Public Policy

Cases

Holman v Johnson

(1775) 1 Cowp 341

Lord Mansfield CJ

“           The objection, that a contract is immoral or illegal as between plaintiff and defendant, sounds at all times very ill in the mouth of the defendant. It is not for his sake, however, that the objection is ever allowed; but it is founded in general principles of policy, which the defendant has the advantage of, contrary to the real justice, as between him and the plaintiff, by accident, if I may say so. The principle of public policy is this; ex dolo malo non oritur actio. No court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act. If, from the plaintiff’s own standing or otherwise, the cause of action appears to arise ex turpi causa, or the transgression of a positive law of this country, there the court says he has no right to be assisted. It is upon that ground the court goes; not for the sake of the defendant, but because they will not lend their aid to such a plaintiff. So if the plaintiff and defendant were to change sides, and the defendant was to bring his action against the plaintiff, the latter would then have the advantage of it; for where both were equally in fault, potior est conditio defendentis.

The question therefore is, whether, in this case, the plaintiff’s demand is founded upon the ground of any immoral act or contract, or upon the ground of his being guilty of any thing which is prohibited by a positive law of this country. — An immoral contract it certainly is not; for the revenue laws themselves, as well as the offences against them, are all positivi juris. What then is the contract of the plaintiff? It is this: being a resident and inhabitant of Dunkirk, together with his partner, who was born there, he sells a quantity of tea to the defendant, and delivers it at Dunkirk to the defendant’s order, to be paid for in ready money there, or by bills drawn personally upon him in England. This is an action brought merely for goods sold and delivered at Dunkirk. Where then, or in what respect is the plaintiff guilty of any crime? Is there any law of England transgressed by a person making a complete sale of a parcel of goods at Dunkirk, and giving credit for them? The contract is complete, and nothing is left to be done. The seller, indeed, knows what the buyer is going to do with the goods, but has no concern in the transaction itself. It is not a bargain to be paid in case the vendee should succeed in landing the goods; but the interest of the vendor is totally at an end, and his contract complete by the delivery of the goods at Dunkirk.

To what a dangerous extent would this go if it were to be held a crime. If contraband clothes are bought in France, and brought home hither; or if glass bought abroad, which ought to pay a great duty, is run into England; shall the French taylor or the glass-manufacturer stand to the risk or loss attending their being run into England? Clearly not. Debt follows the person, and may be recovered in England, let the contract of debt be made where it will; and the law allows a fiction for the sake of expediting the remedy. Therefore, I am clearly of opinion, that the vendors of these goods are not guilty of any offence, nor have they transgressed against the provisions of any Act of Parliament.

I am very glad the old books have been looked into. The doctrine Huberus lays down, is founded in good sense, and upon general principles of justice. I entirely agree with him. He puts the general case in question, thus: tit. De Conflictu Legum, vol 2, pag. 539. “In certo loco merces quædam prohibitæ sunt. Si vendantur ibi, contractus est nullus. Verum, si merx eadem alibi sit vendita, ubi non erat interdicta, emptor condemnabitur, quia, contractus inde ab initio validus fuit.” Translated, it might be rendered thus: In England, tea, which has not paid duty, is prohibited; and if sold there the contract is null and void. But if sold and delivered at a place where it is not prohibited, as at Dunkirk, and an action is brought for the price of it in England, the buyer shall be condemned to pay the price; because the original contract was good and valid.—He goes on thus: “Verum si merces venditæ in altero loco, ubi prohibitæ sunt essent tradendæ, jam non fieret condemnatio, quia repugnaret hoc juri et commodo reipublicæ quæ merces prohibuit.” Apply this in the same manner.—But if the goods sold were to be delivered in England, where they are prohibited; the contract [345] is void, and the buyer shall not be liable in an action for the price, because it would be an inconvenience and prejudice to the State if such an action could be maintained.

The gist of the whole turns upon this; that the conclusive delivery was at Dunkirk. If the defendant had bespoke the tea at Dunkirk to be sent to England at a certain price; and the plaintiff had undertaken to send it into England, or had had any concern in the running it into England, he would have been an offender against the laws of this country. But upon the facts of the case, from the first to the last, he clearly has offended against no law of England. Therefore, let the rule for a new trial be discharged.

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Pearce v Brooks

 (1866) LR 1 Ex 213, [1861-73] All ER 102, (1866) 30 JP 295, 14 LT 288, 35 LJEx 134

Pollock CB

‘I have always considered it as settled law, that any person whocontributes to the performance of an illegal act by supplying a thing with the knowledge that it is going to be used for that purpose, cannot recover the price of the thing so supplied. If, to create that incapacity, it was ever considered necessary that the price should be bargained or expected to be paid out of the fruits of the illegal act (which I do not stop to examine), that proposition . . has now ceased to be law.

Nor can any distinction be made between an illegal and an immoral purpose; the rule which is applicable to the matter is, Ex turpi causa nonoritur actio, and whether it is an immoral or an illegal purpose in which the plaintiff has participated, it comes equally within the terms of that maxim, and the effect is the same; no cause of action can arise out of either the one or the other . .

If, therefore, this article was furnished to the defendant for the purpose of enabling her to make a display favourable to her immoral purposes, the plaintiffs can derive no cause of action from the bargain.’

Baron Martin doubted whether that this principle would apply if it was not entirely sure that the money or goods forming the object of the contract would be used for an illegal purpose

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Shaw v DPP

 [1961] UKHL 1 Cite as: [1962] AC 220, [1961] UKHL 1

Viscount Simonds

It is in these circumstances that the question must be asked whether the

Appellant lived wholly or in part on the earnings of prostitution, and I turn

at once to the statute that makes it an offence to do so. That is now

section 30 of the Sexual Offences Act, 1956, which is as follows:

” 30.—(1) It is an offence for a man knowingly to live wholly or in

” part on the earnings of prostitution.

” (2) For the purposes of this section a man who lives with or is

” habitually in the company of a prostitute, or who exercises control,

” direction or influence over a prostitute’s movements in a way which

” shows he is aiding, abetting or compelling her prostitution with others,

” shall be presumed to be knowingly living on the earnings of prostitu–

” tion, unless he proves the contrary.”

….

I would say, however, that, though a person who is paid for goods or

services out of the earnings of prostitution does not necessarily commit an

offence under the Act, yet a person does not necessarily escape from

its provisions by receiving payment for the goods or services that he supplies

to a prostitute. The argument that such a person lives on his own earnings,

not on hers, is inconclusive. To give effect to it would be to exclude from

the operation of the Act the very persons, the tout, the bully or protector,

whom it was designed to catch. For they would surely claim that they

served the prostitute, however despicable their service might seem to others.

Somewhere the line must be drawn, and I do not find it easy to draw it. It

is not enough to say that here are plain English words and that it must

be left to a jury to say in regard to any particular conduct whether the

statutory offence has been committed. I have said enough, for instance, to

show that the wider meaning of which the words are clearly capable is

inadmissible. The jury should be directed that some limitation must be put

upon the words. What is the limitation?

My Lords, I think that (apart from the operation of subsection (2)) a person

may fairly be said to be living in whole or in part on the earnings of

prostitution if he is paid by prostitutes for goods or services supplied by

him to them for the purpose of their prostitution which he would not

supply but for the fact that they were prostitutes. I emphasise the negative

part of this proposition, for I wish to distinguish beyond all misconception

such a case from that in which the service supplied could be supplied to a

woman whether a prostitute or not. It may be that circumstances will be

equivocal, though no example readily occurs to me. But a case which is

beyond all doubt is one where the service is of its nature referable to

prostitution and to nothing else. No better example of this could be found

than payment by a prostitute for advertisement of her readiness to prostitute

herself. I do not doubt that a person who makes a business of accepting

such advertisements for reward knowingly lives in part on the earnings of

prostitution.

In one of the cases to which I shall refer a person receiving payment

from a prostitute for services rendered by him is described as her coadjutor

and in another as trading in prostitution. These expressions indicate the

distinction that t have in mind though neither of them accurately defines a

legal relation. Thus a man who advertises prostitutes and receives payment

from them for doing so embarks with them on a joint venture the object

of which is that they may earn money by prostitution and in turn pay

him for his services. No doubt, all that he is paid is not profit, for he

has the expenses of publishing. But his net reward is the direct and intended

result of their prostitution. If he had no other means of livelihood it would

be truly said that he lived on their earnings: if he had other means, he would

be doing so in part.

I must add a few words on the authorities that were called to our attention.

In Reg. v. Thomas, 41 C.A.R.117, the accused, who was charged under the

Vagrancy Act, 1898, as amended by the Act of 1912, had agreed with a

woman whom he knew to be a convicted prostitute that she should have

the use of a room between the hours of 9 p.m. and 2 a.m. at a charge of

£3 per night. He was convicted upon a direction by Mr. Justice Pilcher,

which was subsequently approved by the Court of Criminal Appeal. The

learned judge said that ” if there is evidence that the accused has let a room

or a flat at a grossly inflated rent to a prostitute for the express purpose of

allowing her to ply her immoral trade, then it is for the jury to determine, on

the facts of each particular case, whether the accused is in fact knowingly

living wholly or in part on the earnings of prostitution.” The only criticism

I would make of this direction is that it does not distinguish between rooms

and flat and in that case that it attaches undue importance to the rent being

” grossly inflated ” or, as is sometimes said, ” exorbitant”. It appears to

me that, whatever the rent, the jury might have concluded that the accom-

modation was provided for no other purpose than prostitution and would

not have been provided for her unless she was a prostitute. The exorbitance

of the rent would, in my opinion, become important only if there had been

evidence that this sort of accommodation was a necessity or luxury commonly

required by other women for other purposes than prostitution, a thing which is

not easily imaginable. In reaching this conclusion Mr. Justice Pilcher had

found it necessary to differ from a ruling given by Judge Maude at the Central

Criminal Court in Reg. v. Silver. 40 C.A.R.32, and in this too his decision

was approved by the Court of Criminal Appeal. Judge Maude in that case

held that it was not an offence for landlords and their agents to let flats

to prostitutes at what were described as exorbitant rents and by the learned

Judge as ” prostitute rents ” knowing that they would be used for the purpose

of prostitution. I find this a more difficult case. If premises are let only

for the purpose of prostitution and not also for occupation by the prostitute,

as was the room in Reg. v. Thomas, it is easy to conclude that an offence

has been committed. But, if the flat is let for occupation, I am not prepared

to say that the landlord commits an offence merely because he knows that

his tenant is a prostitute and must be assumed to know that she will there

ply her trade. The prostitute must live somewhere just as she must eat

and drink to live. It is, I think, too fine a distinction to say that a grocer

supplying her with groceries does not, but a landlord letting her a flat does,

commit an offence. It is true that the flat is the scene of her prostitution,

but, if she did not eat and drink, she would not have a body to prostitute.

Therefore, in such a case as Silver (where the flats appear to have been let

for occupation) the landlord can only be convicted of an offence upon the

ground that the rent is exorbitant. This may be a tenable view upon the

footing that, to the extent to which the rent is in excess of normal, he extorts

it from the prostitute upon no other ground than that she is a prostitute. He

may be said, therefore, knowingly to live or, as was said in the course of

the argument, to prey upon her earnings. But, as I have said. I find this

a difficult case and would express no final opinion on it.

A third case to which I would refer is Calvert v. Mayes [1954] 1 Q.B.342.

It was, I think, a very clear case, the substantial point in which was that

the accused received payment not from the prostitutes but from the American

airmen who availed themselves of their services. The argument that for

this reason he did not live in part on their earnings was rightly rejected by

the Court of Criminal Appeal. It is interesting in that Mr. Justice Sellers

(as he then was) in the course of his judgment referred to the accused as

” trading in prostitution “, an expression which, as I have already pointed

out, is an apt, if colloquial, way of describing a person who lives on the

earnings of prostitution.

Your Lordships were also referred to some civil cases such as Pearce v.

Brooks, L.R.1 Ex. 213, and Upfill v. Wright [1911] 1 K.B. 506. They, I

think, give little assistance upon the interpretation of the relevant words in

the Sexual Offences Act. But it is at least satisfactory to know that the con-

clusion to which your Lordships come upon that Act marches with the

view taken in civil cases of a contract made for an immoral purpose.

My Lords, as I have already said, the first count in the indictment is

” Conspiracy to corrupt public morals “, and the particulars of offence will

have sufficiently appeared. I am concerned only to assert what was

vigorously denied by Counsel for the Appellant, that such an offence is known

to the common law and that it was open to the jury to find on the facts of

this case that the Appellant was guilty of such an offence. I must say

categorically that, if it were not so, Her Majesty’s courts would strangely

have failed in their duty as servants and guardians of the common law. Need

I say, my Lords, that I am no advocate of the right of the Judges to create

new criminal offences? I will repeat well-known words: ” Amongst many

” other points of happiness and freedom which your Majesty’s subjects have

” enjoyed there is none which they have accounted more dear and precious

” than this, to be guided and governed by certain rules of law which giveth

” both to the head and members that which of right belongeth to them and

” not by any arbitrary or uncertain form of government.” These words are

as true today as they were in the seventeenth century and command the

allegiance of us all. But I am at a loss to understand how it can be said

either that the law does not recognise a conspiracy to corrupt public morals

or that, though there may not be an exact precedent for such a conspiracy

as this case reveals, it does not fall fairly within the general words by which

it is described. I do not propose to examine all the relevant authorities.

That will be done by my noble and learned friend. The fallacy in the

argument that was addressed to us lay in the attempt to exclude from the

scope of general words acts well calculated to corrupt public morals just

because they had not been committed or had not been brought to the notice

of the Court before. It is not thus that the common law has developed.

We are perhaps more accustomed to hear this matter discussed upon the

question whether such and such a transaction is contrary to public policy.

At once the controversy arises. On the one hand it is said that it is not

possible in the twentieth century for the Court to create a new head of

public policy, on the other it is said that this is but a new example of

a well-established head. In the sphere of criminal law I entertain no doubt

that there remains in the Courts of Law a residual power to enforce the

supreme and fundamental purpose of the law, to conserve not only the

safety and order but also the moral welfare of the State, and that it is their

duty to guard it against attacks which may be the more insidious because

they are novel and unprepared for. That is the broad head (call it public

policy if you wish) within which the present indictment falls. It matters little

what label is given to the offending act. To one of your Lordships it may

appear an affront to public decency, to another considering that it may

succeed in its obvious intention of provoking libidinous desires, it will seem

a corruption of public morals. Yet others may deem it aptly described

as the creation of a public mischief or the undermining of moral conduct.

The same act will not in all ages be regarded in the same way. The law

must be related to the changing standards of life, not yielding to every

shifting impulse of the popular will but having regard to fundamental

assessments of human values and the purposes of society. Today a denial

of the fundamental Christian doctrine, which in past centuries would have

been regarded by the Ecclesiastical Courts as heresy and by the common

law as blasphemy, will no longer be an offence if the decencies of controversy

are observed. When Lord Mansfield, speaking long after the Star Chamber

had been abolished, said that the Court of King’s Bench was the custos

morum of the people and had the superintendency of offences contra bonos

mores, he was asserting, as I now assert, that there is in that Court a

residual power, where no statute has yet intervened to supersede the common

law, to superintend those offences which are prejudicial to the public welfare.

Such occasions will be rare, for Parliament has not been slow to legislate

when attention has been sufficiently aroused. But gaps remain and will

always remain since no one can foresee every way in which the wickedness

of man may disrupt the order of society. Let me take a single instance to

which my noble and learned friend, Lord Tucker, refers. Let it be supposed

that at some future, perhaps, early, date homosexual practices between adult

consenting males are no longer a crime. Would it not be an offence if

even without obscenity, such practices were publicly advocated and

encouraged by pamphlet and advertisement? Or must we wait until Parlia-

ment finds time to deal with such conduct? I say, my Lords, that if the

common law is powerless in such an event, then we should no longer do

her reverence. But I say that her hand is still powerful and that it is

for Her Majesty’s Judges to play the part which Lord Mansfield pointed out

to them.

I have so far paid little regard to the fact that the charge here is of

conspiracy. But, if I have correctly described the conduct of the Appellant, it

is an irresistible inference that a conspiracy between him and others to do

such acts is indictable. It is irrelevant to this charge that section 2 (4)

of the Obscene Publications Act, 1959, might bar proceedings against him if

no conspiracy were alleged. It may be thought superfluous, where that Act

can be invoked, to bring a charge also of conspiracy to corrupt public

morals, but I can well understand the desirability of doing so where a doubt

exists whether obscenity within the meaning of the Act can be proved.

I will say a final word upon an aspect of the case which was urged by

Counsel. No one doubts—and I have put it in the forefront of this Opinion

—that certainty is a most desirable attribute of the criminal and civil law

alike. Nevertheless there are matters which must ultimately depend on the

opinion of a jury. In the civil law I will take an example which comes

perhaps nearest to the criminal law—the tort of negligence. It is for a

jury to decide not only whether the defendant has committed the act com-

plained of but whether in doing it he has fallen short of the standard of

care which the circumstances require. Till their verdict is given it is uncer-

tain what the law requires. The same branch of the civil law supplies

another interesting analogy. For, though in the Factory Acts and the Regu-

lations made under them the measure of care required of an employer is

defined in the greatest detail, no one supposes that he may not be guilty of

negligence in a manner unforeseen and unprovided for. That will be a

matter for the jury to decide. There are still, as has recently been said,

” unravished remnants of the common law “.

So in the case of a charge of conspiracy to corrupt public morals the

uncertainty that necessarily arises from the vagueness of general words can

only be resolved by the opinion of twelve chosen men and women. I am

content to leave it to them.

The appeal on both counts should in my opinion be dismissed.

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Bernadette Ennis v. Colm Butterly;

[1997] 1 I.L.R.M. 28

Kelly J

The breach of contract claim 

The first relief which is sought in the amended statement of claim is damages for breach of contract. On an examination of the statement of claim, it appears to me that the only contract (apart from the mortgage on 56 Castleknock Park which is no longer relevant) which is pleaded is a twofold one. The first is an agreement to marry. The second is an agreement to live together as man and wife until such marriage would be possible. In consideration of that agreement, the plaintiff discontinued her business and lived as a full-time housewife and home-maker.

The defendant contends that this twofold claim in contract must fail. As to the first, he relies upon the provisions of s. 1 of the Family Law Act 1981 which abolished the action for breach of promise of marriage. In my view, that enactment is fatal to any claim which is asserted by the plaintiff to derive from the breach by the defendant of an agreement to marry her. Indeed, even before the enactment of the 1981 Act, at common law it had been held in England that a promise by a married person to marry one who knew that person to be already married was unenforceable as being against public policy (see Wilson v. Carnley [1908] 1 KB 729 , Spears v. Hunt [1908] 1 KB 720 , Siveyer v. Allison [1935] 2 KB 403 ). In the instant case, both the plaintiff and the defendant at all times knew that they were each married to someone else. Even before the enactment of the 1981 Act, their agreement to marry each other would have been unenforceable as a matter of public policy. Subsequent to the 1981 Act, there can be, in my view, no doubt but that the defendant is correct when he says that this part of the plaintiff’s claim must fail.

The second contractual arrangement alleged by the plaintiff is set forth at paragraph 8 of the amended statement of claim. It is that, pending marriage, she would ‘in the meantime, live with him as a wife might and, in particular, discontinue her own business and live at home as a full-time housewife and home-maker’ . The defendant contends that an agreement to cohabit, whether pending a forthcoming marriage or not, cannot give rise to enforceable rights. This is so whether the parties agree to live together pending a dissolution of existing marriages or not. It is said that the enforcement of such agreements would be contrary to the public policy of this State. It is furthermore said that the present claim in attempting to enforce this agreement by means of seeking damages for its breach is not actionable as a matter of Irish law. It is furthermore said that the plaintiff’s proceedings are, in effect, a claim for ‘palimony’ .

This expression ‘palimony’ was much used by Mr McDowell in the course of argument but it was never defined nor was any authority opened on the topic. The Oxford English Dictionary defines it as a slang word of American origin formed by a blend of ‘pal’ and ‘alimony’ and denoting ‘compensation claimed by the deserted party after the separation of a couple living together out of wedlock’ . That it is truly a slang term appears to be borne out by the fact that amongst the, admittedly relatively few, text books on American family law available to me, I fail to find a single instance of the word being used.

Historically, applications to seek enforcement of cohabitation contracts in the United States have been treated in much the same way as such claims in England. They were invariably rejected either on grounds of immorality or lack of consideration. Things changed somewhat with the decision of the Supreme Court of California in Marvin v. Marvin (1976) 18 CAL 3D 660 . That court concluded, inter alia :

The courts should enforce express contracts between non-marital partners except to the extent that the contract is explicitly founded on the consideration of meretricious sexual services.

In the absence of an express contract, the courts should enquire into the conduct of the parties to determine whether that conduct demonstrates an implied contract, agreement of partnership or joint venture, or some other tacit understanding between the parties. The courts may also employ the doctrine of quantum meruit , or equitable remedy such as constructive or resulting trusts, when warranted by the facts of the case.

This is the case which appears to have spawned the expression ‘palimony’ . Since the Marvin decision, some state courts have been willing to find implied contracts where no express contract existed. Others have trenchantly refused to go down that path. For example, the New York Court of Appeal in Morone v. Morone (1980) 429 NYS 2D 592 said that:

Finding an implied contract such as was recognised in Marvin v. Marvin … to be conceptually so amorphous as practically to defy equitable enforcement, and inconsistent with the legislative policy enunciated in 1933 when common law marriages were abolished in New York, we decline to follow the Marvin lead.

It seems, therefore, that insofar as the jurisdiction where this concept finds its genesis is concerned, the existence of such a claim is by no means universally accepted.

The position in England and Wales on the other hand appears to be crystal clear. In Windeler v. Whitehall (1990) 2 FLR 505 , Millett J (as he then was) said (at p. 506):

If this were California, this would be a claim for palimony, but it is England and it is not. English law recognises neither the term nor the obligation to which it gives effect. In this country a husband has a legal obligation to support his wife even if they are living apart. A man has no legal obligation to support his mistress even if they are living together …. The courts possess neither a statutory nor an inherent jurisdiction to disturb existing rights of property on the termination of an extramarital relationship, however long established the relationship and however deserving the claimant.

In my view, the law in this country is no different and, if anything, would lean more strongly against such a concept having regard to the special position of marriage under the Constitution.

Agreements by persons to cohabit have long been held to be unenforceable at common law as being injurious to morality and marriage. Mr McDowell relied on the decision in Beaumont v. Reeve (1846) 8 QB 483 in support of his contention that it would be contrary to public policy to permit the enforcement of the present contract. Whatever may have been the public policy in England in 1846 when that case was decided, this case must be decided upon the public policy of this State.

That is to be found in the first instance in the Constitution and, in particular, Article 41 thereof. In that article, the State recognises the family as the natural primary and fundamental unit group of society and as a moral institution possessing inalienable and imprescriptible rights antecedent and superior to all positive law. The State pledges itself to guard with special care the institution of marriage, on which the family is founded and protect it against attack.

In State (Nicolaou) v. An Bord Úchtála [1966] IR 567 , Henchy J said (at p. 622):

For the State to award equal constitutional protection to the family founded on marriage and the ‘family’ founded on an extramarital union would in effect be a disregard of the pledge which the State gives in Article 41.3.1° to guard with special care the institution of marriage.

In that case, the Supreme Court, per Walsh J, said (at p. 643) it was:

Quite clear … that the family referred to in Article 41 is the family which is founded on the institution of marriage and, in the context of the article, marriage means valid marriage under the law for the time being in force in the State.

Given the special place of marriage and the family under the Irish Constitution, it appears to me that the public policy of this State ordains that non-marital cohabitation does not and cannot have the same constitutional status as marriage. Moreover, the State has pledged to guard with special care the institution of marriage. But does this mean that agreements, the consideration for which is cohabitation, are incapable of being enforced? In my view it does since otherwise the pledge on the part of the State, of which this Court is one organ, to guard with special care the institution of marriage would be much diluted. To permit an express cohabitation contract (such as is pleaded here) to be enforced would give it a similar status in law as a marriage contract. It did not have such a status prior to the coming into effect of the Constitution, rather such contracts were regarded as illegal and unenforceable as a matter of public policy. Far from enhancing the position at law of such contracts the Constitution requires mar riage to be guarded with special care. In my view, this reinforces the existing common law doctrines concerning the non-enforceability of cohabitation contracts. I am therefore of opinion that, as a matter of public policy, such agreements cannot be enforced.

I am strengthened in this view by the fact that, notwithstanding the extensive reform of family law which has taken place in this country over the last 20 years, nowhere does one find any attempt on the part of the legislature to substantially enhance the legal position of, or to confer rights akin to those of married persons upon the parties to non-marital unions e.g. a right to maintenance. This absence of intervention on the part of the legislature suggests to me that it accepts that it would be contrary to public policy, as enunciated in the Constitution, to confer legal rights on persons in non-marital unions akin to those who are married.

In the present case, the amended statement of claim makes it clear that the consideration for the second contract was the living together of the plaintiff and the defendant with the plaintiff living with him ‘as a wife might’ and ‘at home as a full-time housewife and home-maker’ .

In my view, the contract contended for here is unenforceable as a matter of public policy. Whether one calls it palimony or not, it is not capable of enforcement in this jurisdiction. If the plaintiff’s claim is truly a palimony one (which I doubt), I am of opinion that Irish law recognises neither the term nor the obligation to which it gives effect. Consequently, it must be struck out. If it is not a palimony claim, it is clearly an attempt to enforce a contract the consideration for which is wifely services being rendered on the part of a mistress. Such contracts were always regarded as illegal and unenforceable and remain so. A claim of this type arising out of such a relationship must, in my view, be struck out.

In coming to the conclusion above, I have not forgotten the two English authorities which were cited by Mr O’Loughlin on behalf of the plaintiff. They were Eves v. Eves [1975] 3 All ER 768 and Tanner v. Tanner [1975] 3 All ER 776 . I do not think that these cases can be of assistance to the plaintiff.

The Eves case was concerned with an equitable interest which was alleged to exist in respect of certain real property. No claim in equity is made in the instant proceedings. Such equitable claim as was once asserted has expressly been abandoned. The Tanner case involved a licence over a premises occupied by an unmarried cohabiting couple. The Court of Appeal, on the facts, implied the existence of a contractual licence. That case is far from the present one. No implied contract is pleaded here. This case involves a straightforward claim for damages for breach of an express contract the principal, if not the only, consideration for which was cohabitation.

Even if an implied contract were contended for the consideration involved would still render it unenforceable on grounds of public policy.

I hold that the claims for damages for breach of contract must, as matter of law, fail. They are struck out.

I turn now to consider the remaining claims in the statement of claim.

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J v ST

[1996] EWCA Civ 1016 [1998] 1 All ER 431

Ward LJ

DOES A WIDER RULE OF PUBLIC POLICY APPLY TO DEBAR THIS CLAIM BECAUSE EX TURPI CAUSA NON ORITUR ACTIO ?

The answer can be given after considering:

(1)       The basis of the ex turpi principle;

(2)       The object-matter of the public policy protection;

(3)       The essence of marriage;

(4)       Is the Defendant’s conduct injurious to this notion of marriage?

(1)       The basis of the ex turpi principle

In my judgment the principle hitherto under discussion that no one should benefit from his crime is a specific application of a wider principle that ex turpi causa non oritur actio . In Beresford v Royal Insurance Company Ltd [l937] 2 K.B. 194, 219 Lord Wright M.R., giving the judgment of the court with Romer and Scott L.JJ. held:-

“The principle (that the court will not allow a criminal or his representative to reap by the judgment of the court the fruits of his crime) has been applied….in many decisions dealing with varied states of fact and applications of the same or similar principle. These are all illustrations of the maxim ex turpi causa non oritur actio . The maxim itself, notwithstanding the dignity of a learned language, is, like most maxims, lacking in precise definition.”

The House of Lords [l938] A.C. 586 agreed with this judgment although there was no direct assent or dissent from that particular proposition. In Hardy v Motor Insurers Bureau [l964] 2 Q.B. 747, 767 Diplock L.J. said of his proposition that all contracts to indemnify a person against a liability which he may incur by committing an intentional crime are unlawful:-

“The rule of law … – ex turpi causa non oritur actio – is concerned not specifically with the lawfulness of contracts but generally with the enforcement of rights by the courts, whether or not such rights arise under the contract. All that the rule means is that the courts will not enforce a right which would otherwise be enforceable if the right arises out of an act committed by the person asserting the right … which is regarded by the court as sufficiently anti-social to justify the court’s refusing to enforce that right.”

The leading case of earlier times is Holman v Johnson [l775] 1 Cowp.341, 343 where Lord Mansfield C.J. said this:-

“The principle of public policy is this: ex dolo malo non oritur actio . No court will lend its aid to a man who founds his cause of action upon an immoral or illegal act. If from the Plaintiff’s own stating, or otherwise, the cause of action appears to arise ex turpi causa , or the transgression of a positive law of this country, then the court says he has no right to be assisted. It is on that ground the court goes: not for the sake of the Defendant, but because they will not lend their aid to such a Plaintiff.”

In Pearce v Brooks [l866] L.R. 1 Ex.213, 218 the Plaintiff failed to recover from the Defendant the charges for the hire of a brougham which he knew was to be used by her for her professional purposes of prostitution because, per Pollock C.B.:-

“The rule which is applicable is ex turpi causa non oritur actio , and whether it is an immoral or an illegal purpose in which the Plaintiff has participated, it comes equally within the terms of the maxim, and the effect is the same.”

I note the shift over barely a century from “immoral purpose” to “anti-social” action which suggests that the word is to be fairly broadly interpreted. Such a broad interpretation must not, however, extend so far as it was expressed (albeit with a later qualification) by Kerr L.J. in Euro-Diam Ltd v Bathurst [l990] 1 Q.B. 1, 35C:

“It applies if in all the circumstances it would be an affront to the public conscience to grant the Plaintiff the relief which he seeks because the court would thereby appear to assist or encourage the Plaintiff in his illegal conduct or to encourage others in similar acts.”

In Tinsley v Milligan [l994] 1 A.C. 340, the House of Lords were unanimous in their view that a ‘public conscience’ test has no place in determining the extent to which rights created by illegal transactions should be recognised. The adoption of that test, said Lord Goff of Chieveley at p.363C:-

“would constitute a revolution in this branch of the law, under which what is in effect a discretion would become vested in the court to deal with the matter by the process of a balancing operation, in place of a system of rules, ultimately derived from the principle of public policy enunciated by Lord Mansfield C.J. in Holman v Johnson , 1 Cowp. 341 which lies at the root of the law relating to claims which are, in one way or another, tainted by illegality.”

At p.355C he said:-

“It is important to observe that, as Lord Mansfield made clear, the principle is not a principle of justice; it is a principle of policy, whose application is indiscriminate and so can lead to unfair consequences as between the parties to the litigation. Moreover the principle allows no room for the exercise of any discretion by the court in favour of one party or the other.”

Although the power given to the Court under Section 25 of the Matrimonial Causes Act l973 gives the court the broadest discretion “in deciding whether to exercise its powers… and, if so, in what manner”, we must, if we are strictly to answer the question posed in the preliminary issue, decide whether or not this claim is debarred on grounds that it is contrary to public policy.

It seems to me that the answer to the question whether the claim is tainted with turpitude depends not on whether the person against whom the claim is made will suffer disadvantage; but rather on whether there is a discernible public interest which will be damaged by the court’s sanctioning the prosecution of the claim. There must be a legitimate public interest to protect. We have an established system of rules for the classification of objects of public policy protection so that the court will, for example, impeach any claim which is economically against the public interest (restraint of trade) or injurious to good government (trading with the enemy) or to the administration of justice (an example well known in matrimonial law being an agreement to oust the jurisdiction of the court to grant ancillary relief: Hyman v Hyman [l929] A.C. 601). In another category, there is a system of rules to proscribe acts injurious to morality, and, akin to that, acts injurious to marriage.

There is a public interest in marriage probably because marriage is a public act and marriage confers status which means, per Lord Simon of Glaisdale in the Ampthill Peerage Case [l977] A.C. 547, 577A:-

“the condition of belonging to a class in society to which the law ascribes peculiar rights and duties, capacities and incapacities.”

One of the peculiar rights is the right to claim ancillary relief. It is a right which is not available, or certainly not yet available – for the matter is under consideration by the Law Commission – to those of different sexes, still less to those of the same sex, who simply live and cohabit together. That the guilty bigamist should not gain advantage from the decree of nullity was, as I have already said, one of the factors which influenced the decision in Whiston v Whiston . The same applies here.

Public policy has extended its umbrella of protection to the sanctity of the marriage tie and the married state which has been held to be so fundamental that it has been regarded as morally wrong and against public policy to become engaged whilst still married – Spiers v Hunt [l908] 1 K.B. 720 and Wilson v Charnley [l908] 1 K.B. 729 (C.A.) – but not, by a majority decision, if a Decree Nisi of divorce has already been pronounced – Fender v St. John-Mildmay [l937] A.C.1. Even in the latter decision, Lord Atkin at p.16 thought:-

“There is real substance in the objection that such a promise tends to produce conduct which violates the solemn obligations of married life.”

In another context, in Vervaeke v Smith [l983] 1 A.C. 145 the issue was whether a Belgian decree pronouncing void a marriage celebrated in England should be recognised here. The parties had entered into the marriage with no intention of ever living together. Relying on its notion of public policy, the Belgian Court treated that as a sham and so declared it void. The opposite view was taken here. English public policy required that the marriage be held valid here and the court so declared. An attempt was then made to obtain recognition of the Belgian nullity decree. It failed. The rule of English public policy which received the endorsement of the House of Lords was that which had been expressed by Lord Merrivale P. in Kelly (orse. Hyams) v Kelly [l932] 49 T.L.R. 99, 101 in these terms:-

“In a country like ours, where the marriage status is of very great consequence and where the enforcement of the marriage laws is a matter of great public concern, it would be intolerable if the marriage law could be played with by people who thought fit to go to a Register Officer and subsequently, after some change of mind, to affirm that it was not a marriage because they did not so regard it.”

Yet again, in the once well known case of Blunt v Blunt [1943] A.C. 517, 525, Viscount Simon L.C. dealing with the considerations warranting the exercise of the court’s discretion in respect of a party’s adultery, said:-

“I would add a fifth (consideration) of a more general character, which must, indeed, be regarded as of primary importance, namely, the interest of the community at large, to be judged by maintaining a true balance between respect for the binding sanctity of marriage and the social considerations which make it contrary to public policy to insist on the maintenance of a union which has utterly broken down.”

If there were any doubt about whether there is a present public interest in buttressing and protecting the institution of marriage, then the recent public and Parliamentary debates about the reform of the divorce law will have dispelled all such concerns.

Thus it seems to me that the status of married persons, the sanctity of the marriage union and the institution of marriage itself are all objects of public policy requiring our protection.

(3)       The essence of marriage

What then is this hallowed notion of marriage which lies at the heart of this public policy? Sir William Scott, a master of the ecclesiastical law, gave an early definition which has withstood the test of time. In Lindo v Belisario (1795) 1 Hag. Con.216,230 he said:-

“The opinions which have divided the world, or writers at least, on this subject, are, generally, two. It is held by some persons that marriage is a contract merely civil – by others, that it is a sacred, religious, and spiritual contract, and only to be so considered. The jurisdiction of the Ecclesiastical Court was founded on ideas of this last described nature; but in a more correct view of this subject, I conceive that neither of these opinions is perfectly accurate. According to juster notions of the nature of the marriage contract, it is not merely either a civil or religious contract; and, at the present time is not to be considered as originally and simply one or the other. It is a contract according to the law of nature, antecedent to civil institution, and which may take place to all intents and purposes, whenever two persons of different sexes engage, by mutual contracts, to live together.”

Nearly a century later, Lord Penzance gave his classic definition in Hyde v Hyde [l866] L.R. 1. P & D 130, 133:-

“I conceive that marriage, as understood in Christendom, may for this purpose be defined as the voluntary union for life of one man and one woman, to the exclusion of all others.”

Although some elements of that may have been eroded, bigamy and single sex unions remain proscribed as fundamentally abhorrent to this notion of marriage. Here the binding force of the decree of nullity declared that there was no marriage of the kind Lord Penzance had in mind, indeed it was not a marriage at all. The responsibility for that meretricious ceremony taking place at all lies solely with the Defendant and the Plaintiff is the innocent victim of his gross deception. The proper question is, however, the one which follows.

(4)       Is the defendant’s conduct injurious to this notion of marriage ?

Deception per se is not the material factor. Many a deception may be practised before the exchange of the marriage promises. The deception may be big or small. Lies may be told about fortune and financial matters. A party may be deceived about matters which Ormrod J. thought were important in Corbett such as the other party’s ability to have sexual intercourse and to procreate children. Matters of health may be concealed, Aids or H.I.V., for example, and the harm may be grievously compounded by thereafter consummating the marriage and transmitting a potentially lethal disease. A pregnancy per alium may be hidden. The lie may be about age or close blood relationship. In some of the examples I have given, the facts will justify a decree that the marriage was voidable or even void for want of capacity, as this one is. Yet in all of these examples I would be very slow to allow an appeal to public policy to justify striking out a claim for ancillary relief and would limit the application of this rule to bigamy and single sex ‘marriages’ where the claimant for relief has been guilty of deceiving the other.

My reason for this limitation is that it is only in these two instances that the deception goes to the fundamental essence of marriage. No other touches the two vital corner-stones of marriage implicit in the union of one man and one woman. To cheat in respect of either of these two basic core elements is to undermine the institution, the sanctity and status of marriage to an extent I regard as contra bonos mores .

Conclusion

I am very conscious of the judgments of my Lords which I have read in draft. I am very conscious of the wisdom of the views of Parke B. in Egerton v Brownlow 4 H.L.C. 484,491 for they have so often been cited with approval. Thus I remind myself that:-

“Public policy is a vague and unsatisfactory term, and calculated to lead to uncertainty and error, when applied to the decision of legal rights; it is capable of being understood in different senses; it may, and does, in its ordinary sense, mean ‘political expedience,’ or that which is best for the common good of the community; and in that sense there may be every variety of opinion, according to education, habits, talents, and dispositions of each person, who is to decide whether an act is against public policy or not. It is the province of the statesman, and not the lawyer, to discuss, and of the Legislature to determine, what is best for the public good, and to provide for it by proper enactments. It is the province of the judge to expound the law only; the written from the statutes: the unwritten or common law from the decisions of our predecessors and of our existing courts, from the text writers of acknowledged authority, and upon principles to be clearly deduced from them by sound reason and just inference; not to speculate upon what is best, in his opinion, for the advantage of the community. Some of these decisions may have no doubt been founded upon the prevailing and just opinions of the public good; for instance, the illegality of covenants in restraint of marriage or trade. They have become part of the established law, and we are therefore bound by them, but we are not thereby authorised to establish as law everything which we may think for the public good, and prohibit everything which we think otherwise.”

I remain satisfied that more than covenants in restraint of marriage are ‘part of the established law’: such restraints are, after all, but an aspect of the protection of the institution itself. Thus I consider myself not only empowered but bound to take a decision on public policy grounds.

I also remind myself at the prompting of Mr Emmerson that public policy is not static. 25 years after Corbett things may be very different. There is a discernible tendency in some jurisdictions to grant transsexuals freedom to marry in cases where their psychological sex and their anatomical sex are in harmony. I can see the strength of the argument that such a transsexual who enters into the marriage ceremony honestly believing there is no impediment to it and who then lives as man and woman with the other party, should not be debarred from relief. But that is not this case. This Defendant’s body denied him the fulfilment of his desire. He knew he could not marry. He knew the Plaintiff would not marry him in the unhappily ambiguous condition to which he is condemned.

The speech of Lord Thankerton in Fender v St. John-Mildmay at p.23 instructs me that:-

“There can be little question as to the proper function of the Courts in questions of public policy. Their duty is to expound, and not to expand such a policy.”

So we must reflect, not form public policy. In my judgment of present public interest, the fundamental essence of matrimony must be made inviolable, and must be buttressed by refusing to permit the Defendant’s taking any advantage from the decree of nullity which has annulled this travesty of marriage.

For those reasons, I would dismiss his appeal. I go on, however, to consider shortly the final question.

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J M Allan (Merchandising) Limited v Cloke

 [1963] 2 QB 340

Lord Denning MR

 ‘.. argues before us that the parties to this letting were ignorant of its unlawfulness: and that, in these circumstances (as it is a contract which could lawfully be performed) it is not to be regarded as unlawful unless they had a ‘wicked intention to break the law.’ He relies on the well-known judgment of Blackburn J in Waugh v Morris (1873) LR 8 QB 202. Now I desire to say that where two people together have the common design to use a subject-matter for an unlawful purpose, so that each participates in the unlawful purpose, then that contract is illegal in its formation: and it is no answer for them to say that they did not know the law on the matter. I would take a comparable case where there is a common design to use a subject matter for an immoral purpose. If a landlord lets a flat to a prostitute at a rent beyond any normal commercial rent, or if he lets her a brougham of a specially intriguing nature [a reference to Pearce v Brooks (1866) LR 1 Exch 213] it may fairly be inferred that it was their common design that it should be used for an immoral purpose. The letting is unlawful and he cannot recover the rent or hire. It is different with the washerwoman who washes the clothes of the prostitute or the butcher who supplies her with meat. They may know of her trade but they charge her normal commercial prices. There is there no common design. There is no participation in the immoral purpose, but merely knowledge of it. And that is no bar to recovering the price. Likewise with an unlawful purpose, active participation debars, but knowledge by itself does not. As I read Waugh v Morris there was there no participation in any unlawful purpose and the plaintiff could recover. In this case, however, there was participation. The common design was that a game should be played which was in fact unlawful.’

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Jagger & Ors v Decca Music Group Ltd

[2004] EWHC 2542

Pumfrey J

The Arbitration Clause

The arbitration clause is as follows

7. Any and every dispute difference or question which may at any time arise upon under or in connection with or pursuant to this Agreement or touching or concerning the construction meaning effect validity or enforceability thereof or of any provision thereof or concerning any alleged determination or claim for rectification thereof shall be referred to a single arbitrator being a barrister of at least seven years standing to be nominated in default of agreement by the president for the time being of the Law Society and the Arbitration Act 1950 or any statutory modification or re-enactment thereof for the time being in force shall apply to any such arbitration PROVIDED ALWAYS that in the event of any claim by either of the parties hereto for breach of or otherwise arising out of or in connection with or pursuant to this agreement the sole obligation of the other party in respect of such claim shall be to pay such sum as may be awarded upon arbitration pursuant to this clause and such arbitration or award shall be a condition precedent to the institution of any action at law or in equity.

The claimants contend, and the Master appears to have accepted, that the claim as set out in the Particulars of Claim is not caught by the arbitration clause. If it is caught, they accept that the stay of the proceedings is mandatory. They do not suggest that any of the exceptions to the mandatory stay provided for by section 9 of the 1996 Act are relevant to his case.

Their argument in outline is as follows. It is plain that the arbitration clause restricts the remedies available in an arbitration to damages. Clause 6 of the agreement does not confer a mere “procedural” entitlement to see documents for the purposes of any claim, but confers a substantive right to conduct the specified audit with the specified materials. This audit is not contingent upon any demonstration by the claimants that there is, or might be, a deficiency in the account delivered to the respective member of the group pursuant to clause 5(3) and, accordingly, its non-performance does not sound in damages at all. Accordingly, the restriction upon the remedies available in an arbitration contained in clause 6 renders the arbitration clause inapplicable or inappropriate to an allegation of breach of clause 6. As a matter of construction, the arbitration clause would deprive clause 6 of all its substance and cannot extend to a breach of that clause and a mandatory stay need not be granted.

The contrary view is that the words of the arbitration clause are very wide; that the Scott v. Avery nature of the clause makes it quite plain that no cause of action accrues for breach of any provision of the agreement until after an arbitration; and the limitation to pecuniary remedies is irrelevant since as a matter of substance it is open to the claimants either to seek damages for breach or an account of royalties due under the agreement and payment of all sums found due upon such an account by way of arbitration, and the arbitratorwould be bound in consequence of the provisions of clause 6 to require the production of all the documents which the claimants would obtain under clause 6 had there been no breach of it. The distinction which the claimants seek to draw between a merely procedural provision and one conferring substantive rights is illusory and since they will obtain in an arbitration all the information and documents which they would have obtained under clause 6 there is no reason why the arbitration clause should be taken as a matter of construction not to extend to a breach of clause 6.

I should also note that there was at least a suggestion in the submissions before me that there had been no breach of clause 6 on the part of Decca. That issue does not arise in this appeal, and I decline to consider it.

I turn to the construction of the arbitration clause. It falls naturally into three parts. Down to the proviso, the clause is in wide and familiar terms. The first half of the proviso limits the remedies from the arbitrator in respect of “any claim by either of the parties hereto for breach of or otherwise arising out of or in connection with or pursuant to this agreement” the second part of the proviso is a Scott and  Avery provision which, as is well known, prevents the accrual of any cause of action for breach otherwise falling within the clause until after the arbitration. Given this structure, the questions are

i)          What is the effect of the general words of the clause? Do they apply to a breach of clause 6?

ii)         What is the effect of the proviso? Does it relate to an allegation of breach of clause 6?

iii)        What is the effect of the Scott v Avery provision, if it is relevant at all?

So far as the general words of the clause are concerned, they could hardly be wider in their effect. Indeed, the words “in connection with” would in my view be sufficient to catch any allegation of a breach of clause 6. I am reinforced in my view of the inclusive nature of these words by the judgment of Bingham LJ (as he then was) in Ashville Investments Limited v. Elmer Contractors Limited [1989] Q.B. where he said this in respect of the words “in connection with”:

“I do not find this language either vague or ambiguous. Any dispute or difference unconnected with the party’s contractual relationship is not subject to the arbitration agreements. Any other dispute or difference is.”

There is only so much that can be said about the width of the words employed by this arbitration clause. On the face of it, they are plainly wide enough to cover any dispute arising from an allegation of breach of clause 6.

The same goes for the words of the first part of the proviso. The remedies available in an arbitration are limited to a pecuniary sum. Again, these words are more than wide enough to cover a successful contention that there has been a breach of clause 6 of the agreement.

The real problem is whether the nature of the obligation of clause 6 is such that a breach is not capable of being compensated in damages with the result that there is, in effect, a repugnancy between the arbitration clause and clause 6. Put another way, can it be said that to provide only a pecuniary remedy for breach is to deprive clause 6 of its substance?

In my view, the Court should attempt to ensure if possible that an unqualified agreement of the kind represented by this clause is respected if at all possible. Mr Meade on the part of the claimants was disposed to submit that it was clear that the arbitration clause was in standard form while the provisions of clause 6 were obviously tailored to the particular circumstances of the parties. In the context of this agreement, I consider that submission to be erroneous. The inclusion in the context of an agreement of this sort of a substantial arbitration clause including a limitation of remedy must be taken to be a matter to which the parties have turned their attention. But in any event I consider that the suggestion that an award of damages following an arbitration in respect of a dispute arising out of clause 6 is a wholly inadequate remedy to be entirely misconceived. It seems to me that prima facie the measure of damages for breach of clause 6 should be arrived at as follows. If on an audit under clause 6 it would have been discovered that there had been an underpayment then the underpaid sum is the measure of damages. If on an audit under clause 6 it were to be discovered that there had been no underpayment, then damages would be nominal only. In either case, the question “what would an audit under clause 6 have discovered?” can only be answered by reference to the documents which would have been obtained by the auditor carrying on an audit in accordance with the clause. I understand this proposition to have been accepted by Mr Howe who appeared on the part of the defendants. It necessarily follows that disclosure in the context of the arbitration would involve disclosure of the documents which the auditor might reasonably have requested for the purpose of performing his auditing duties. Accordingly, the class of documents discloseable in the arbitration would be the class of documents provided to the auditor upon a consensual audit under clause 6.

Mr Howe submitted that the same result could be brought about by seeking an account before the arbitrator. That such an account is possible appears to have been accepted on previous occasions by these parties, and on the face of it the same observations as I have made in respect of a claim for damages for breach of clause 6 are applicable, save that the scope of the disclosure cannot, I think, be so directly related to the auditor’s rights under clause 6.

In either case, there would be no question of the claimants having to demonstrate a deficiency in the accounts before they could claim substantial damages and so become entitled to disclosure of the material in question. The dispute referred to arbitration is the breach of the obligation to permit the audit on the materials to which the claimants are contractually entitled: and it necessarily follows that the materials to which the claimants are contractually entitled must be considered in the context of the arbitration.

It seems to have been assumed by the master that unless clause 6 was specifically enforceable it was a dead letter. His conclusions in paragraph 13 of his judgment were as follows:

“1.       Clearly there is an effective arbitration clause to which, in principle, effect should be given. The real question is one of construction, and not necessarily of efficacy;

2.         Clause 7 is certainly broadly drawn, but it appears to be about dispute resolution;

3.         Notwithstanding its breadth, that does not necessarily lead to the conclusion that clause 6, which, if complied with, may lead to dispute, is to be regarded as a mere adjunct to the process of dispute resolution;

4. If compliance with clause 6 can be secured only through arbitration, then that will serve to further dispute and consequent expense rather than the reverse.”

This does not seem to me to grapple with the main problem in the case as I have outlined it above. If the Master was seeking to suggest that this arbitration clause was merely a means of “dispute resolution” then that is unexceptionable, save that the disputes which it resolves include disputes relating to breach of clause 6. I do not find the Master’s remaining conclusions helpful, and I consider that for the reasons I have given that a breach of clause 6 is to be arbitrated, and that in that arbitration the pecuniary remedy that will be obtained will depend upon whether the audit under clause 6 would or would not have revealed an under-payment0 of royalty to the claimants. That question cannot be investigated without making the documents that would have been made available in an audit under clause 6 available to the claimants, and it follows that the restriction on remedy contained in the arbitration clause does not deprive clause 6 of its substance.

There is therefore no reason why I should not give effect to the clear choice of an arbitral tribunal by the parties to this agreement. Since there is no other reason advanced why a stay under section 9 of the 1996 Act should not be granted, these proceedings must be stayed. I will hear counsel as to the appropriate order to costs if that cannot be agreed.

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Caledonian Insurance Co. v. Gilmour

[1892] UKHL 172 30 SLR 172

Lord Watson

In my opinion the distinction between those contracts of submission to arbiters unnamed, which have been held to be invalid, and those which the law sustains, is to be found in the fact that the one class does, whilst the other does not, oust the jurisdiction of the ordinary Courts of the country. The reason assigned for the decision in Buchanan v. Muirhead, Mor. Dict. 14,594, was that “supporting such clauses would create a new Court;” and in all the cases which have followed on the same point, that has been accepted by the bench as the real ground of their judgment, although some Judges have doubted whether it was satisfactory. On the other hand, where the object of the reference is to ascertain some fact or term which is made essential to the constitution of contract rights or liabilities it does not raise a proper lis. As Lord Deas said in Cochrane v. Guthrie, 21 Sess. Cas. (2nd ser.) 376—“It has long been settled that such a stipulation is effectual. It is not a submission of disputes and differences. It is an agreement that the occurrence of a certain contingency shall be ascertained in a certain way, and in that way only.” In the later case of Howden & Company v. Dobie & Company, 9 Sess. Cas. (4th ser.) 761, Lord President Inglis observed—“A reference to fix a price or the conditions of a lease, or any dispute arising as to the execution of a contract, as in Merry & Cuninghame’s case, 21 Sess. Cas. (2nd ser.) 1337, are matters which cannot be settled by a court of law without assistance. They are not lites.”

Had I been able to accept the construction which appears to have been put upon the terms of the policy in the Courts below, I should probably have agreed in their conclusion as to the non-obligatory character of the agreement to refer. But the language of the policy is exceptionally plain and free from ambiguity. The 8th condition is incorporated with and made an integral part of the obligation of indemnity undertaken by the appellants, and it expressly stipulates that their obligation is not to give rise to any pecuniary liability until the amount of loss or damage payable to the insured has been liquidated by an award. Assuming the Court below to be right in holding that the agreement to refer is not binding in law, and that the respondent has the option of either naming or declining to nominate an arbiter, what would be his position? Upon that point I do not entertain any doubt. If he chose to carry out the reference the appellants would become his debtors, and he could sue them for the amount of the award whenever it was issued. If he elected to decline, it would, in my opinion, be beyond the competency of the Court to make a new and different contract between these parties by entertaining an ordinary action for assessment of damage, and giving decree against the appellants for a sum which by the terms of the contract they are in no event liable to pay. I do not mean to suggest that if through any act or default of the appellants such a reference as is contemplated in the policy had become impossible, the Court could not have given the respondent a remedy by entertaining an action of damages as for breach of agreement, but no such case occurs here.

Upon the question whether a reference like the present, by reason of its possibly devolving upon the arbiters the decision of the matters specified in the passage already cited from the opinion of the Lord President, becomes obnoxious to the charge of invading the jurisdiction of Her Majesty’s Courts, the judgment of this House in  Scott v. Avery, 5 H.L. Cas. 811, is a direct authority. No doubt the judgment was given in an English suit, but that circumstance does not detract from the weight, because until modified by comparatively recent legislation the law of England went beyond that of Scotland, and held that no agreement to refer future disputes to arbitrators, whether named or not named, could oust the jurisdiction of the Courts or disable either of the contracting parties from resorting to them. In  Scott v. Avery the action was brought by the insured under three maritime policies, each of which contained clauses and conditions with respect to payment of indemnity and the ascertainment of the amount by the award of the arbitrators, substantially the same with those which occur in the policy before us. It was held by the House, affirming the judgment of the Exchequer Chamber, that until an award was made no action was maintainable.

In delivering the judgment of the House Lord Campbell said ( 5 H.L. Cas. 851)—“I think that the contract between the shipowner and the underwriters is as clear as the English language could make it, that no action should be brought against the insurer until the arbitrators had disposed of any dispute that might arise between them. It is declared to be a condition-precedent to the bringing of any action. There is no doubt that such was the intention of the parties; and upon a deliberate view of the policy I am of opinion that it embraced not only the assessment of damage, the contemplation of quantum, but also any dispute that might arise between the underwriters and the insured respecting the liability of the insurers as well as the amount to be paid.” The noble and learned Lord then deals with the question, whether such a contract is tainted with illegality, which he answers in the negative, and the main ground of judgment is expressed by him in these terms ( 5 H.L. Cas. 854)—“Now, in this contract it is stipulated in the most express terms that until the arbitrators have determined, no action shall lie in any Court whatever. That is not ousting the Courts of their jurisdiction, because they have no jurisdiction whatsoever, and no cause of action accruesuntil the arbitrator have determined.”

The observations of the noble and learned Lord, in so far as they refer to the terms of the contract, are precisely applicable to the contract of insurance between the appellants and the respondent, and in so far as they relate to non-ouster of the Court’s jurisdiction, they appear to me to be in consonance with the principles of Scots law as these are illustrated by the decisions cited in the arguments of counsel, which I shall now notice in the order of their dates.

The first of these cases— Monro v. Mackenzie, 1 Sess. Cas. (1st series, N.E.) 508—which was strongly relied on by the appellants’ counsel, does not throw much light upon the present controversy. In virtue of powers reserved to him by the lease, the lessor during its currency resumed possession, and took over the tenant’s stock of sheep, for which it was stipulated that he should pay such valuation as might be put upon them by two men mutually chosen. Four years afterwards the tenant brought an action at law for the value of the stock. The Lord Ordinary remitted to a person of skill, selected by himself, to ascertain and report the value of the sheep at the time of delivery. Against that appointment the landlord unsuccessfully reclaimed to the First Division, on the ground that he was entitled as a matter of right to have the case sent for trial to the Jury Court. The clause of reference was not, and neither party appears to have insisted that it should be, enforced.

Dixon v. Campbell, 8 Sess. Cas. (1st series) 970, is more in point. A lease of coal provided that in the event of the mineral-field becoming, “in the opinion of skilful men, mutually chosen by the parties, incapable of being wrought to advantage,” the tenants should have power to renounce. The First Division, reversing the judgment of the Lord Ordinary, held that the clause of reference continued to be binding, notwithstanding that two arbiters duly nominated by the parties had differed in opinion, and consequently that the tenants could not maintain an action to have it found and declared that the coal had become unworkable to profit, and that they were entitled to give up the lease.

In Smith v. Wharton Duff, 5 Sess. Cas. (2nd series) 749, a lessor resumed possession under a clause in the lease which bound the tenant to remove on being allowed such compensation as should be “ascertained by men mutually chosen for that purpose.” Arbiters were mutually nominated, and issued their award. The tenant being dissatisfied with its amount, raised an action against the lessor, concluding for reduction of the award, and for payment of £800 as compensation. The award was set aside by the Court on account of various irregularities, but the Lord Ordinary (Cockburn) assoilzied the defender from the petitory conclusion, holding it to be settled law that where such an engagement to refer is incorporated with the contract so as to form a part of it, the engagement is obligatory. In the First Division his judgment was unanimously affirmed. The Lord President (Hope) agreed with the reasoning of the Lord Ordinary. Lords Mackenzie and Jeffrey came to the same conclusion, but thought the case was attended with difficulty. Lord Fullerton delivered a very clear opinion in favour of the judgment, observing—“When the reference is essential to liquidate the obligation come under by the party, it is good, though to a person not named. If not, what would become of the obligation?” The same learned Judge, in Hendry’s Trustees v. Renton, 13 Sess. Cas. (2nd series) 1007, stated the rule of law to be that clauses of reference to persons not named are valid and obligatory in cases where the ascertainment by their means “of a point essential to the extrication of a special stipulation in the contract is made part of the stipulation itself. As, for instance, when parties bind themselves to pay or receive a sum to be fixed by men mutually chosen, or to accept their opinion as the criterion of the existence or non-existence of some contingency on which the obligation of parties is by the contract dependent.” The clause of reference in Hendry’s Trustees v. Renton being a general one, and the stipulation which the Court was asked to enforce not being made dependent upon it, was held not to be binding; but I refer to these dicta because of the effect which was given to them in the next case which I have to notice.

The clause which was considered by the Court in Merry & Cuninghame v. Brown, 21 Sess. Cas. (2nd series) 1337, occurred in a mineral lease constituted by an informal missive, and was in these terms—“Should the minerals become exhausted or workable only at an evident loss the tenants shall be entitled to give up the lease on the same being ascertained by arbiters mutually chosen.” The tenants brought an action to have it declared that the lessor was bound not only to name an arbiter, but also to concur in naming an oversman, or in giving the arbiters power to appoint one in the event of their differing in opinion; and in the event of the question not being so determined, to have it declared by the Court that the minerals were unworkable to profit, and that they had the right to renounce the lease. The Lord Ordinary (Benholme) found that the parties were bound to refer to two arbiters, as provided in the missive lease, and assoilzied the defender. In the Inner House, where the judgment of the Lord Ordinary was substantially adhered to, a question arose upon the construction of the missive as to the true character of the clause of reference, and upon that point there was a difference of opinion. Lords Wood, Cowan, and Benholme held that the reference was so incorporated with the power of remuneration that they formed one stipulation, whilst the late Lord Justice-General (then Lord Justice-Clerk) was of opinion that the ascertainment of the fact of unworkability to profit, by means of arbitration, was not made a condition-precedent of the tenants’ right to renounce. But all the learned Judges, the Lord Justice-Clerk included,

expressed their approval of the law laid down by Lord Fullerton in Smith v. Wharton Duff, and Hendry’s Trustees v. Renton.

The principle of law followed by the First Division of the Court of Session in Dixon v. Campbell and Smith v. Wharton Duff, and by the Second Division in Merry & Cuninghame v. Brown, appears to me to be practically the same with that which was adopted by this House in  Scott v. Avery. I can find no authority in any Scotch decision for limiting the application of the principle to cases in which the sole duty of the arbiters is to value an existing thing the identity of which is admitted, and which they can inspect for themselves, or to forming an estimate of value upon facts admitted or otherwise ascertained. It is seldom possible for arbiters, who have to decide whether a mineral field has become unworkable to profit, to determine the question by personal examination. In order to form an estimate they must know approximately how much mineral has been worked out, how much remains to be worked out, and the probable cost of bringing it to the surface. These are matters which can in very few cases be ascertained by inspection. In Cochrane v. Guthrie, 21 Sess. Cas. (2nd series) 376, Lord Deas said, in reference to the functions committed to an arbiter in cases of that kind—“I have no idea that men of skill are not entitled to investigate in all cases so far as necessary to enable them to form their opinion. They may take evidence if they wish it, or they may go to the spot and use only their own eyes if they find this sufficient. In short, they are entitled to do whatever is necessary to enable them to make up their minds.” In the opinion thus expressed I entirely concur.

In this case Lord M’Laren refers for the grounds of his judgment to Ramsay v. Strain, 11 Sess. Cas. (4th series) 527, where his Lordship, sitting in the Second Division with Lords Young and Rutherfurd Clark, delivered the leading opinion. In that case a disposition of coal, dated in 1788, laid an obligation upon the disponees to pay damages done to the surface by their workings, “as the same shall be ascertained by neutral persons, to be mutually chosen.” In the year 1883 the then owner of the surface brought an action against the then coal-owner, who not only pleaded that the action was excluded by the clause of reference, but also (1) that the pursuer was not in titulo to maintain the claim, and (2) that it was barred by previous settlements and discharges. To my mind it seems clear that it was not in the contemplation of the parties who contracted in 1788 to submit either of these two prejudicial pleas to the decision of the arbiters. The Lord Ordinary found that the action was excluded by the clause of reference, and the pursuer having reclaimed, the Inner House recalled the interlocutor and remitted the case to him. I cannot regard that as a precedent which can govern the present case, because there were pleas stated, proper for the determination of the Court, before any question could arise as to the manner in which the amount of damage fell to be ascertained; and I am confirmed in that view by the fact that Lord Young, one of the two Judges who concurred in Lord M’Laren’s opinion, expressly stated, without contradiction either by Lord Rutherfurd Clark or Lord M’Laren, that the Court was not deciding “anything just now as to whether, after the Lord Ordinary has had a proof on the question of liability, there should be a reference as to the amount of damage.” Subject to that explanation, the decision was in my opinion perfectly right. If, on the contrary, it was intended to settle the question raised in this appeal, I should have no hesitation in holding that it was wrong.

For these reasons I am of opinion that the judgments appealed from ought to be reversed, and that the appellants ought to have absolvitor.

Lord Ashbourne—My Lords, I have had an opportunity of reading and considering the opinion which has just been addressed to your Lordships by my noble and learned friend near me (Lord Watson), and I only desire to express my entire concurrence in the conclusion at which he has arrived.

My noble and learned friend Lord Morris, who is unavoidably absent to-day, has requested me to state his concurrence in the conclusion at which your Lordships unanimously arrive.

Lord Field—My Lords, the contract which your Lordships are called upon to construe in this appeal is the familiar one of fire insurance, and is made in the familiar form of a “policy” under the company’s seal, containing on the face the consideration for and the promise to pay for loss or damage by fire, and the conditions on the back on which the contract is based, and which are by the very terms of the policy “to be taken as part of it.” Although, however, the instrument wears the appearance at first sight of two contracts, one to pay or compensate the assured, leaving the amount to be ascertained in case of difference in the ordinary way, and the other an independent contract to refer any such difference to unnamed arbiters, yet in truth the language of the policy which I have referred to makes the 13th condition, which is the only one to which it is necessary to refer, a very essential part of the policy, the result being that thereare not two contracts to any extent independent of each other but one contract, which may be thus generally expressed—as a contract to pay only such amount as shall be ascertained by the arbiters to be named in the manner provided by the condition. This appears to me to be the plain construction of the contract, and the reasoning which induced this House to give a similar construction to the mutual policy under consideration in the case of  Scott v. Avery, referred to by my noble and learned friends, fortifies me in coming to that conclusion.

If, then, the parties to the contract have for obvious motives of convenience agreed to substitute (except in case of the allegation

of fraud or non-compliance with conditions-precedent) for the ordinary tribunal, a tribunal which from its composition may consist of persons competent by their experience to deal with the questions which ordinarily arise when the value of destroyed or injured property has to be ascertained, and by their freedom of movement able to investigate upon the very spot the necessary condition, does the law of Scotland on the ground of general public interest refuse to enforce this contract which the parties have so made for them selves? My Lords, the authorities which have been so exhaustively dealt with by my noble and learned friend Lord Watson satisfy me of the contrary; and I think therefore that your Lordships should give effect to the contract by adopting the motion now made.

Their Lordships reversed the interlocutors appealed from, and assoilzied the appellants from the conclusion of the action, and reserved the question of costs.