The doctrine of public policy

Parke, B., in Egerton v. Brownlow 4 H.L.C. 1, 123; 10 E.R. 359, 408, which is a leading judgment on the subject, describes the doctrine of public policy thus at p. 123 :

“‘Public policy’ is a vague and unsatisfactory term, and calculated to lead to uncertainly 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. To allow this to be a ground of judicial decision, would lead to the greatest uncertainly and confusion. 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 text writers of acknowledged authority, and upon the principles to be clearly deduced from them by sound reason and just inference; not to speculate upon what is the 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 a part of the recognised 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.”

 In Janson v. Driefontein Consolidated Mines, Ltd. (1902) A.C. 484 an action raised against British underwriters in respect of insurance of treasures against capture during its transit from a foreign state to Great Britain was resisted by the underwriters on the ground that the insurance was against public policy. The House of Lords rejected the plea. Earl of Halsbury, L.C., in his speech made weighty observations, which may usefully be extracted. The learned Lord says at page 491 :

“In treating of various branches of the law learned persons have analysed the sources of the law, and have sometimes expressed their opinion that such and such a provision is bad because it is contrary to public policy; but I deny that any Court can invent a new head of public policy; so a contract for marriage brokerage, the creation of a perpetuity, a contract in restraint of trade, a gaming or wagering contract, or, what is relevant here, the assisting of the King’s enemies, are all undoubtedly unlawful things; and you may say that it is because they are contrary to public policy they are unlawful; but it is because these things have been either enacted or assumed to be by the common law unlawful, and not because a judge or Court have a right to declare that such and such things are in his or their view contrary to public policy. Of course, in the application of the principles here insisted on, it is inevitable that the particular case must be decided by a judge; he must find the facts, and he must decide whether the facts so found do or do not come within the principles which I have endeavoured to describe – that is, a principle of public policy, recognised by the law, which the suggested contract is infringing, or is supposed to infringe.”

 These observations indicate that the doctrine of public policy is only a branch of common law and unless the principle of public policy is recognised by that law, Court cannot apply it to invalidate a contract. Lord Lindley in his speech at p. 507 pointed out that public policy is a very unstable and dangerous foundation on which to build until made safe by decision. A promise made by one spouse, after a decree nisi for the dissolution of the marriage has been pronounced, to marry a third person after the decree has been made absolute is not void as being against public policy : see Fender v. St. John-Mildmay (1938) A.C. 1. In that case Lord Atkin states the scope of the doctrine thus at p. 12 :

“In popular language, following the wise aphorism of Sir George Jessel cited above, the contract should be given the benefit of the doubt.

But there is no doubt that the rules exists. In cases where the promise to do something contrary to public policy which for short I will call a harmful thing, or where the consideration for the promise is the doing or the promise to do a harmful thing a judge, though he is on slippery ground, at any rate has a chance of finding a footing. …… But the doctrine does not extend only to harmful acts, it has to be applied to harmful tendencies. Here the ground is still less safe and more treacherous”.

Adverting to the observation of Lord Halsbury in Janson v. Driefontein Consolidated Mines Ltd. (1902) A.C. 484 Lord Atkin commented thus, at page 11 :

“……….. Lord Halsbury indeed appeared to decide that the categories of public policy are closed, and that the principle could not be invoked anew unless the case could be brought within some principle of public policy already recognised by the law. I do not find, however, that this view received the express assent of the other members of the House; and it seems to me, with respect, too rigid. On the other hand, it fortifies the serious warning illustrated by the passages cited above that the doctrine should only be invoked in clear cases in which the harm to the public is substantially incontestable, and does not depend upon the idiosyncratic inferences of a few judicial minds”.

52. Lord Thankerton summarised his view in the following terms, at p. 23 :

“In the first place, 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 policy. That does not mean that they are precluded from applying an existing principle of public policy to a new set of circumstances, where such circumstances are clearly within the scope of the policy. Such a case might well arise in the case of safety of the State, for instance. But no such case is suggested here. Further, the Courts must be watchful not to be influenced by their view of what the principle of public policy, or its limits, should be”.

 Lord Wright, at p. 38, explains the two senses in which the words “public policy” are used :

“In one sense every rule of law, either common law or equity, which has been laid down by the Courts, in that course of judicial legislation which has evolved the law of this country, has been based on considerations of public interest or policy. In that sense Sir George Jessel, M.R., referred to the paramount public policy that people should fulfil their contracts. But public policy in the narrower sense means that there are considerations of public interest which require the Courts to depart from their primary function of enforcing contracts, and exceptionally to refuse to enforce them. Public policy in this sense is disabling”.

 Then the noble Lord proceeds to lay down the following principles on which a judge should exercise this peculiar and exceptional jurisdiction : (1) It is clear that public policy is not a branch of law to be extended; (2) it is the province of the judge to expound the law only; (3) public policy, like any other branch of the common law, is governed by the judicial use of precedents; and (4) Courts apply some recognised principles to the new conditions, proceeding by way of analogy and according to logic and convenience, just as Courts deal with any other rule of the common law. The learned Lord on the basis of the discussion of case law on the subject observes at p. 40 :

“It is true that it has been observed that certain rules of public policy have to be moulded to suit new conditions of a changing world : but that is true of the principles of common law generally. I find it difficult to conceive that in these days any new head of public policy could be discovered”.

The observations of the aforesaid Law Lords define the concept of public policy and lay down the limits of its application in the modern times. In short, they state that the rules of public policy are well-settled and the function of the Courts is only to expound them and apply them to varying situations. While Lord Atkin does not accept Lord Halsbury’s dictum that the categories of public policy are closed, he gives a warning that the doctrine should be invoked only in clear cases in which the harm to the public is substantially incontestable, Lord Thankerton and Lord Wright seem to suggest that the categories of public policy are well-settled and what the Courts at best can do is only to apply the same to new set of circumstances. Neither of them excludes the possibility of evolving a new head of public policy in a changing world, but they could not conceive that under the existing circumstances any such head could be discovered.

 Asquith, L.J., in Monkland v. Jack Barclay Ltd. (1951) 1 All 714 restated the law crisply at p. 723 :

“The Courts have again and again said, that where a contract does not fit into one or other of these pigeon-holes but lies outside this charmed circle, the courts should use extreme reserve in holding a contract to be void as against public policy, and should only do so when the contract is incontestably and on any view inimical to the public interest”.

The Indian cases also adopt the same view. A division bench of the Bombay High Court in Shrinivas Das Lakshminarayan v. Ram Chandra Ramrattandas ILR (1920) 44 Bom. 6. observed at p. 20 :

“It is no doubt open to the Court to hold that the consideration or object of an agreement is unlawful on the ground that it is opposed to what the Court regards as public policy. This is laid down in section 23 of the Indian Contract Act and in India therefore it cannot be affirmed as a matter of law as was affirmed by Lord Halsbury in Janson v. Driefontein Consolidated Mines, Limited 1902 A.C. 484 that no Court can invent a new head of public policy, but the dictum of Lord Davey in the same case that “public policy is always an unsafe and treacherous ground for legal decision” may be accepted as a sound cautionary maxim in considering the reasons assigned by the learned Judge for his decision”.

The same view is confirmed in Bhagwant Genuji Girme v. Gangabisan Ramgopal ILR 1941 Bom. 71 and Gopi Tihadi v. Gokhei Panda (I.L.R. 1953 Cuttack 558.). The doctrine of public policy may be summarized thus : Public policy or the policy of the law is an illusive concept; it has been described as “untrustworthy guide”, “variable quality”, “uncertain one”, “unruly horse”, etc.; the primary duty of a Court of Law is to enforce a promise which the parties have made and to uphold the sanctity of contracts which form the basis of society, but in certain cases, the Court may relieve them of their duty on a rule founded on what is called the public policy; for want of better words Lord Atkin describes that something done contrary to public policy is a harmful thing, but the doctrine is extended not only to harmful cases but also to harmful tendencies; this doctrine of public policy is only a branch of common law, and, just like any other branch of common law, it is governed by precedents; the principles have been crystallized under different heads and though it is permissible for Courts to expound and apply them to different situations, it should only be invoked in clear and incontestable cases of harm to the public; though the heads are not closed and though theoretically it may be permissible to evolve a new head under exceptional circumstances of a changing world, it is advisable in the interest of stability of society not to make any attempt to discover new heads in these days.

 This leads us to the question whether in England or in India a definite principle of public policy has been evolved or recognized invalidating wagers. So far as England is concerned, the passages from text-books extracted and the decisions discussed in connection with the first point clearly establish that there has never been such a rule of public policy in that country. Courts under the common law of England till the year 1845 enforced such contracts even between parties to the transaction. They held that wagers were not illegal. After the passing of the English Gaming Act, 1845 (8 & 9 Vict. c. 109), such contracts were declared void. Even so, the Courts held that though a wagering contract was void, it was not illegal and therefore an agreement collateral to the wagering contract could be enforced. Only after the enactment of the Gaming Act, 1892 (55 Vict. c. 9), the collateral contracts also became unenforceable by reason of the express words of that Act. Indeed, in some of the decisions cited supra the question of public policy was specifically raised and negatived by Courts : See Thacker v. Hardy I.L.R (1878) Q.B. 685; Hyams v. Stuart King [1908] 2 K.B. 696; and Michael Jeffrey & Company v. Bamford (1949) 2 All 452. It is therefore abundantly clear that the common law of England did not recognize any principle of public policy declaring wagering contracts illegal.

 The legal position is the same in India. The Indian Courts, both before and after the passing of the Act 21 of 1848 and also after the enactment of the Contract Act, have held that the wagering contracts are not illegal and the collateral contracts in respect of them are enforceable. We have already referred to these in dealing with the first point and we need not cover the ground once again, except to cite a passage from the decision of the Judicial Committee in Ramloll Thackoorseydass v. Soojumnull Dhondmull (1848) 4 M.I.A. 339, which is directly in point. Their Lordships in considering the applicability of the doctrine of public policy to a wagering contract observe at p. 350 :

“We are of opinion, that, although, to a certain degree, it might create a temptation to do what was wrong, we are not to presume that the parties would commit a crime; and as it did not interfere with the performance of any duty, and as if the parties were not induced by it to commit a crime, neither the interests of individuals or of the Government could be affected by it, we cannot say that it is contrary to public policy.”


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