

33 e.g., Wright, M.R. in Beresford v. Royal Insurance Co. Ltd. [1937] 2 K.B. 197 at 219–220.Google Scholar

34 e.g., Denning, L.J. in Marles v. Philip Trant and Sons Ltd. [1954] 1 Q.B. 37.Google Scholar

35 [1957] 1 Q.B. 267 at 281.

36 Re Giles (deceased) [1971] 3 W.L.R. 641 at 645.Google Scholar See also Hall v. Knight and Baxter [1914] P. 6Google Scholar, per Cozens-Hardy M.R.

37 See Wright, Lord, Legal Essays and Addresses, p. 90.Google Scholar

38 See, for instance, Cozens-Hardy, M.R. in Hall v. Knight and Baxter [1914] P. 6Google Scholar; In the Estate of Crippen [1911] P. 108Google Scholar at 112.

39 Starke, J. in Jenkins v. Smith [1969]Google Scholar V.R. 267 at 276—cited by Fleming (1971) M.L.R. 176.

40 p. 59.

41 [1971] 2 Q.B. 554 at 581. For a fuiler discussion of this case, see below.

42 For the practical man's reaction to the social, human, prudish, business and legal reasons for refusing to enforce an illegal contract, see Professor Glanville Williams, 8 C.L.J. 51 at 61.

43 [1971] 2 Q.B. 554 at 582.

44 [1938] A.C. 586. See below.

45 A slight variation of this explanation is to be found in Re Giles [1971] 3 W.L.R. 640 at 646Google Scholar (italics added): “The principles of public policy on which the courts act change over the generations and centuries, but I am not persuaded that there is any sufficient ground for qualifying the established rule.

46 St. John Shipping Corporation v. Joseph Rank Ltd. [1957] 1 Q.B. 267Google Scholar at 288.

47 Court of Appeal [1971] 2 Q.B. 554 and at first instance (Geoffrey Lane J.) [1970] 2 Q.B. 626.

48 It is perhaps significant that an English common lawyer, reared on the arbitrary results of the illegality rules, should regard this “windfall” objection as the less important.

49 Can murder be an accident? See Nisbet v. Raye and Burn [1910] 2 K.B. 689Google Scholar at 692, per Cozens-Hardy M.R.: “I think it was an accident from the point of view of [the deceased].” Thus the widow succeeded in her Workmen's Compensation Act claim.

50 Per Salmon L.J. at 580. With respect, is not this kind of implied term yet another example of covert public policy-making? “The judge finds himself the criterion of what is reasonable. The court is in this sense making a contract for the parties, though it is almost blasphemy to say so”: Wright, Lord, Legal Essays, p. 259.Google Scholar

51 Kenny v. Preen [1963] 1 Q.B. 499.Google Scholar

52 Chapman v. Honig [1963] 2 Q.B. 502Google Scholar; Addis v. Gramophone Co. Ltd. [1909]Google Scholar A.C. 488 at 495. Is a man to have his damages reduced because he is “harsh, grasping or pitiless …”?

53 Devlin, op. cit., p. 52.

54 [1972] A.C. 60 at 79 (italics added).

55 Of course the penal consequences are cumulative to the civil disability so that all criminal conspiracies comprise illegal contracts.

56 Napier v. National Business Agency Ltd. [1951] 2 All E.R. 264.Google Scholar

57 [1957] 2 Q.B. 621, where the granting of clean bills of lading by shipowners for cargoes known to be unsound was regarded as “a slipshod and unthinking extension of a known commercial practice to a point where it constituted fraud in law.”

58 Furmstone (1965) 16 Univ. of Toronto L.J. 267 at 280. See also 73 L.Q.R. 438: “In such a case it seems unfair to those who have relied on the practice that the law should suddenly demand a higher standard. … The law has been described as a hard teacher, but it is better to have a hard teacher than no teacher at all.”

59 [1970] 2 Q.B. 626 at 639.

60 The Court of Appeal recognised that the motor manslaughter cases of Tinline v.White Cross Insurance Association Ltd. [1921] 3 K.B. 327Google Scholar and James v. British General Insurance Co. Ltd. [1927] 2 K.B. 311Google Scholar were correctly decided. If the deterrence argument does not apply to the man who deliberately acts in an anti-social manner likely to cause injury, such as driving his car in excess of the speed limit or when drunk, why should it apply to the man who deliberately carries a gun to threaten somebody, but then accidentally shoots him?

61 Per Phillimore L.J. [1971] 2 Q.B. 554 at 587, per Salmon L.J. at 581.

62 Per Denning M.R. at 568. Cf. Re Giles [1971] 3 W.L.R. at 646Google Scholar: “It is very easy to imagine cases of diminished responsibility of an entirely different kind where the relaxation of the established rule could be harmful and dangerous.”

63 See also the Judgement of Diplock, L.J. (as he then was) in Hardy v. Motor Insurers Bureau [1964] 2 Q.B. 745Google Scholar at 769–770: “It seems to me to be slightly unrealistic to suggest that a person who is not deterred by the risk of a possible sentence of life imprisonment for using a vehicle with intent to cause grievous bodily harm would be deterred by the fear that his civil liability to his victims would not be discharged by his insurers. I do not myself feel that by dismissing this appeal we shall add significantly to the statistics of crime.”

64 Fleming (1971) M.L.R. 176.

65 4 Bligh (N.S.) 194.

66 At p. 211.

67 e.g., Moore v. Woolsey, 4 E. & B. 243.

68 [1938] A.C. 586.

69 p. 598.

70 [1971] 2 Q.B. 554 at 582.

71 Examples abound; but see Harman, L.J. in Sheridan v.Dickson [1970] 1 W.L.R. 1328Google Scholar; Lord Mansfield in Holman v.Johnson (1775) I Cowp. 341 at 343; Bankes, L.J. in Re Mahmoud and Ispahani [1921] 2 K.B. 716Google Scholar; and Mocatta, J. in Rolloswin Investments Ltd. v.Chromolit Portugal Cutelarias e Productos Metalicos [1970] 1 W.L.R. 912.Google Scholar

72 e.g., Strongman (1945) Ltd. v. Sincock [1955] 2 Q.B. 525.Google ScholarPer Denning L.J. at 535: “It has been said that if damages could be recovered (for the breach of warranty) it would be an easy way of getting round the law about illegality. This does not alarm me at all.” Also per Birkett L.J. at 538.

73 e.g., Burrows v. Rhodes and Jameson. Per Grantha L.J. [1899] 1 Q.B. 816.

74 e.g., St. John Shipping Corporation v. Joseph Rank Ltd. [1957] 1 Q.B. 267.Google Scholar

75 See above, note 14. See also Knight, 38 L.Q.R. 207, and at 219: “ It is in actual fact as well as principle, the ever-obliging authority and available instument for what may be nothing other than positive judicial legislation, independent, absolute, in the absence of statute.”

76 In Re Mirams [1891] 1 Q.B. 594Google Scholar at 595.

77 Egerton v. Brownlow (1853) 4 H.L.Cas. 1.

78 Winfield, 42 Harv.L.R. 76 at 89.

79 e.g., Wright, Lord, Legal Essays and Addresses, p. 70.Google Scholar

80 See Winfield, 42 Harv.L.R. 76 for this important addition to Cardozo's list.

81 [1938] A.C. 586.

82 [1921] 2 K.B. 716.

83 See Wright, Legal Essays and Addresses, p. 87; Glanville Williams, 8 C.L.J. 51 at 58.

84 Grodecki, “In Pari Delicto ” (1955) 71 L.Q.R. 254 at 257.

85 Gellhorn, 35 Colum.L.R. 679.

86 Contrast the operation of public policy in relation to contracts in restraint of trade where a greater degree of flexibility has been retained, e.g., Lord Watson in Nordenfelt v. Maxim Nordenfelt Guns and Ammunition Co. Ltd. [1894] A.C. 535 at 553.

87 e.g., Tinline v. White Cross Insurance Association Ltd. [1921] 3 K.B. 327Google Scholar at 331, per Bailhache J.: “… If the law is not logical, public policy is even less logical.” James v. British General Insurance Co. Ltd. [1927] 2 K.B. 311Google Scholar at 322, per Roche J.: “The Principles of public policy, which I suppose are only a branch of the principles of ethics, are themselves unchanging: but their applications may be infinitely various from time to time and from place to place.”

88 Haseldine v.Hosken [1933] 1 K.B. 822Google Scholar at 835, 838. Cf. the belated recognition of Tinline and James as good law by the Court of Appeal in Gray v. Barr [1971] 2 Q.B. 554Google Scholar at 568 (per Denning M.R.) and at 581(per Salmon L.J.).

89 Fleming (1971) 34 M.L.R. 176.

90 [1938] A.C. 586.

91 See Macmillan, p. 604.

92 See Atkin, p. 599. For a recent bizarre application of the maxim to the law of torts, see Burns v. Edman[1970] 2 Q.B. 541.Google Scholar

93 In particular, see Fleming (1971) 34 M.L.R. 176 and Jolowicz [1970] C.L.J. 194.

94 See Launchbury v.Morgans [1971] 2 Q.B. 245Google Scholar at 253.

95 See Diplock L.J. (as he then was) in Hardy v. M.I.B. [1964] 2 Q.B. 745Google Scholar at 769: “The purpose of the rule is to prevent persons becoming victims, not to penalise them when it has failed its purpose.”

96 Per Atkin, Lord in Beresford [1938] A.C. 586Google Scholar at 595, cited by Phillimore, L.J. in Gray v. Barr [1971] 2 Q.B. 554Google Scholar at 587.

97 Per Phillimore L.J., ibid.: “Who can suppose that either party if told of the facts of this case when entering into the contract would have agreed that the death of Mr. Gray could be regarded as an ' accident covered by the policy?”

98 Lister v. Romford Ice[1957] A.C. 555Google Scholar at 576.

99 Or, in the analogous operation of public policy in matters of probate, by Act of Parliament. See Hall v. Knight and Baxier [1914] P. 5.Google Scholar “ You do not look for public policy, in the sense in which that expression is used, in an Act of Parliament.”

1 Furmstone, 16 Univ. of Toronto L.J. 267. Where one might respectfully join issue is in doubting whether the conventional emphasis has been to state or analyse such “ social or economic interests.” The courts have invalidates contracts irrespective of the social or economic interests involved.

2 Gellhorn, 25 Colum.L.R. 679 at 684.

3 Vita Food Products Inc. v. Unus Shipping Co.Ltd. [1939] A.C. 277Google Scholar at 293, per Lord Wright: “… public policy understood in a wider sense may at times be better served by refusing to nullify a bargain save on serious and sufficient grounds.”

4 [1964] 2 Q.B. 745 at 767–770.

5 At p. 768—italics added.

6 [1921] 3 K.B. 327.

7 [1927] 2 K.B. 311.

8 p. 320. See also Devlin' concern in St. John Shipping Corporation v. Joseph Rank Ltd. [1957] 1 Q.B. 267Google Scholar at 289 that to refuse the claim for freightage would cause general “inconvenience and injury to maritime business.”

9 [1964] 2 Q.B. 769–770.

10 The discussion proceeds on the assumption

(i) that Mr. Gray's death was an accident under the policy; and

(ii) that the suggested construction of policies of insurance in the light of the status of the parties, third party expectations and wider issues of public policy is correct.

11 Cf. Bennett v. Tugewell [1971] 2 Q.B. 267Google Scholar at 269, 270.

12 [1938] A.C. 586.

13 Cf. Re Giles [1971] 3 W.L.R. 646Google Scholar where Pennycuick V.-C. appeared to think that the rule might be qualified by a “ higher tribunal.”

14 e.g., Wright, Legal Essays and Addresses, p.68. “What then is meant by public policy as part of the common law; not something outside the common law but a body of rules and principles within the common law?”; and p. 91, “I regard its rules as govered by precedent, like any other branch of the common law or equity.”

15 As it is argued above, occurred in Beresford and Re Mahmoud.

16 Wright, op. cit., p. 78.

17 Contrast the ever extending application of the principle of public policy to prevent restraint of trade, e.g., Bull v. Pitney Bowes Ltd. [1967] 1 W.L.R. 273Google Scholar; Esso Petroleum Co. Ltd. v. Harpers Garage (Stourport) Ltd. [1968] A.C. 269Google Scholar; Eastham v. Newcastle United F.C. [1964] Ch. 413Google Scholar; Nagle v. Fielden [1966] 2 Q.B. 633Google Scholar; Dickson v. Pharmaceutical Society of Great Britain [1970] A.C. 403.Google Scholar

18 Per Blackburn, J. in Waugh v. Morris, L.R. 8 Q.B. 202Google Scholar at 208. “Where a contract is to do a thing which cannot be performed without a violation of the law it is void, whether the partices knew the law or not.”

19 [1955] 2 Q.B. 525.

20 See pp. 538–539; “The Nicholls are in my hands.… If the Nicholls can be bluffed they deserve to lose their money.”

21 See Sheridan v. Dickson [1970] 1 W.L.R. 1328.Google Scholar

22 Devlin, Lord, The Enforcement of Morals, p. 54Google Scholar. “The wholesale condemnation of illegality, instead of promoting morality frequently encourages roguery.” One is reminded of Lord Shaw's condemnation of the rule in Chandler v. Webster as a maxim which “works well enough among tricksters, gamblers and thieves.”