Other Incapacity
Cases
Thomas Bruce Hart v Joseph O’Connor Paul Michael O’Connor Frances Joseph O’Connor
[1985] UKPC [1985] AC 1000, [1985] 3 WLR 214, [1985] 2 All ER 880, [1985] UKPC 17, [1985] 1 NZLR 159
Lord Brightman
If a contract is stigmatised as “unfair”, it may be unfair in one of two ways. It may be unfair by reason of the unfair manner In which it was brought into existence; a contract induced by undue influence is unfair in this sense. It will be convenient to call this “procedural unfairness”. It may also, in some contexts, be described (accurately or inaccurately) as “unfair” by reason of the fact that the terms of the contract are more favourable to one party than to the other. In order to distinguish this “unfairness” from procedural unfairness, it will be convenient to call it “contractual imbalance”.
The two concepts may overlap. Contractual imbalance may be so extreme as to raise a presumption of procedural unfairness, such as undue influence or some other form of victimisation. Equity will relieve a party from a contract which he has been induced to make as a result of victimisation. Equity will not relieve a party from a contract on the ground only that there is contractual imbalance not amounting to unconscionable dealing. Of the three indicia of unfairness relied upon by the learned judge in Archer v. Cutler (assuming unfairness to have existed) the first was contractual imbalance and the second and third were procedural unfairness.
The judgment in Archer v. Cutler contains, if their Lordships may be permitted to say so, a most scholarly and erudite review by the trial judge of the textbook authorities and reported cases on the avoidance of a contract made by a person of unsound mind. For present purposes the key passages in the judgment are these (page 400, line 44):-
“From these authorities, it would seem that the English law on the subject is ill-defined. The case of Imperial Loan Company v. Stone [ 1892] 1 Q.B. 599 widely accepted as being a statement of the law on avoidance of contracts made with persons of unsound mind would, save in the judgment of Lopes LJ, seem to regard unfairness of the contract as being of no moment. Proof of unsoundness of mind and the other party1 s knowledge of that unsoundness alone will avoid the contract. But the passage cited from the judgment of Lopes LJ. and the dicta of Pollock CB. in Molton v. Camroux (1848) 2 Exch 487 of Patteson J. on appeal in the same case, of Sir Ernest Pollock MR. in York Glass Company v. Jubb [1924] 131 L.T. Rep. 559 and of Sargant LJ. in the same case would suggest that proof of unfairness of a bargain entered into by a person of unsound mind, even though that unsoundness be not known to the other party, will suffice to avoid it.”
and (page 401, line 45):-
“I find nothing in policy or principle to prevent me from holding that a contract entered into by a person of unsound mind is voidable at his option if it is proved either that the other party knew of his unsoundness of mind or, whether or not he had that knowledge, the contract was unfair to the person of unsound mind.”
Their Lordships apprehend that in these passages the learned judge is dealing indifferently with procedural unfairness and contractual imbalance, either of which, or both of which in combination, may enable the contract to be avoided against a contracting party ignorant of the mental incapacity of the other.
The original rule at law, and still the rule in Scotland, was that a contract with a person of unsound mind was void, because there could be no consensus ad idem. This was later qualified by a rule that a person could not plead his own unsoundness of mind in order to avoid a contract he had made. This in turn gave way to a further rule that such a plea was permissible if it could be shown that the other contracting party knew of the insanity.
Their Lordships turn to the three cases mentioned in the first citation from Archer v. Cutler. The starting point for a consideration of the modern rule is Molton v. Camroux (1848) 2 Exch 487, and on appeal 4 Exch 17, which was heard first in the Court of Exchequer, and later in the Court of Exchequer Chamber. It arose out of the purchase by a person of unsound mind of annuities from a life assurance society. The society had granted the annuities in the ordinary course of its business. After referring to earlier authorities that a plea of insanity would not prevail unless the other contracting party knew of it, the court said this at page 502:-
“We are not disposed to lay down so general a proposition, as that all executed contracts bona. fide entered into must be taken as valid, though one of the parties be of unsound mind; we think, however, that we may safely conclude, that when a person, apparently of sound mind, and not known to be otherwise, enters into a contract for the purchase of property which is fair and bona fide, and which is executed and completed, and the property, the subject-matter of the contract, has been paid for and fully enjoyed, and cannot be restored so as to put the parties in statu quo, such contract cannot afterwards be set aside, either by the alleged lunatic, or those who represent him.”
The case was then heard by the Court of Exchequer Chamber. The Court identified the issue as (page 19):-
“… whether the mere fact of unsoundness .of mind, which was not apparent, is sufficient to vacate a fair contract executed by the grantee, by payment of the consideration money, and intended bona fide to be executed by the grantor, by payment of the annuity.”
The answer was that:-
“… the modern cases show, that when that state of mind was unknown to the other contracting party, and no advantage was taken of the lunatic, the defence cannot prevail, especially where the contract is not merely executory, but executed in whole or in part, and the parties cannot be restored altogether to their original position,”
In the foregoing passages and in certain other citations from the authorities, their Lordships find it convenient to underline references to “fairness” and “not taking advantage” and the like.
The learned judge in Archer v. Cutler read these passages from Molton v. Camroux as emphasising the importance of fairness as an ingredient in an enforceable contract with a lunatic whose condition of mind is unknown to the other party; see pages 396 and 397. However their Lordships respectfully think that Molton v. Camroux is not an authority for the proposition that contractual imbalance, or procedural unfairness short of unconscionable conduct or equitable fraud, enables a person of unsound mind to escape from the contract.
In Molton v. Camroux Pollock C.B. listed the circumstances which would enable the courts safely to conclude that a contract with a lunatic apparently of sound mind should be upheld. One such circumstance was that the contract was “fair and bona fide”. This was an appropriate qualification for the purpose of excluding cases where the other contracting party, though ignorant of the insanity, was guilty of fraud. It does not, their Lordships respectfully think, support the proposition that the court is entitled to embark on a balancing exercise before upholding such a contract, in order to see where the balance of advantage lies; and if it is thought that the advantage lies, or at the time of the contract lay, substantially in favour of the innocent party of sound mind, then the contract can be set aside. This seems apparent from the earlier passages in the judgment of the Chief Baron. He equated “fairness” with “made in good faith” when discussing counsel’s distinction between the executed and the executory contract of a lunatic; see page 502 line 1. In the quotations he selected from Browne v. Joddrell (1827) 1 M. and M. 105 and Dane v. Viscountess Kirkwall (1838) 8 CAR. and P. 679 the person of unsound mind can have the contract set aside if the other party “imposed” upon him, or “took advantage of” his unsoundness of mind. These references seem to their Lordships to demonstrate that it was procedural unfairness to which the Chief Baron was directing his mind and not contractual imbalance. The same is to be said of the judgment of the Court of Exchequer Chamber. Their Lordships find nothing in Molton v. Camroux. to suggest that contractual imbalance, falling short of some species of fraud, entitles a person of unsound mind, whose mental impairment is not apparent, to have the contract avoided.
In Imperial Loan Co. Ltd. v. Stone [1892] 1 Q.B. 599, a person of unsound mind was sued on a promissory note which he had signed as surety. The jury found that he was insane when he signed the note but there was no finding as to the creditor’ s knowledge of such insanity. Nevertheless the judge entered a verdict against the creditor. On appeal it was submitted that there was no authority that a man could be sued and made liable on an executory contract which he had made when of unsound mind, except in the case of a contract for necessaries. This submission was rejected, and a new trial was directed. Lord Esher MR. said this (at page 601):-
“When a person enters into a contract, and afterwards alleges that he was so insane at the time that he did not know what he was doing, and proves the allegation, the contract is as binding on him in every respect, whether it is executory or executed, as if he had been sane when he made it, unless he can prove further that the person with whom he contracted knew him to be so insane as not to be capable of understanding what he was about.”
Fry LJ. said (page 602):-
“It thus appears that there has been grafted on the old rule the exception that the contracts of a person who is non compos mentis may be avoided when his condition can be shown to have been known to the plaintiff. So far as I know, that is the only exception.”
Lopes LJ. introduced the word “fair” .into his statement of the rule (page 603):-
“In order to avoid a fair contract on the ground of insanity, the mental incapacity of the one must be known to the other of the contracting parties. A defendant who seeks to avoid a contract on the ground of his insanity, must plead and prove, not merely his incapacity, but also the plaintiff s knowledge of that fact, and unless he proves these two things he cannot succeed.”
The learned judge in Archer v. Cutler relied on the statement of Lopes LJ. that the mental incapacity of a lunatic must be known to the other contracting party “in order to avoid a fair contract on the ground of insanity”, as implying that such knowledge is unnecessary in order to avoid a contract which is unfair in the sense of contractual imbalance. But in their Lordships’ view “fair” was quite appropriately used by Lopes LJ. so as to except the case of the apparently sane person who is imposed upon in a manner which equity regards as unconscionable, and was not intended to permit an inquiry into the balance of the terms of the contract. The quotation from Lopes LJ. which the learned judge in Archer v. Cutler relied upon omits (page 398, line 51) the succeeding sentence where the Lord Justice repeats the rule without any reference to “fairness” and says in unqualified terms, that “a defendant who seeks to avoid a contract on the ground of his insanity, must plead and prove, not merely his incapacity, but also the plaintiff s knowledge of that fact, and unless he proves these two things he cannot succeed”. In the face of that statement of the rule, it seems to their Lordships impossible to suppose that Lopes LJ. regarded proof of contractual imbalance as a permissible alternative to knowledge of insanity where a person of unsound mind seeks to set aside an agreement which was made in good faith. (indeed, how is one to judge a contract of suretyship in terms of contractual balance?) This approach is in line with two .cases which shortly followed Molton v. Camroux, namely Beavan v. M’Donnell (1854) 9 Exch 309 at page 314 “… The contract was entered into by the defendant, and the money received, fairly and in good faith”; and Campbell v. Hooper (1855) 3 Sm. and G. 153 at page 159, “… the money was honestly paid, and no advantage taken by the plaintiff, nor any knowledge by him of the lunacy …”.
The Imperial Loan case was considered and accepted as correct by the High Court of Australia in McLaughlin v. Daily Telegraph Newspaper Co. Ltd [1904] 1 C.L.R. 243, where Griffith CJ. delivering the judgment of the Court said this of the Imperial Loan case and its predecessor Molton v. Camroux (at page 272):-
“The principle of the decision seems, however, to be the same in both cases, which, in our judgment, establish that a contract made by a person actually of unsound, but apparently of sound mind with another who deals with him directly, and who has no knowledge of the unsoundness of mind, is as valid as if the unsoundness of mind had not existed. If the man dealing with the person of unsound mind is aware of his insanity, the contract is voidable at the option of the latter, but the party who takes advantage of the other cannot himself set up the incapacity. In this respect the matter is treated on the same footing as cases of fraud inducing a contract. There is, indeed, authority for saying that the equitable doctrines governing the validity or invalidity of a contract made with an insane person are only a particular instance of the general doctrines relating to fraudulent contracts. In the cases last mentioned no unfairness of dealing could be imputed to the persons who sought to take advantage of the contract, which was, in fact, made, In each case, with an apparently sane person. The principle appears to be that the validity of a contract made with an apparently sane person is to be determined – by the application of the same rules as are applied in ordinary cases.”
The third case mentioned by the learned judge in the key passage which their Lordships have quoted from his judgment in Archer v. Cutler was York Glass Co. Ltd. v. Jubb [1924] 131 L.T. Rep. 559, and on appeal (1925) 134 L.T. Rep, 36. This was a vendor’s action for breach of contract against the committee of the estate of a person of unsound mind. The purchaser pleaded first that he was of unsound mind to the knowledge of the defendant, secondly (by a late amendment) that the vendor knew that he was infirm of mind and body and incapable of managing his affairs reasonably and properly, that the price was excessive, that he had no legal advice and that there was no reasonable degree of equality between the contracting parties. The first plea was a plea at law. The second plea was relied upon as raising a case in equity for the rescission of the contract upon the grounds alleged, that is to say, on the assumption that at law there was a valid and binding contract but that it was one which a court of equity under the old practice, when the two courts were separate, would have rescinded and set aside and would have granted an injunction and restrained the plaintiff from enforcing at law; see the manner in which these two pleas were distinguished by Sir Ernest Pollock at page 37, Warrington LJ. at page 41 and Sargant LJ. at page 43. Issues (A) and (C) in the instant appeal reflect the same differentiation between the plea at law and the plea in equity.
The trial judge had no doubt as to the rule at law (at page 561):~
“It is well settled that where the defendant in an action of contract sets up the defence of his insanity at the date of the contract he must, in order to succeed, show that the plaintiff knew of his insanity.”
That plea failed, because the judge held that the company did not know of the unsoundness of mind. When, throughout his judgment, the judge refers to “fairness”, it is plain that he was doing so in the context of the second plea, the plea in equity, as is apparent from the following passage (also at page 561):-
“In the result, after having carefully considered the whole of the evidence in support of this part of the case, I have come to the conclusion and hold as a fact that there was no want of fairness either in the terms of the contract itself or in the circumstances under which it was made, and I acquit all the persons concerned in the transaction on behalf of the plaintiff company from the charge made against them of having overreached or exercised any undue influence over the defendant.”
He held that the contract was accordingly valid.
This decision was upheld on appeal; the contract was valid at law because the vendor was unaware of the unsoundness of mind. The contract was not impeachable in equity because the purchaser failed to establish any of the four circumstances on which he relied in order to establish the plea in equity. It is however necessary to look a little closely at the judgment of Sargant LJ. He identified three issues (page 43); first, whether there was a concluded contract apart from lunacy; if so, secondly, was that contract enforceable at law; “thirdly, if it was enforceable at law, was there any case for saying that equity would restrain the enforcement of the contract that is to say, is the case one in which, prior to the Judicature Act, a bill would have lain for an injunction to prevent the plaintiff from enforcing his remedies at law?” There ~was plainly a concluded contract. In dealing with the second question, whether the contract was enforceable at law, which he held it was, he added:-
“It is possible a question may arise in some future case, with which we have not to deal at present, whether, in the case of a contract which is not a reasonable one and which is made by an insane person that contract can be enforced, the other person not knowing of the insanity. I have looked through a number of cases and I have not found a single case in which a contract has in fact been binding except where the contract was an ordinary reasonable contract. I do not in any way want to attempt to express my own view on that point because the point has not been argued before us … I only want to guard myself by saying that my mind is entirely open on the question whether the fairness of the bargain is an essential element to the enforceability of the bargain against a person who was in fact a lunatic although not known to be such by the other contracting party.”
He then turned to the third point, the plea in equity, and held that it failed.
York Glass then was a case in which the court considered a lunatic’s contract from the point of view of the position at law and separately from the point of view of equity; but Sargant LJ. also posed, but did not answer (because it did not arise and was not argued) the question whether on the first aspect a court of common law would have enforced a contract by a person of unsound but apparently sound mind, the terms of which were not “reasonable” or “fair”.
In the opinion of their Lordships it is perfectly plain that historically a court of equity did not restrain a suit at law on the ground of “unfairness” unless the conscience of the plaintiff was in some way affected. This might be because of actual fraud (which the courts of common law would equally have remedied) or constructive fraud, i.e. conduct which falls below the standards demanded by equity, traditionally considered under its more common manifestations of undue influence, abuse of confidence, unconscionable bargains and frauds on a power. (Cf. Snell’s Principles of Equity, 27th edn., pages 545 et seq.) An unconscionable bargain in this context would be a bargain of an improvident character made by a poor or ignorant person acting without independent advice which cannot be shown to be a fair and reasonable transaction. “Fraud” in its equitable context does not mean, or is not confined to, deceit; “it means an unconscientious use of the power arising out of the circumstances and conditions of the contracting parties”; Sari of Aylesford v. Morris [1873] 8 Ch. App 484, 490. It is. victimisation, which can consist either of the active extortion of a benefit or the passive acceptance of a benefit in unconscionable circumstances.
Their Lordships have not been referred to any authority that a court of equity would restrain a suit at law where there was no victimisation, no taking advantage of another’s weakness, and the sole allegation was contractual imbalance with no undertones of constructive fraud. It seems to their Lordships quite illogical to suppose that the courts of common law would have held that a person of unsound mind, whose affliction was not apparent, was nevertheless free of his bargain if a contractual imbalance could be demonstrated which would have been of no avail to him in equity. Nor do their Lordships see a sufficient foundation in the authorities brought to their attention to support any such proposition. It is not supported by anything said in Wilson v. The King [1938] 3 D.L.R. 433, to which the learned judge in Archer v. Cutler referred, because in that case . the immediate contracting party of sound mind was fully aware of the other1 s insanity. The full quotation from Hardman v. Falk [1955] 3 D.L.R. 129, of which the learned judge at page 401 cites only the third sentence, reads as follows:-
“The contract of a lunatic is voidable not void: see York Glass Co. v. Jubb, Courts of equity will not interfere if a contract with a lunatic is made in good faith without any knowledge of the incapacity of the lunatic and no advantage is taken. If the contract is fair and the respondent had no knowledge that the appellant was a lunatic, the appellant is without a remedy: see Wilson v. The King.”
The learned Justice of Appeal in that case was dealing with the circumstances in which equity would not interfere, that is to say, in the absence of bad faith or taking advantage or other unconscionable conduct. Their Lordships do not think that in the whole context the last sentence of the quotation can be read as any foundation at all for the proposition that despite the absence of equitable fraud, the court will weigh the terms of a lunatic’ s contract and determine whether they are appreciably more favourable to the other contracting party, and if so, set the contract aside.
Their Lordships must also refer to Tremills v. Benton (1892)- 18 V.L.R. 607 which the learned judge in Archer v. Cutler mentioned as an Australian case “where lack of fairness has been held to be a material element” in a contract entered into with a lunatic who was ostensibly sane; (page 401, line 11). The action was by the personal representative of Tremills to set aside deeds whereby Tremills had granted land and buildings to Mr. and Mrs. Benton, reserving to himself a life interest, in return for his keep. He was 86 years of age, in bad health and died 12 days later. The administrator sought to set aside the deeds on the ground that their execution was obtained by undue influence, and secondly on the ground that Tremills was, to the knowledge of the Bentons, of unsound mind. The trial judge found that although Tremills was in full possession of his faculties, he suffered from delusions; he was not however acting in subjection to any undue influence. The Full Court upheld these findings. The Chief Justice said (at page 620):-
“Was the contract itself, which was entered into by the parties, a fair and bona fide contract? If it was, this case is clearly within the legal and the equitable rule by which such a contract, if executed and completed, is to be upheld, although it has been made by a person of unsound mind with another person who has no knowledge that he is contracting with a lunatic. In determining whether a contract is or is not unfair, the adequacy of the consideration is, as the learned primary judge observed, one of the elements to be regarded; but it should be added that it is only one element, and that in order to justify the avoidance of a contract on this ground, the inadequacy of the consideration must be so great as to be unconscionable, and to amount in itself to conclusive and decisive evidence of over-reaching or fraud.”
The Chief Justice accepted the trial judge’s finding that the consideration given by the defendants was “altogether inadequate”, and that neither the deceased nor the defendants regarded the matter as a bargain in which the former expected to receive or the latter supposed they were giving full value. He concluded (page 621):-
“Holding, as we are bound to do, that proof of undue influence on the part of the defendants has failed, and that the deceased had full possession of his faculties, and perfectly comprehended what he was doing, I cannot find any evidence whatever that the transaction between these parties was in itself wanting in fairness and bona fides. The deceased, who was advised by his solicitor, had a single, definite object in view. Under the influence of an insane delusion, he wished to deprive his son of his property after his own death, while at the same time he sanely and prudently desired ,to retain full possession of it during the remainder of his life, and also to secure for himself the benefits and comforts of a home… He bargained for this as a condition of his gift, and the defendants complied with his wish, and covenanted to carry it into effect. The burden of the covenant was in the event small in proportion to the money value of the gift, but the disparity was not caused by the act or demand or undue influence of the defendants. They gave the consideration they were asked to give, and that was all that the deceased in his insane delusion,, and in his prudent regard for himself, thought of requiring. The bargain was made a legal and binding bargain by the act of the deceased, and apart from the suspicion, which we must hold to be unfounded, of undue influence having been employed to bring it about, presents no trace of fraud or over-reaching on the part of the defendants, although they undoubtedly reaped the larger share of the benefit of the bargain. I “think that we should be departing from the principles on which courts of equity have acted in similar cases if these deeds should now be set aside at the instance of the administrator.”
Holroyd J. said this Cat page 621):-
“After much hesitation, and examining carefully all the authorities that were cited, I have come to the conclusion that a contract entered into with a lunatic by a person who does not know him to be, or suspect him to be, a lunatic, cannot be avoided by the lunatic or by his representatives after his death on the ground merely of the insufficiency of the consideration; but that some fraud or imposition must have been practised by the party who desires to uphold the contract, or something done by him which would render it unconscientious on his part to take advantage of the bargain, to afford a ground for setting it aside. For that reason only I differ from the learned primary judge.”
Finally Hodges J. (at page 622):-
“The learned judge has found, and in ray opinion has so found on sufficient evidence, that there was not undue influence, that there was bona fides on the part of the defendants, and that the defendants did not know that H. Tremills was insane; but he has declared the deeds void on the ground that H. Tremills was insane at the time that he executed them, and that they were no t ‘fair’ within the meaning of that word as used in the judgment In Hassard v. Smith, Ir. Rep. 6 Eq. 433 and it is against this decision that the defendants have appealed. The learned judge appears to have acted on the following passage, which he quoted from the case of Hassard v, Smith:- “The rule which now prevails, both at law and in equity, in reference to contracts entered Into by a person of apparently sound mind, and not known by the other contracting party to be insane, is, that such contracts, If executed and completed, and if fair and bona fide, will not be held void or set aside1 . This, I think, correctly states the law if the word ‘ fair’ be understood in the sense in which the Vice-Chancellor must be taken from the context to have intended that it should be understood. And by ‘fair’ I understand him to mean not unfair, not unconscientious, not over-reaching. I think it refers to a contract not obtained by imposition, but I do not think that it would correctly give the Vice-Chancellor’s meaning to substitute for the word ‘fair’ the words ‘for full consideration’.”
(The words “if executed and completed” should of course now be disregarded). Then, picking up the word ‘fairly’ in Beavan v. M’Donnell, he said:-
“There the word ‘fairly’ could not, I think, be referring to a perfect equality of the consideration given by each party to the contract. Again, a little further on, the Vice-Chancellor quotes with approval the following passage from Story:- ‘The ground upon which courts of equity now interfere to set aside the contracts and other acts, however solemn, of persons who are Idiots, lunatics, and otherwise non compotes mentis, is fraud’. The Vice-Chancellor could not quote, with approval, Story’s opinion that the ground on which courts of equity set aside these contracts is fraud, if he was deciding that inequality of consideration was a sufficient ground for setting aside such contracts. Again, The Vice-Chancellor a little further on again quotes with approval Story’s view that ‘ If a purchase is made without any knowledge of the incapacity, and no advantage has been taken, courts of equity will not interfere to set aside the contract etc’ Here again the Vice-chancellor shows that what invalidates these contracts is not mere inequality of consideration, but the taking of an advantage. If an advantage is taken, the contract is not ‘fair'”
This case appears to their Lordships to be directly contrary to the proposition adopted in Archer v. Cutler, because it plainly recognises that a contract with an unsuspected lunatic will not be set aside short of equitable fraud.
In the opinion of their Lordships, to accept the proposition enunciated in Archer v. Cutler that a contract with a person ostensibly sane but actually of unsound mind can be set aside because it is “unfair” to the person of unsound mind in the sense of contractual imbalance, is unsupported by authority, is illogical and would distinguish the law of Hew Zealand from the law of Australia, as exemplified in McLaughlin’s case and Tremills’ case, for no good reason, as well as from the law of England from which the law of Australia and New Zealand and other “common law” countries has stemmed. In so saying their Lordships differ with profound respect from the contrary view so strongly expressed by the New Zealand courts.
To sum the matter up, in the opinion of their Lordships, the validity of a contract entered into by a lunatic who is ostensibly sane is to be judged by the same standards as a contract by a person of sound mind, and is not voidable by the lunatic or his representatives by reason of “unfairness” unless such unfairness amounts to equitable fraud which would have enabled the complaining party to avoid the contract even if he had been sane.
Their Lordships turn finally to issue (C), whether the respondent trustees are entitled to have the contract set aside as an “unconscionable bargain”. This issue must also be answered in the negative, because Mr. Hart was guilty of no unconscionable conduct. Indeed, as is conceded, he acted with complete innocence throughout. He was unaware of Jack’s unsoundness of mind. Jack was ostensibly advised by his own solicitor. Mr. Hart had no means of knowing or cause to suspect that Jack was not in receipt of and acting in accordance with the most full and careful advice. The terms of the bargain were the terms proposed by Jack’s solicitor, not terms imposed by Mr. Hart or his solicitor. There was no equitable fraud, no victimisation, no taking advantage, no over-reaching or other description of unconscionable doings which might have justified the intervention of equity to restrain an action by Mr. Hart at law. The respondent trustees have in the opinion of their Lordships failed to make out any case for denying to Mr. Hart the benefit of a bargain which was struck with complete propriety on his side.
For these reasons their Lordships have tendered to Her Majesty their humble advice that the appeal should be allowed; that the declaration of the New Zealand Court of Appeal. rescinding the contract of 1st September 1977 for incapacity and unfairness should be set aside; that the respondents should give possession in terms of the contract to the appellant on 1st June 1985 on condition that the net compensation money of $58,201.92 be repaid by the appellant to the respondents on that day; and that leave should be reserved to either party to apply to the High Court for directions on all other matters which may arise; and that the appellant should have the costs of the hearings below and before the Board, including the costs of the compensation hearings at first instance and on appeal.
Their Lordships desire to record their great appreciation of the skill with which this difficult case was presented and argued by counsel on both sides; they could not have had more assistance than that which they were so fortunate as to receive.
Saorstat and Continental Steamship Company v. de las Morenas.
Haugh J. [1945] IR 292
In this case the plaintiffs have sued the defendant in person for a sum of £2,600 for breach of contract, by plenary summons, issued on the 17th April, 1944, to which the defendant entered an appearance on the 6th June, 1944, without waiver of his right to withhold submission to the jurisdiction of the Court on the ground that the contract was entered into as an act of sovereignty by the defendant for, and on behalf of, the Government of Spain.
A statement of claim was delivered by the plaintiffs on the 16th June, 1944.
By notice of motion, dated the 19th July, 1944, the plaintiffs intimated their intention of moving, on the 24th July, for an order that they might be at liberty to enter judgment in default of delivery of defence against the defendant for the sum of £2,600, damages and costs, based upon the affidavit of John Orr, the manager of the plaintiff company, and sworn on the 19th July, 1944.
The defendant replied by affidavit sworn on the 24th July, and prayed for an order “that the plenary summons, the conditional appearance and all subsequent proceedings be set aside on the ground that the said proceedings are outside and without the jurisdiction of this Court, as they implead the Government of Spain, a sovereign State, the contract having been entered into by me, as representative of and for, and on behalf of, the said Government and such being duly known to the plaintiffs.”
After an adjournment, the matter came before me on Friday, the 28th July, whereupon both parties were represented by counsel.
The plaintiffs contended there was no substance in the defendant’s submission as they were only suing the defendant in person, in respect of a contract made by him in person.
The defendant contended that the facts showed that the action was one that impleaded his Government, a foreign State, in view of the known representation, he being a colonel in the army of Spain and the head of the Spanish Military Commission in Ireland for the purchase of horses, and he relied on the certificate of His Excellency, the Spanish Minister Plenipotentiary, which certificate verified and authenticated his status and the mission upon which the Spanish Government had sent him to Ireland, and that the funds were placed to his credit in Dublin by the Spanish Government through the Institute of Foreign Money.
I take the view that the matters raised by the defendant are substantial and important; but I feel that I must have some evidence directly from, or through, its Ambassador that the Spanish Government deems itself to be impleaded by these proceedings. I am told that present war conditions make it impossible to secure any further information in that respect. If that be so, I feel I must have some evidence from some dependable source to prove that conditions are such before the plaintiffs may be denied their right of hearing.
Accordingly I will adjourn the case to the day of the first vacation sitting on the 16th August, to enable me to get the information I require from Spain, or to show me that such information cannot be got under present circumstances.
Subsequently Haugh J. wrote the following as to his decision on the 16th day of August, 1944:
On the 16th August, defendant’s counsel stated that the position was unchanged, and was likely to remain so for an indefinite period. Plaintiffs pressed for leave to enter judgment, and on the defendant stating that he did not want time within which to enter a defence, I ordered that the plaintiffs should recover from the defendant damages for breach of contract and costs, and that the assessment of such damages be had before a Judge without a jury.
MURNAGHAN J. :
18 Dec.
I agree with the judgment about to be read by Mr. Justice O’Byrne.
GEOGHEGAN J. :
I have read Mr. Justice O’Byrne’s judgment and I agree with it.
O’BYRNE J. :
The plenary summons in this action, claiming damages for breach of contract, was issued on the 17th April, 1944, against the defendant, Rafael de las Morenas, who is therein described as a colonel in the Spanish army.
On the 6th June, 1944, the defendant entered a conditional appearance, without prejudice to his right to withold submission to the jurisdiction of the Court on the ground that the contract, the subject-matter of the plaintiffs’ claim, was entered into as an act of sovereignty by the defendant for, and on behalf of, a foreign State, that is to say, the Government of Spain.
The statement of claim, which was delivered on the 16th June, 1944, alleged that, by a contract in writing, dated the 9th March, 1944, the defendant agreed with the plaintiffs that they should reserve for him space for 52 horses at the rate of £50 each, to be carried by the plaintiffs’ vessel, the S.S. Assaroe, from Dublin to Lisbon, due to sail about the 24th March, 1944, and that the contract further provided that, should the defendant fail to tender the said horses for shipment to the plaintiffs’ agents at Dublin when the ship was ready to sail, the defendant would be responsible for dead freight. The statement of claim further alleged that the defendant failed to deliver any of the said horses in accordance with his contract, that the plaintiffs thereby suffered loss and damage, and the plaintiffs claimed £2,600 damages.
No defence having been delivered within the time limited by rules of Court, the plaintiffs, on the 19th July, 1944, moved for judgment in default of defence.
On the 24th July, 1944, the defendant applied, by motion on notice, for an order that the plenary summons, the service thereof on the defendant, the conditional appearance and all subsequent proceedings be set aside on the ground that the said proceedings are outside and without the jurisdiction of the Court as they implead the Government of Spain, a sovereign State, the contract having been, as alleged, entered into by the defendant as representative of and for, and on behalf of, the said Government.
Both motions came before Haugh J., sitting for the High Court, on the 16th August, 1944, and the learned Judge dismissed the defendant’s said motion with costs, and further ordered that the plaintiffs should recover judgment against the defendant for damages and costs, and directed that such damages should be assessed before a Judge without a jury.
From that order the defendant appeals. The grounds of the appeal are:
(a) that the learned Judge misdirected himself in fact in determining that the evidence adduced by the defendant had not sufficiently established that the Government of Spain, a sovereign State, was impleaded in the proceedings in this suit, and
(b) that the learned Judge misdirected himself in law in holding that the Government of Spain, a sovereign State, was not impleaded in the proceedings in this suit.
It, accordingly, becomes necessary to consider:(a) the grounds upon which a foreign sovereign State may claim immunity from the jurisdiction of these Courts, and (b)whether the defendant has brought this case within any of these grounds.
The immunity of sovereign States and their rulers from the jurisdiction of the Courts of other States has long been recognised as a principle of international law, and must now be accepted as a part of our municipal law by reason of Article 29, para. 3, of our Constitution, which provides that Ireland accepts the generally recognised principles of international law as its rule of conduct in its relations with other States.
The various authorities dealing with the matter were fully reviewed and considered in the leading case of The Parlement Belge (1), and the principle established by these authorities was stated by Lord Esher (then Brett L.J.) in that case and subsequently reiterated by the same learned Judge in Mighell v. Sultan of Johore (2) in the following terms:
“The principle to be deduced from all these cases is that as a consequence of the absolute independence of every sovereign authority, and of the international comity which induces every sovereign State to respect the independence and dignity of every other sovereign State, each and every one declines to exercise, by means of its Courts, any of its territorial jurisdiction over the person of any sovereign or ambassador of any other State, or over the public property
of any State which is destined to public use, or over the property of any ambassador, though such sovereign, ambassador, or property be within its territory, and therefore, but for the common agreement, subject to its jurisdiction.”
The principle, so stated, has never been whittled down, though it has been considered, amplified and re-stated in many subsequent cases.
The matter was very fully considered by the House of Lords a few years ago in the case of Compania Naviera Vascongado v. S.S. Cristina (1), in which a ship, calledThe Cristina, belonging to the plaintiff company and registered at the port of Bilbao, was requisitioned by the Spanish Government; and the Spanish counsul at Cardiff, where the ship was lying, having gone on board and dismissed the master and put a new master in charge, the plaintiff company commenced proceedings in rem claiming possession of the ship as being their property. The Spanish Government entered a conditional appearance and thereupon applied, by motion on notice, for an order that the writ should be set aside on the ground that it impleaded a foreign sovereign State. This application having been granted by Bucknill J., the plaintiff company appealed, unsuccessfully, to the Court of Appeal and to the House of Lords.
We are not concerned with several of the points discussed in that case; but I desire to cite, from the speech of Lord Atkin, at p. 490, two principles of international law which, in the opinion of the learned Law Lord, were well established and beyond dispute:
(a) “The first is that the Courts of a country will not implead a foreign Sovereign, that is, they will not by their process make him against his will a party to legal proceedings whether the proceedings involve process against his person or seek to recover from him specific property or damages.
(b) The second is that they will not by their process, whether the Sovereign is a party to the proceedings or not, seize or detain property which is his or of which he is in possession or control.”
Lord Atkin proceeds:”There has been some difference in the practice of nations as to possible limitations of this second principle as to whether it extends to property only used for the commercial purposes of the Sovereign or to personal private property. In this country it is in my opinion well settled that it applies to both.”
The rule deals with the impleading of a foreign Sovereign, against his will, in the Courts of another State. Such Sovereign, may, of course, voluntarily submit to the jurisdiction, either by instituting proceedings himself, or by entering an unconditional appearance in proceedings brought against him personally or in respect of property which he claims; in any such case no question arises.
It is unnecessary, in this case, to consider the immunity accorded to ambassadors and other political or diplomatic representatives. Counsel on behalf of the appellant expressly stated in this Court that the appellant does not claim any such immunity. As I understand the argument of counsel, the case made on behalf of the appellant is that he came to this country as an agent for, and on behalf of, the Government of Spain, that he contracted on behalf of that Government, and that the Spanish Government is, in truth and effect, defendant in these proceedings.
It was established by the evidence and I shall assume, for the purpose of this decision, that the appellant is an officer of the Spanish army on active service, that he came here on an official mission for the purpose of purchasing horses for the Spanish army, and that the expenses incurred in connection with such purchases or otherwise in connection with the mission are to be defrayed out of the funds of the Government of Spain. It remains to be considered whether, on this basis, the appellant is entitled to have these proceedings set aside as being, in effect, an impleading of the sovereign State of Spain or its Government in the Courts of this country.
It is clear that, in the proceedings, as framed, no relief is sought against any person save the appellant. He is sued in his personal capacity and the judgment which has been, or any judgment which may hereafter be, obtained against him, will bind merely the appellant personally, and any such judgment cannot be enforced against any property save that of the appellant.
It is contended that the true rule of international law, as recognised in the Courts of this country, is that a foreign Sovereign cannot be impleaded directly or indirectly in these Courts, and we have been referred to such judgments as that of Greene M.R. in the case of Haile Selassie v. Cable and Wireless Ltd (1), in which the rule is so stated. I do not think that the rule, as so stated, differs materially from the rules as stated by Lord Esher and Lord Atkin.
There is only one way in which a Sovereign or State may be directly impleaded, viz., by his being named as defendant in the proceedings, and it is conceded that this has not been done in this case. It is, however, argued that there are many ways in which a Sovereign or State may be indirectly impleaded, and it is contended that the Spanish State is impleaded here, because the defendant is an official agent of the State and would be entitled to be indemnified out of State funds in respect of any expenses incurred by him in the carrying out of his mission, including any damages awarded against, and any costs incurred by, him in these proceedings.
It may well be that, by virtue of the terms of his appointment, the appellant is, as between himself and his Goverment, entitled to be so indemnified; but it seems to me that this is far short of saying that the Government is being impleaded.
There is one matter which is quite clear, and it seems wholly inconsistent with the appellant’s contention, and that is, that no property belonging to Spain or its Government could be made available to satisfy any judgment which may be obtained against the appellant in this action. The proceedings are brought against a person who is, ex concessis,an agent of the Spanish Government; but counsel have been unable to refer us to a single case in which a Government was held to be impleaded merely because its agent was sued. The consular representative of a foreign State may, admittedly, be sued, and we have not been referred to, and I am not aware of, any case in which it was held that the consul was entitled to have the proceedings set aside on the ground that his Government, being bound to indemnify him in respect of the particular contract or matter on which he was sued, is being impleaded in the proceedings. Ambassadors and other diplomatic representatives of foreign States, who are entitled to claim privilege for themselves and their suites, are in a class apart; but I am not aware of any rule of international law under which mere agents of a foreign State can claim immunity from the jurisdiction of the Courts of the State in which they are carrying out their duties.
We were referred to the case of Fenton Textile Association Limited v. Krassin (1), decided by the Court of Appeal in England. In that case, Krassin, who was acting as the official agent in England of the Soviet Government of Russia, was named as defendant in an action for the price of goods sold and delivered. He applied that the writ should be set aside on the ground that, as the authorised representative of a foreign State, he was immune from the civil process of the English Courts. It was held that, as the defendant had not been recognised by any competent authority in England in any capacity other than that of official agent under a trade agreement, his status was insufficient to carry with it the immunity accorded to the diplomatic representatives of foreign States.
At first sight that case seems to bear a close resemblance to the case before us; but there are two important points of distinction. In the first place, the trade agreement between the British Government and the Government of Russia, under which Krassin had been received by the British Government, provided that official agents thereunder should be immune from arrest and search, but did not provide for immunity from civil process, and the decision turned largely on this provision, which, it was held, made full provision for the basis on which such an agent should be received, and for the privileges attaching to his position. Secondly, as pointed out by Mr. Lavery in the course of his argument, Krassin based his application on his alleged right to personal immunity, whereas the appellant in this case claims immunity not on his own behalf, but on behalf of his Government. This latter point, though it distinguishes this case from Krassin’s, is open to the comment that, if the appellant is entitled to have these proceedings set aside as indirectly impleading his Government in the Courts of this country, the same claim might well have been put forward by Krassin in the English Courts; but no such claim was made.
Counsel on behalf of the appellant strongly relied upon the decision of the English Court of Appeal in the case of Compania Mercantil Argentina v. U.S. Shipping Board (1),in which it was held that the action was an attempt to implead the Government of the United States of America, and that the proceedings should be set aside. That case is clearly distinguishable from the present. It appeared from the evidence before the Court that the Shipping Board was not a corporation or partnership; but that the Commissioners, constituting the Board, were nominated by the President of the United States by, and with, the advice of the Senate, as provided by Acts of Congress, and that the Board was an executive branch of the Government of the United States constituted for the purposes mentioned in the said Acts.
There was some discussion at the Bar as to what constitutes an indirect impleadment of a foreign Sovereign or State. The most obvious example, and the instance in which the point most frequently arises, is the case of Admiralty proceedings in rem against a ship. In such proceedings no person is named as defendant; but, as has been pointed out, this is merely a convenient way of suing the owners, who must either come in and defend the proceedings, or allow their property to go by default. Where a foreign Sovereign claims to be the owner of the ship, it is clear that he is being impleaded. This, however, is only one of many instances that might be cited, in which such a Sovereign might be held to be impleaded. He is also impleaded, though not named as a party, in any proceedings in which the Court seizes or detains, or attempts or is required to enforce its process against, any property which the Sovereign claims to be his, or of which he claims to be in possession or control. Where the Sovereign is not named as a party and where there is no claim against him for damages or otherwise, and where no relief is sought against his person or his property, I fail to see how he can be said to be impleaded either directly or indirectly.
The claim made on behalf of the plaintiff company is that the defendant, while in this country, entered into a contract with them, that he failed to carry out the terms of the contract, and that they, thereby, suffered loss and damage, and they sue him for damages for breach of the contract. They claim that the appellant is personally responsible to them, and they do not seek redress against any other person or persons. In these circumstances, and having regard to the nature and scope of the action, I am of opinion that there is no ground for the suggestion that the Government of Spain is being impleaded, either directly or indirectly, and no basis for the claim that the proceedings should be set aside.
For these reasons I am of opinion that this appeal, in so far as it is concerned with the refusal of Haugh J. to set aside the proceedings, fails and should be dismissed.
This does not conclude the matter, as it may well be that the appellant has a good defence to the proceedings as framed, and it is obvious that, until the motion to have the proceedings set aside had been disposed of, he could not very well have filed a defence. For this reason, I am of opinion that the judgment entered for the plaintiff company should be set aside on such terms (if any) as to the Court may seem just, and that the defendant should be given liberty to defend the action.
It was also contended, by counsel for the respondents, that the claim on behalf of the Government of Spain had not been properly brought before the Court, and counsel submitted that that Government should have entered a conditional appearance and brought the claim for immunity directly before the Court, or else, that the Government of this State should have entered a protest against the proceedings, as in the case of The Eolo (1).
Having arrived at the foregoing conclusion on the main point argued before us, it is unnecessary for me to consider this point, and I express no opinion upon it.
BLACK J:
I agree.
Fitzharris -v- O’Keefe & Anor
[2008] IEHC 438 (18 December 2008)
Judgment of Miss Justice Laffoy delivered on the 18th day of December, 2008
Preliminary issue
In order to put the preliminary issue which is the subject of this judgment in context it is necessary to consider the pleadings in the substantive action to some extent.
In the statement of claim delivered on 30th November, 2004, the plaintiff is described as a “keen game hunter”. The following matters are pleaded to illustrate the plaintiff’s relationship to the defendants:-
(a) that the plaintiff has been a member of Ballitore Game Club (the Club) since 1971 and its secretary since 1974;
(b) that the club is affiliated to Kildare Regional and Game Wildlife Council (the Council) and the plaintiff was at all material times a serving officer of the Council since the early 1980s;
(c) that at all material times the plaintiff was a member of the National Association of Regional Game Councils of Ireland (the National Association);
(d) that the National Association operates a self insurance scheme entitled “The National Association of Regional Game Councils Game Hunting Compensation Fund” (the Compensation Fund); and
(e) that the defendants are members of the National Executive of the National Association and that they are being sued in these proceedings in their representative capacity.
In the pleas in the statement of claim which are at the core of the preliminary issue it is contended as follows:-
(i) By contract or collateral contract effective from 1st August, 2003 (and similarly for previous years) made between the plaintiff and the National Association, the plaintiff and the National Association agreed to be bound by the Constitution and Rules of the National Association as adopted on 11th February, 1995, as amended;
(ii) The plaintiff’s application for renewal together with the Constitution and Rules of the National Association and the correspondence that had been exchanged between the parties represented the terms of a contract and/or collateral contract between the plaintiff and the National Association;
(iii) Pursuant to the terms of the contract the National Executive of the National Association was under a duty to consider the plaintiff’s application for membership in accordance with the Constitution and Rules, in particular, Rule 19, and in accordance with the requirements of natural and constitutional justice, and properly, fairly and reasonably;
(iv) In preventing the renewal of the plaintiff’s membership, the defendants acted ultra vires their powers and in breach of the plaintiff’s contractual rights; and
(v) The National Association is under a duty to admit the plaintiff to membership when he complies with its rules in all material respects.
The kernel of the plaintiff’s complaint against the National Association as pleaded, which is not factually disputed, is that on the 8th September, 2003, a motion was passed by the National Executive of the National Association that the membership of the plaintiff be declined at the next renewal unless certain conditions were met. On 20th May, 2004, the plaintiff duly completed a proposal for renewal of his membership number 6210 of the Compensation Fund, which was declined, thus excluding him from membership of the Compensation Fund and effectively from membership of the National Association or its constituent parts and the benefits therefrom.
In their defence delivered on 5th April, 2005, the defendants denied, in multifarious formulations, that any contract existed between the plaintiff and the National Association and asserted that in the circumstances no breach could occur and that no cause of action had been revealed in the statement of claim.
The defendants brought a motion seeking an order of the court in pursuance of Order 25 of the Rules of the Superior Courts 1986 directing that “the preliminary objections/points” as raised by the defendants in their defence be disposed of as a preliminary issue in the proceedings. By an order made on 7th November, 2005, which was made by consent, Clarke J. ordered that a preliminary issue be tried on the following question:-
“Whether having regard to the Constitution and Rules of the National Association of Regional Game Councils there can be said to be any contract and/or collateral contract between the Plaintiff and the Defendants/Association as might arguably give rise to the various contentions as pleaded by the Plaintiff”.
The scope of the question is very narrow. On my interpretation of it, in essence, what the court is required to do is to determine whether, as a matter of law, the plaintiff can found his case against the defendants in contract.
Pleadings/evidence
Directions were given in the order of 7th November, 2005, as to the service of points of claim and the reply and the setting down of the issue for trial. The defendants were to be the moving party on the preliminary issue and the plaintiff was to be the respondent.
The points of claim delivered by the defendants merely rehearsed what had happened up to that point. However, the defendants’ position in relation to the plea as to the existence of a contract or collateral contract between the plaintiff and the National Association was summarised. It was alleged that the plaintiff was not a member of the National Association at any material time, that the National Association is made up of Regional Game Councils, not private individuals, and that private individuals have no right of membership. The defendants asserted that under the Constitution and Rules of the National Association neither the plaintiff nor any private individual has a right to individual membership.
In relation to the factual matrix within which the preliminary issue is to be determined, in responding to the defendants’ motion in an affidavit sworn on 26th July, 2005, the plaintiff’s solicitor had pointed to the fact that the preliminary issues sought to be tried required to be tried in the context of agreed facts. That assertion was correct. It is well settled that a preliminary issue of law cannot be tried in vacuo, but must be tried in the context of agreed or established facts (McCabe v. Ireland [1991] 4 I.R. 151). While the point was not specifically addressed in the parties written submissions or in the oral submissions made by their counsel, I am assuming, for the purposes of dealing with the preliminary issue, that the relevant facts which are to form the basis of the court’s decision on the preliminary issue are those outlined earlier from the statement of claim, in conjunction with the contents of the following documents which have been put in evidence by agreement:-
(1) the National Association Constitution and Rules 2002/2005,
(2) the Compensation Fund Contract and Personal Accident Insurance Summary 2002/2005,
(3) the Council’s Rules and Constitution and
(4) the Club’s Rules and Regulations.
Two further documents were put before the court, namely:-
(a) the National Association Constitution and Rules 2005/2007,
(b) the Compensation Fund Contract and Personal Accident Summary 2002/2007.
The question posed for the determination of the court, as I construe it, relates to the Constitution and Rules of the National Association in force when these proceedings were instituted in July, 2004. Counsel for the plaintiff referred to amendments of the Constitution and Rules, which were introduced at an Extraordinary General Meeting of the National Association held on 2nd July, 2005, which are reflected in the document referred to at (a) above, and it was suggested that the amendments were introduced so as to score a personal attack on the plaintiff. I agree with the submission of counsel for the defendants that those amendments are not relevant to the issue to be determined. Therefore, I have had no regard to the documents at (a) and (b).
For the same reason, irrelevancy, I have had no regard for matters put before the court by counsel for the defendants as to how the relationship of the National Association, the Council and the Club has changed since these proceedings were instituted. The contention that the plaintiff’s application for renewal of his membership of the Compensation Fund and the National Association has become moot is not before the court on the preliminary issue. Indeed, mootness is not pleaded in the defendants’ defence.
The Constitution and Rules of the various bodies
The National Association
The plaintiff’s case for the existence of a contract or a collateral contract between him and the National Association is founded primarily on the provisions of the Constitution and Rules of the National Association, the relevant version, as I have stated, being that in force when these proceedings were instituted and when the dispute between him and the National Association arose, that is to say, the Rules which are described as being pertinent to 2002 to 2005.
The provisions of the Constitution and Rules to which attention was drawn by counsel for the plaintiff were the following:-
(1) The definition of “Associate Member” in the definition section, which defines that expression as meaning “a member of the Compensation Fund”,
(2) Article III of the Articles of the Association, which deals with affiliation and membership and provides for two categories of members as follows:-
“a. Each [Regional Game Council] shall be entitled to affiliate as a member of the Association. In the cases of Counties Leitrim and Tipperary there shall be separate bodies in the North and in the South.
b. Every person whose Compensation Fund Contract is validated by the Association shall be a non-voting Associate Member, whose membership (which may be renewed) ceases to exist at the end of each Compensation Fund year.”
(3) The provisions of the Rules of the Association which deal with the Compensation Fund, namely, Rules 13 and 14. Rule 14 deals with the Fund Contract and provides that the Fund Board, as constituted by Rule 13, shall administer the Compensation Fund to provide protection for Associate Members and other specified persons and bodies through the issue of a Fund Contract.
(4) Rule 19, which deals with disciplinary procedures, non-compliance with which forms the basis of the plaintiff’s allegation of breach of contract on the part of the National Association.
The Compensation Fund
The Fund Contract is the contract of insurance between a person who is accepted as a member of the Compensation Fund and the Fund Board. Counsel for the plaintiff drew attention to the membership proposal form, in which the applicant for membership of the Compensation Fund was required to declare as follows:-
“I am a fully paid up current Member of the Club named in this proposal”.
Part 3 of the Fund Contract sets out the basis of protection and provides that the proposal shall be the basis of the contract and be regarded as incorporated in the Fund Contract. It also provides for the payment of a membership fee as consideration for the benefits of membership. The risks protected against are set out in Part 4 and the conditions of protection are set out in Part 5. Counsel for the plaintiff specifically referred to Part 6 as demonstrating a contractual nexus between the various organs of the National Association. It deals with extensions of protection and provides in clause (10) that the protection afforded by the contract is extended to protect all officers and trustees during their terms of office in all organs of the National Association while in the course of discharging their official duties of office, but contains a proviso that, where the protection applies to officers of gun clubs or local clubs, such protection will only be given where “each and every” member of the club is a member of the Compensation Fund.
Counsel for the plaintiff also pointed to Part 9, which deals with renewal procedure, which provides that, upon payment by the member of the membership fee for a subsequent period of membership and acceptance of that renewal fee by the Compensation Fund, the member’s membership shall be renewed, without the necessity for the completion of a further proposal form, subject to such alterations to the contract as may be imposed by the Fund Board as are notified to the member.
The Council
The Rules and Constitution of the Council as passed in September, 1996 provided in Rule 14 that all Game/Gun Clubs affiliated to the Council must be members of the Compensation Fund.
The Club
The rules and regulations of the Club as of October, 2000 provided that all members must be insured through the Club with the National Association.
The Law
Of the authorities to which the court was referred, the one which seems most relevant to the question raised in the preliminary issue is the decision of Morris J., as he then was, in Walsh v. Butler [1997] 2 ILRM 81. In his judgment, Morris J. considered the relationship between an unincorporated association, in that case a rugby football club, and its members. As the head note records, Morris J. held that the relationship between an unincorporated association and its members is a contractual one, which is based upon the rules of the club. Morris J. put it slightly differently at p. 84 when, having said that he was satisfied that the rugby football club in question was correctly described as “an unincorporated association”, he went on to say:-
“… I am satisfied that as such the relationship as between the members must be regarded as a contractual relationship based upon the rules of the club”.
In that case, the issue as to whether the plaintiff was a member of the rugby football club in question arose in the context of a personal injuries action. On the facts it was held that he was not a member of the club at the time of the alleged accident. The practical implications of the contractual nature of the relationship between a club and its members is exemplified by the judgment of Morris J. in two respects: the failure to comply with rules regarding the election of members prevents a person becoming a member of the club; and, even where a person is properly elected a member of a club, if the club rules provide that a failure to pay an annual subscription in respect of a year causes membership to lapse, membership will lapse if the annual subscription is not paid.
The significance of the decision of Morris J. is illustrated in the decision of the Court of Appeal in Robertson v. Ridley [1989] 1 W.L.R. 872, which was relied on by counsel for the defendants. That was also a claim for personal injuries by the plaintiff, a member of an unincorporated members’ club, whose injury arose when he fell off his motorcycle while he was riding in the club’s premises, having struck a pothole. In essence, what the Court of Appeal held was that an unincorporated members’ club has no liability in tort, for example, in negligence, to individual members. There may be liability in contract but that depends on the construction of the rules. The rule relied on by the plaintiff as imposing liability was a rule that provided that the chairman and secretary of the club were “responsible in law for the conduct of the club a corporate body”. In a passage relied on by counsel for the defendants (at p. 876) May L.J. stated that “very clear words in the rules of a members’ club” would be needed to displace the general rule that an ordinary contract of membership of a members’ club does not impose liability on the club to an individual member in respect of the condition of the club premises. May L. J. continued:-
“Certainly in the instant case, merely to say that the secretary and the chairman shall be responsible in law for the conduct of the club, cannot lay any duty of care to the plaintiff on either the chairman or the secretary in respect of the state of this road. In my opinion, therefore, the claim must fail both in contract and in tort …”.
No dispute arose in that case as to whether there was a contractual relationship between the member and the club. What was at issue was what the terms of the contract were, which was a matter of construction of the rules of the club.
In my view, none of the other authorities referred to by counsel for the defendants is relevant to the issue the court has to determine.
Application of the law
Whether there was a contractual relationship between the plaintiff and the National Association turns on whether, by reference to its Constitution and Rules and as a matter of fact, the plaintiff was a member of the National Association. The nature of the contractual liability is a matter of the construction of the Constitution and Rules.
Counsel for the plaintiff characterised the game hunting organisation, (and I have chosen the word “organisation” as a neutral term) as a tree with four branches: the individual members, the local gun clubs (for example, the Club), the regional councils (for example, the Council) and the National Association, which was described as the umbrella organisation in charge of all the tiers. The Compensation Fund, which is controlled and administered by the National Association, binds the organisation together through the contractual linkage created by the Compensation Fund Contract and the constitutions and rules of the various branches, it was submitted.
That is broadly speaking correct. Looking at the position of the plaintiff as of 1st August, 2003, his status in relation to the three unincorporated bodies, by reference to their constitutions and rules, and in relation to the Compensation Fund, by virtue of the Compensation Fund Contract, was as follows:-
(1) He was a member of the Club, which was affiliated to the Council.
(2) He was a member of the Compensation Fund and there was a contractual relationship between him and the Compensation Fund, which was regulated by the Compensation Fund Contract.
(3) As a member of the Compensation Fund, and, as counsel for the plaintiff submitted, this is the nub of the matter, he was a non-voting associate member of the National Association. The fundamental flaw in the position which the defendants have adopted is that they have ignored what is stated in “black and white” in Article III of the Constitution and Rules of the National Association, which I have quoted earlier, from which it is clear that, as a member of the Compensation Fund, he was a person whose Compensation Fund Contract was validated by the National Association, and, as such, he was a non-voting associate member of the National Association.
(4) Accordingly, there was a contractual relationship between the plaintiff and the other members of the unincorporated body which constituted the National Association and, thus, between the plaintiff and the National Association, which was regulated by its Constitution and Rules.
The Answer to the Question
Having regard to the foregoing, the answer to the question posed is as follows:-
“Having regard to the Constitution and Rules of the National Association, there can be said to be a contract between the plaintiff and the National Association such as might arguably give rise to the various contentions as pleaded by the plaintiff.”
However, that answer does not address the terms of the contractual relationship relevant to the substantive action, nor whether any of those terms was breached, nor whether the plaintiff is entitled to any of the reliefs which he has claimed on the basis of such contractual relationship. All of those issues fall to be determined by reference to, and on the proper construction of, the terms of the contract as contained in the Constitution and Rules of the National Association in the substantive action.