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Judicial Review of Rules of Law - Maxim cessante ratione, cessat ipsa lex

March 1977


Case comment


Daniel Arthur Laprès



The Exchange Risk Allocation Rule: A Study in Judicial Legislation

Judge-Made Law Reform: A Sociological Approach

Sociological Reasoning in the Lower Courts






In Broome v. Cassell & Co. Ltd,l the House of Lords blocked the Court of Appeal from overriding a House of Lord's position because it was considered by the Court of Appeal to be wrong. And now, in Miliangos v. Geo. Frank (Textiles) Ltd,2 where the Court of Appeal has renewed its attack on the authority of a House of Lords position because its underlying social forces had weakened, the House of Lords has again firmly blocked the way. But it is doubtful that the Court of Appeal has been deterred from challenging the House of Lords when it feels the need. Exhortations by the House of Lords, unsupported by any strength of reason, that the Court of Appeal treat its decisions as "absolutely binding"3 are less than compelling. The history of the issues in Miliangos reinforces the claims that judge-made law should be adjusted to new social conditions and that lower courts should be allowed to join in the process.

In Miliangos, a Swiss seller and an English buyer had contracted for the sale of goods according to Swiss law with payment in Swiss Francs. Delivery of the goods was completed but the buyer did not pay. Between the time of the breach by the buyer and the issue of an order for judgment in the seller's favour, the value of the Swiss Franc had changed from 9.9 per pound to 6 per pound. So, if the judgment debtor were ordered to deliver Swiss Francs, he would have to pay 166 per cent of the value in Sterling, which he had originally agreed to pay. If the judgment debt were paid in Sterling, the allocation between the parties of the exchange risk during the dispute resolution period depends on the date chosen for converting the damages in the contract currency to the judgment debt in the court currency. If judgment is given in the Sterling equivalent as of the date of the default, the Swiss creditor loses forty per cent of his expected Swiss Franc payment. But, the House of Lords decided the parties' intention that their business be transacted in Swiss Francs should prevail over the procedural convenience of giving judgment in Sterling. In doing so their Lordships not only reversed a particular rule of law that had endured for over three centuries but also reversed the House of Lords' traditional emphasis on formal, even at the expense of substantial, justice.


The Exchange Risk Allocation Rule: A Study in Judicial Legislation

Predictably the courts long ago formulated a policy to allocate the risk of exchange loss from delays in compensating wrongs. With the exception of one very early case4 the English courts for almost four centuries would give judgment only in English currency. In the words of Lord Justice Lawton:6

This was robust common sense appropriate to trading conditions in which there were no telephones, no radio, no telex and news took seven days to get to London from Paris and a month from Rome.

With the exception of the Master of the Rolls, Sir Nathaniel Lindley,J.,6 who argued that a Court of Chancery might make an order for specific performance of a contract to pay foreign currency, no one had questioned the wisdom of the policy.7

In 1960 the House of Lords in the case of In re United Railways of Havana and Regla Warehouses Ltd.8 reviewed the development of the English rule allocating the dispute period exchange risk. They declared the rule to be that judgments must be given in Sterling and that conversion from the damages due in the relevant foreign currency to Sterling was to be effected using the exchange rate on the date of the wrong. The United Railways of Havana Company had financed its purchase of rolling stock in the United States under a plan whereby the lenders were given an interest in a trust which rented the equipment to the borrower at a rate guaranteeing the lenders a return on their loan. The dispute arose when the Cuban government purchased control of the railway company and did not make payment on the equipment trust certificates. Under Cuban law, a novation had arguably occurred such as would have released the borrower's successors front the obligation to make payments on the equipment trust certificates. But the English courts found Pennsylvania law applicable and awarded judgment in favour of the lenders. Since Sterling had depreciated relative to the Dollar, the court had to decide whether judgment could be given in Dollars and, if not, at what date the conversion should be made from Dollars to Sterling. Viscount Simonds, whose reasoning was echoed by Lord Radcliffe, argued:9

We are engaged in settling the law upon a question in which any rule is artificial and to some extent arbitrary. In other systems of law different rules have been adopted, and there is no doubt that one system may benefit one creditor and another another. No rule can do perfect justice in every case. In this country the rule is settled so as to bind our courts that where the claim is in damages for breach of contract, or for a tortious act, the date of conversion is the date of that breach or that act. It would, in my opinion, introduce a sort of refinenent into the law, against which 1 have striven and shall ever strive, if a different rule were adopted in the case of a foreign debt.

Lord Reid chose the date of the wrong for making the conversion from foreign to domestic currency by a process of elimination of the alternatives on grounds of procedural impracticality:10

The reason for the existing rule is, I think, primarily procedural. A plaintiff cannot sue in England for payment in Dollars, and he cannot get specific performance of a contract to pay Dollars-it would not bc right that he should. So at best he could only have the Dollars converted to Sterling at the date of judgment. Owing to appeals and difficulties of enforcement a long time may elapse between judgment and getting his money, and the rate of exchange may have altered substantially during that time.... Really the only practicable choice would seem to bc between converting at the date of breach and converting at the date of raising the action in England.... But the rate at the date of raising the action may be very different from the rate at the date of payment. Indeed the objections to taking it are not very mach less than the objections to taking the rate at the date of the breach....

Lord Denning participated both in the House of Lords decision consolidating the Havana Railways position and the Court of Appeal decisions retreating from it. In Havana Railways, Lord Denning acknowledged that:11

The origin of the rule ... lies in the fact that for long years Sterling was regarded as "a stable currency of whose true-fixed and resting quality there is no fellow in the firmament". Sterling is the constant unit of value by which, in the eye of the law, everything else is measured.

But Lord Denning took account of the fact that Sterling had departed from the gold standard and had been devalued:12

The question is whether the rule is to apply when Sterling loses the value which it once had. It may be said that in these conditions the rule is apt to produce an injustice to a creditor in the United States who is owed money in Dollars: because, if he comes to our courts after devaluation, he does not recover sufficient Sterling to compensate him for his loss. But 1 am afraid that, if he chooses to sue in our courts instead of his own, he must put up with the consequences. Our courts here must still treat Sterling as if it were of the same value as before: for it is the basis on which our monetary transactions are founded.

In 1969, Lord Denning began the movement away from the Havana Railways rule with his dissent in the case of The Teh Hu.13 A Japanese company had contracted under the terms of a Lloyd's Standard Form to salvage a vessel owned by a Panamanian company and registered in Liberia. A dispute arose and, as provided in the Lloyd's form, arbitration was held in London. The value of Sterling had decreased relative to the Japanese salvers' favoured currencies (the Japanese Yen and the United States Dollar) between the time when the salvage expenses were incurred and the time when the arbitration award was issued. Both the original arbitrator and the appeal arbitrator were prepared to increase the Sterling award payable at the time of the award to account for its loss of value. However, when the shipowners appealed, both the judge of first instance and the majority of the Court of Appeal applied the Havana Railways rule. Lord Denning dissented commenting that:14

I am afraid that the common law rule on this subject is most unsatisfactory. It was fixed at the time when the Pound Sterling was a stable currency ... but that enviable state of affairs is gone. Sterling is no longer the most stable currency in the world. It bas been devalued more than once. We ought to recognize this. We should modify the common law to meet the new situation. . . .

By 1973, Lord Denning's minority opinion in The Teh Hu had become the view of the majority of the Court of Appeal in the case of Jugoslavenska Oceanska Plovidba v. Castle Investments Co.15, That case involved a time charter on the standard New York Products Exchange form between Yugoslav shipowners and a company registered in Panama. All payments under the charter were expressed in United States Dollars. A dispute arose over unpaid hire and was referred to two arbitrators in London who, in accordance with the City practice, made an award in favour of the shipowners in United States Dollars. When the charterers did not honour the award, the owners sought leave of the court to enforce the award under the Arbitration Act 1950. The Master refused leave and Kerr J. upheld this decision on the ground that English arbitrators were not entitled to make awards in foreign currencies. The Court of Appeal reversed these rulings declaring that the restriction on the ability of English courts to grant judgments in foreign currencies did not apply to arbitrators. Lord Denning justified this distinction on the grounds that resort to execution is less frequent in arbitrations than court proceedings. Accordingly, the difficulties of effecting execution using a foreign currency of account and payment are supposed to occur less frequently in arbitrations.16 Even in the case of execution of an arbitration award in foreign currency, conversion to local currency could be made on the day of payment of the debt.

In the absence of empirical evidence, Lord Denning's assertion that creditors in arbitration proceedings have less recourse to execution than judgment creditors is not convincing. Also, the vital question is not whether judgments and awards may bc denominated in foreign currencies. The vital question is what date is to be selected for converting the amount due in foreign currency into domestic currency. Lord Denning did not attempt to justify the use of different conversion dates in court proceedings and arbitration proceedings. Lord Denning's true intention was manifestly to avoid the effect of the Havana Railways rule. Thus, referring to the Havana Railways rule, he argued:17

I venture to suggest that this view of the courts should be open for reconsideration. If the money payable under a contract is payable in a foreign currency, it ought to be possible for an English court to order specific performance of it in that foreign

currency: and then let the exchange rate be made into Sterling when it comes to be enforced. 1 know that this is not yet the law.... At any rate there is no reason why the rule about judgments of the court should be extended to awards by arbitrators.

In 1974, the Court of Appeal again slipped past the Havana Railways rule. Schorsch Meier v. Hennin involved a debt for the sale and delivery of goods pursuant to a contract which provided for payment in Deutschmarks. Since the date of breach by the English debtor, the value of Sterling had dropped relative to the value of the Deutschmark. The Court of Appeal gave judgment in Deutschmarks and stipulated that if payment were made in Sterling the conversion from Deutschmarks should be made as of the date of payment. AU three members of the Court of Appeal used as one ground for avoiding the Havana Railways rule the Treaty of Rome provision by which:18

Each member state undertakes to authorize, in the currency of the member state in which the creditor ... resides, any payments connected with the movement of goods, services or capital, ... to the extent that the movement of goods, services, capital and persons between member states bas been liberalised pursuant to this Treaty.

A majority of the court of Appeal ruled, as a ground of equal standing for its decision, that the economic and legal conditions supporting the Havana Railways rule no longer existed. Relying on the rule that cessante ratione, cessat ipsa lex, Lord Denning argued:19

It is a maxim which can be applied by these courts as well as by the House of Lords or by Parliament. From time to time they have done so. A good instance is the Court of Common Pleas in Davies v. Powell (1737) Willes 46, 51, where Willes L.C.J. said: "When the nature of things changes, the rules of law must change too." So when the nature of Sterling changes, the rule of law may change too.

In fact, however, Sterling had ceased to be a stable currency even before the Havana Railways case. In Havana Railways, Lord Denning himself had specifically related the issues of the case to the departure of Sterling from the gold standard and its devaluation. Consequently, the majority's argument in Schorsch Meier was founded on a change of circumstances but in reality all that had changed was the court's appreciation of the circumstances. Had not the per incuriam route for challenging House of Lords decisions been closed in Broome v. Cassel, the Court of Appeal might have been able to state its position more candidly. The Schorsch Meier decision was not appealed to the House of Lords. So it was only on the appeal in Miliangos that the House of Lords had the opportunity to pass judgment on the Court of Appeal's avoidance of the Havana Railways decision on the grounds that shifting social conditions had made that rule obsolete.

Judge-Made Law Reform: A Sociological Approach

The House of Lords in Miliangos opted for a basically different strategy than their predecessors in Havana Railways in allocating the exchange risk during the dispute period. Lord Wilberforce in Miliangos refused to bc confined to "straightjacket solutions based on concepts".20 Lord Wilberforce and Lord Frazer of Tullybelton supported Lord Simon of Glaisdale's otherwise dissenting opinion that the maxim cessante ratione, cessat ipsa lex lent no authority to the Court of Appeal's reformist initiatives since the maxim merely "operates to distinguish an instant from a previous legal decision or to justify an exception from a principal legal rule".21

Nor did the House of Lords choose to treat the decision in Havana Railways as given per incuriam. Lord Wilberforce thought it:22

... inappropriate and unnecessary to say that, in the circumstances of the time and on the arguments and authorities presented, the decision was wrong or is open to distinction or explanation.

Lord Cross of Chelsea, while "bluntly" declaring the Havana Railways decision "wrong",23 nevertheless would not have overturned it on that ground alone. Following Lord Reid's comments in another case, he argued that despite

... the fact that we no longer regard previous decisions of this House as absolutely binding it does not mean that whenever we think that a previous decision was wrong we should reverse it. In the general interest of certainty in the law we must be sure that there is some very good reason before we so act.24

Thus the House of Lords in Miliangos relied on neither of the established reasons for departing from its prior position in Havana Railways. Instead the majority strongly subscribed to the necessity of changing legal rules to accommodate new social conditions. Lord Wilberforce stated:25

But if 1 am faced with the alternative of forcing commercial circles to fall in with a legal doctrine which bas nothing but precedent to commend it or altering the doctrine so as to conform with what commercial experience bas worked out, 1 know where my choice lies. The law should be responsive as well as, at times, enunciatory, and good doctrine can seldom be divorced from sound practice.

Lord Cross of Chelsea referred to the "change which has come over the 'foreign exchange' situation generally and the position of Sterling in particular in the course of the last 15 years"26; as justifying the departure from the Havana Railways position. Lord Edmund-Davies confessed that he was "glad" that the social circumstances had so greatly changed since Havana Railways was decided that the court could "avoid perpetrating the great injustice which would result were the ratio decidendi of that case applied to the present claim.27

Lord Wilberforce alluded to factors other than changes in social conditions in his evaluation of whether to vary the established judge-made law. His Lordship stressed that the Havana Railways rule was judge-made in origin and not a subject of such general political interest as to arouse Parliarnentarians.28 In an enigmatic passage, Lord Wilberforce observed:29

These considerations and the circumstances that 1 have set forth, when related to the arguments which moved theirLordships in the Havana Railways case . . lead me to the conclusion that, if these circumstances had been shown to exist in 1961, sortie at least of their Lordships, assuming always that the interests of justice in the particular case required, would have been led, as one of them very notably bas been led, to take a different view.

It is tempting to speculate that Lord Wilberforce meant that justice in the individual case would be adequate reason for bending an established rule. Also, Lord Wilberforce's observation perhaps invites judges to enter the minds of judges previously charged with the same issues and to extrapolate and apply a different outcome in the prior case on the basis of the newly acquired information. Rewriting of earlier decisions by extrapolation with new information is only one step from interpolating what would have been the outcome considering the hypothetical decisions of a full bench including the judges who did not hear the prior case. The notion is familiar, though not well regarded, in American jurisprudence.30

The House of Lords in Miliangos looked to precedents with more interest in the force of their argument than their hierarchical status. Lord Wilberforce referred to the different evolution of the allocation rule by arbitrators as a "very important"31 development. Lord Wilberforce cited cases from the Commonwealth and even the United States in support of his position and also referred to juridical writings32 Lord Simon of Glaisdale acknowledged that he lent "great weight" to the views of one particular judge-Lord Radcliffe-because of "his knowledge, unusual in a judge, of public and commercial finance".33 Lord Simon also cited the report of an expert legal committee-the Private International Law Committee-to show that commercial circles, at least as of 1962 when the Committee reported, felt no urgency to amend the Havana Railwavs rule.34 The House of Lords' decisions in Miliangos refer to some of the self-restraints that should be exercised in judicial law reform.

Their Lordships expressed reluctance to become embroiled in shifting positions that are pervasively integrated into the legal system or whose reform would bc beyond the limit of judicial competence. Both Lord Wilberforce and Lord Simon of Glaisdale were conscious that the judge-made rule allocating the loss from currency fluctuations during the dispute period involves subjects as remote from judicial competence as international monetary theory and public finance. Largely for this reason, Lord Simon of Glaisdale would have preferred that the rule be left to Parliament to change, perhaps with the guidance of an expert committee. "Law is too serious a matter to bc left exclusively to judges"."35 But Lord Wilberforce sounded the majority opinion::36

Indeed, from some experience in the matter, 1 am led to doubt whether legislative reform, at least a prompt and

comprehensive reform, in this field of foreign currency obligation, is practicable. Questions as to the recovery of debts or of damages depend so much upon the individual mixtures of facts and merits as to make them more suitable for progressive solutions in the courts.

Lord Simon of Glaisdale also explained his reluctance to participate in law reform from the bench observing that 37

... a long established rule of law almost always gathers juridical adhesions, so that its abrogation causes dislocations elsewhere in the legal system. Parliament, on executive or expert advice, can allow for these. the judiciary can rarely do so.

This argument actually only tests the court's ability to live with anomalies. The majority expressly confined their rule to foreign debt claims and refused to extend its application te, cases involving damages in torts or contracts other than cases of foreign debts.38 Indeed, anomalies seem inevitable in all law, not only judge-made law. In allocating the exchange risk during the dispute period, the Carriage of Goods by Air Act of 1961 (based on the Hague Convention of 1956) provides that conversion from the foreign currency amount owing to Sterling should bc made as of the date of the award.39 The Carriage of Goods by Road Act provides for conversion as of the date of payment.40 The Bills of Exchange Act 1882 provides for conversion as of the date of the wrong.41

Another important limitation on the exercise of the power to judicially review established rules of law relates to the significance of the interests implicated by the rule. If the rule is in fact an arbitrary mechanism by which to settle disputes in which the private interests weigh equally and the social interests weigh equally or not at all, then the establisbed rule should be retained for the sake of convenience. As noted above, some members of the Havana Railways court felt able to treat the rule allocating the exchange risk during the dispute resolution period as arbitrary since currency fluctuations were rare and consequently there were few interests effected by the rule. Had the rule actually been arbitrary in its application, then there would have been no urgency for change. But when private or public interests are effected by changes in currency values, then the courts have a duty to adopt rules that account for the interests at issue.

Lord Simon of Glaisdale, while shying away from participating in judge-made law reform, nevertheless proposed some measures which might overcome his reluctance to do so in the future. Specifically, His Lordship proposed the use of prospective overruling and the participation as amicus curiae of representatives of the executive branch.42 Certainly the use of prospective overruling is desirable. In fact, the House of Lords has already applied the technique in the Practice Statement of 1966 which announced that the House of Lords would no longer consider itself absolutely bound by its prior decisions.43 But judge-made law by prospective overruling need not and should not bc the only technique available to the courts for reforming outmoded rules of law. What justice after ail is there in enforcing one last time a rule now considered so unjust that it will not bc enforced in subsequent cases? Surely such a margin of certainty cannot outweigh the merits of doing justice in the case immediately at hand.

The idea of obtaining executive guidance in matters of public policy which fall to judges to decide is appealing, but what specifically is to bc the evidentiary value of such executive testimony? If the executive viewpoint is purely or primarily political and this view conflicts with the demands of justice in the case, how are these objectives to bc reconciled? Is it to be up to the court to invite the executive to participate or is the executive expected to act on its own initiative? How is silence from the executive quarters then to be treated? These are issues that have been well canvassed in the United States where the executive has played a special role in court actions involving the act of state doctrine. The American struggle for a solution to these questions has been a long and vexing experience.44

In short, the most significant contribution of the Miliangos case is that the House of Lords has committed itself to judge-made law reform as required by changes in social conditions. Yet in what seems a contradiction of this spirit the House of Lords would exclude the lower courts from the process.

Sociological Reasoning in the Lower Courts

In Schorsch Meier, the Court of Appeal buttressed its application of the maxim cessante ratione, cessat ipsa lex, by pushing forward where the procedural barriers to the grant of a judgment in foreign currency had been swept aside. Lord Denning argued that since Beswick v. Beswick1 45 English courts could give specific performance of debt agreements:46 Furthermore the rules of court had been changed to provide a form for the issue of judgments in amounts of foreign currencies.47

The House of Lords exploded both these arguments. Lord Wilberforce indicated that the actual significance of the Beswick case was that an award for specific performance could be given where damages were an inadequate remedy. But it was the change in the foreign exchange markets which had caused the award of damages to become an inadequate remedy for breaches of international agreements.48 Also the problem is not with the form of order for judgment but with the difficulty of effecting execution in a currency other than the local currency. But execution need not be levied in foreign currencies provided the amount of the judgment in foreign currency is converted to local currency using the exchange rate prevailing on the date of payment. Lord Cross of Chelsea (Lord Simon of Glaisdale concurring) succinctly assessed the force of the Court of Appeal's reliance on changes in the form of order for judgment as a basis for challenging the authority of a House of Lords decision :49

The only reason ever given for the rule that judgments for payment of sums of money must be expressed in Sterling is that execution by way of "fieri facias" or "elegit" can not

issue autornatically on a judgment for u sum of money expressed in a foreign currencyand that reason for what it is worth is as valid today as it ever was. As 1 have said, I

think that it is worth nothing: but that is a different matter.

Lord Simon of Glaisdale, with whose judgment on this topic Lords Wilberforce, Cross of Chelsea and Frazer of Tulleybelton expressly concurred, restricted the use by lower courts of the maxim cessante ratione cessat ipsa lex. The maxim did not authorize lower courts to depart from decisions of higher courts on the basis that the reasons for the decision had changed since,

... this would enable any court in the land to disclaim any authority of any higher court on the ground that the reason

which had led to such a higher court's formulation of the rule of law was no longer relevant. A rule rooted in the history could be reversed because history is the bunk of the past.50

Thus the House of Lords has closed every visible avenue by which the Court of Appeal might depart from prior House of Lords decisions.

Briefly, in the Schorsch Meier case the Court of Appeal, in order to accomplish an eminently sensible objective of social policy, had to drum up artificial rationalizations. With a touch of sublime irony, the Court of Appeal in Miliangos simply held itself bound by the Schorsch

Meier decision and barely touched on the substantive issues of the appeal.51 In Miliangos, the House of Lords took up the Court of Appeal's position in Schorsch Meier on the substantive issues but rapped the Court of Appeal for their artificial reasoning and breach of precedent. While abandoning its position in Havana Railways for the Court of Appeal's position in Schorsch Meier, the House of Lords unanimously declared that the only judicial means by which its decisions could be reviewed was by the House of Lords itself under the Practice Statement of 1966.

But no matter how categorical the House of Lords pronouncements may be, it would be surprising if they actually dissuaded the Court of Appeal from slipping away from House of Lords rules that are antiquated or clearly wrong for whatever other reason. The House of Lords still has not responded rationally and persuasively to the Court of Appeal's challenge to the binding effect of precedent.

Binding lower courts by upper court decisions does not increase predictability where the court of ultimate appeal can change the rule by which all other courts are bound. Assuming that two parties to a dispute both believe their arguments are sustainable and that each will carry the debate to the next level if it loses until the parties reach the final level of decision-making, then it makes no difference whether the lower courts follow the established rule or set off in a new direction. And it makes no difference in principle whether there are five levels of review (as may occur in arbitrations) or only one (under the "Leap-Frog" procedures).52 The point is that once the House of Lords can change its rules, then there are no gains in expediency by holding lower courts to the old rule because close cases will probably be appealed anyway.

But while the efficiency gains of binding precedent are few, the potential gains from its abolition are considerable. In Schorsch Meier, the Court of Appeal departed from the House of Lords rule and there was no appeal. It is of course difficult to read the intentions of the parties from the case reports but one cannot but suspect that counsel were convinced that the change in the rule accomplished by the Court of Appeal was good law and would have been upheld by the House of Lords.53 Had the Court of Appeal applied the Havana Railways rule, either the case would have been appealed involving wasted expense or, if the case had gone no further, both the law and the defeated party would have suffered from the Court of Appeal's inability to break new ground.

If situations recur where the Court of Appeal departs from House of Lords decisions, there arises the problem whether courts subsequently charged with the same issues should direct themselves in accordance with the law as stated by the House of Lords or as stated by the Court of Appeal. As long as this problem is analysed in terms of binding precedent and chains of authority no satisfactory answer will be reached. In Miliangos, the House of Lords had to evaluate a Court of Appeal decision whose ratio decidendi was that, as between a House of Lords decision and a subsequent decision of the Court of Appeal departing from that of the House of Lords, the Court of Appeal is bound to follow its own decision. In Young v. Bristol Aeroplane, Lord Greene had detailed the application of the rule of precedent in the Court of Appeal. He indicated that the Court of Appeal:54

…is bound to follow previous decisions of its own as well as those of courts of co-ordinate jurisdiction. The only exceptions to this rule (two of them apparent only) are those already mentioned which for convenience we here summarize: (1) The court is entitled and bound to decide which of two conflicting decisions of its own it will follow. (2) The court is bound to refuse to follow a decision of its own which, though not expressly overruled, cannot, in its opinion, stand with a decision of the House of Lords. (3) The court is not bound to follow a decision of its own if it is satisfied that the decision was given per incuriam .... Where the court is satisfied that an earlier decision was given in ignorance of the terms of a statute or a rule having the force of a statute ... (it) cannot, in our opinion, be right to say that in such a case the court is entitled to disregard the statutory provision and is bound to follow a decision of its own given when that provision was not present to its mind. Cases of this description are examples of decisions given per incuriam.

Lord Greene's approach was endorsed in Miliangos by the House of Lords. Nevertheless, the House of Lords split on whether the Court of Appeal should have followed its own prior decision contrary to the earlier Lords decision or instead should have followed their Lordships' earlier decision. Lord Simon of Glaisdale argued that the Court of Appeal's decision in Schorsch Meier was not given per incuriam within Lord Greene's definition since the Court of Appeal was not ignorant of the Havana Railways decision. Accordingly, the Court of Appeal in Miliangos acted correctly in holding itself bound by the Schorsch Meier decision.55 On the other hand, Lord Cross of Chelsea argued.56

It was wrong for the Court of Appeal in this case to follow the Schorsch Meier decision. It is no doubt true that the decision was not given "per incuriam" but 1 do not think Lord Greene when he said in Young v. Bristol Aeroplane Co. Ltd that the only exception to the rule that the Court of Appeal is bound to follow previous decisions of its own were those which he set out, can fairly be blamed for not foreseeing that one of his successors might deal with a decision of the House of Lords in the way in which Lord Denning dealt with the Havana Railways case.

The other Lords chose not to comment on the problem perhaps hoping that such a conflict of views between levels of courts would never again present itself.

What emerges is that, if the court of ultimate appeal can change its earlier rules, little marginal certainty is gained by compelling lower courts to follow the earlier decisions of the highest level. Also, there is little point in restricting the grounds on which lower courts can reconsider the law as previously stated by a higher level in the hierarchy. If the House of Lords can now change the law to account for new social conditions, why restrict a lower court in its ability to hear evidence of change in circumstances and to pass judgment on that evidence? What is accomplished by a decision such as Lord Justice Lawton's in Schorsch Meier in which the rule established by the higher court is described as "founded on archaic legalistic nonsense" but applied nevertheless because the judge is "timorous" and stands in "awe of the House of Lords"?57 Such a decision is a clear-cut invitation to appeal and, short of impecuniosity, the defeated party would appeal. If the defeated party cannot afford to appeal, what sort of justice is this? If he does appeal, what was accomplished by the token heeding of the superior court's earlier decision? And if the lower court does vary the higher court's rule, the defeated party can accept that the change in the law is for the better or he can rely on the higher court's decision to found his appeal.


The moment is rapidly approaching when the House of Lords will finally abandon the intellectual confines of analytical jurisprudence. In the nineteenth century, the English courts sought refuge from the policy implications of their decisions by applying established concepts to analogous problems. In Miliangos the analytical approach virtually disappeared from the rhetoric of the House of Lords. Perhaps the only remaining areas of its influence are in subjects where the rules of law are arbitrary, or so pervasively integrated into the network of legal relations as to require extensive ancillary law reform, or where the implications of a reform in the law are overridinglypolitical in nature.

The use by the House of Lords of sociological reasoning in Miliangos contrasts sharply with its iconoclastic view of the role of lower courts in the law reform process. This attitude is probably a lingering vestige of the analytical approach seeking once and for all answers in specific rules of conduct. But the search for certainty in law is futile and often counter-productive. If laws are to be adjusted to changing social conditions, then rules of law can be no more stable than their social environment. To preclude lower courts from participating in updating rules of law, at best, only delays the reform until the case can be brought to the highest court of appeal thus putting the parties to unnecessary expense. But if the case is not appealed it postpones the law reform indefinitely. The balance of real flexibility versus pretended certainty shows the value of allowing all levels of court to assess social change and evaluate whether and how rules of law must be adjusted. The House of Lords will surely be frustrated in its campaign to exclude the lower courts from the law reform process.





1 - [19721 A.C. 1027. The present author had occasion to comment on that case. Sec Stare Decisis, Binding Effect

of Decisions of House of Lords on Lower Courts (1974), 53 Can. Bar Rev. 128.

2 - (19751 2 W.L,R. 555 (Bristow J., and the C.A.), 3 W.L.R. 758

3 - Per Lord Simon of Glaisdale, ibid., at p. 775.

4 -Bagshaw v. Playn (1595), 1 Cro. Eliz. 536.

5 - Schorsch Meier v. Hennin, [1974] 3 W.L.R. 823, at p. 832.

6 - Manners v. Pearson & Son, [1898] 1 CW 581, at p. 587.

7 - Per Lord Denning, supra, footnote 2, at p. 563.

8 [19611 A.C. 1007.

9 Per Viscount Simonds, ibid., at pp. 1048-1049, per Lord

Radcliffe, at p.1060.

10 Ibid., at pp. 1052-1053.

11 Ibid, at p. 1069.

12 Ibid.

13 (19691 3 W.L.R. 1135.

14 Ibid., at pp. 1147-1149.

15 - (1973) 3 W.L.R. 847.

16 - Ibid., at p. 852.

17 - Ibid.

18 - Supra, footnote 5, at p. 830.

19 - Ibid., at p. 827.

2O - Supra, footnote 2, at p. 771.

21 - Ibid., at p. 776; per Lords Wilberforce and Frazer of Tullybelton, ibid., at pp. 769 and 804 respectively.

22 - Ibid., at P. 764.

23 - Ibid., at p. 797.

24 - Ibid. Per Lord Reid in Reg. v. Knuller (Publishing,

Printing and Promotions) Ltd, (19731 A.C. 435, at p. 455.

25 - Ibid., at P. 768. 213 Ibid., at p. 798.

26 - Ibid., at p. 798.

27 - Ibid., at p. 802.

28 - Ibid., at pp, 772-773.

29 - Ibid., at p. 770.

30 - See Roofing Wholesale Co. v. Palmer (1972), 502 P. 2d 1327, at p. 1328 (Sup. Ct Ariz.) refusing to follow

Fuentes v. Shevin (1972), 407 U.S. 67. Sec also the comment on these cases in (1973), 86 Harv. L. Rev. 1307.

31 - Supra, footnote 2, at p. 767.

32 - Lord Wilberforce cites the decision of Mr. Justice Holmes in Deutsche Bank Filiale Nurnberg v. Humphrey (1926), 272 U.S. 517; the case of In re Dawson, dec'd, [19661 2 N.S.W.R. 211, and F.A. Mann, The Legal Aspect of Money (3rd ed., 1971); see Lord Wilberforce's decision, ibid., at pp. 769 and 711. In the United States, federal courts continue to follow the Deutsche Bank reliance on the date of judgment for conversion of the damages into local currency. While the New York courts have in the past used the date of the wrong for conversion, there has been a tendency toward using the judgment date. The other countries in the Western World either allow judgment in foreign currencies or provide for conversion dates closer to the date of actual judgment than the breach date. Sec F.A. Mann, op. cit., ibid., at pp. 350-376. The Canadian courts generally follow the breach date conversion rule (The Custodian v. Blucher, [1927] S.C.R. 420), but see Quartier v. Farah (1921), 64 D.L.R. 37 which used the date of judgment of first instance for conversion. Also see: J.-G. Castel, Private International Law (1960), pp. 92-93.

33 - Supra, footnote 2, at p. 787.

34 - Ibid., at p. 784.

35 - Ibid., at p. 783,

36 - Ibid., at p. 773.

37 - Ibid., at p. 789.

38 - Per Lord Wilberforce, ibid., at pp. 771-772; per Lord Cross of Chelsea, ibid., at p. 799; and per Lord Frazer of

Tullybelton, ibid., at p. 803. As noted by their Lordships,

cases such as bankruptcies, which involve the distribution from a fund, require special rules. Sec also, F. A. Mann, op. cit., footnote 32, pp. 347-352.

39 - The Warsaw Convention as am. at The Hague, 1955, art.

22(5), adopted by Carriage by Air Act 1961, 9 & 10

Eliz. 2, c. 27, s. 1.

40 - Convention on the Contract for the International Carriage of Goods by Road (1956), art. 27(2), adopted by Carriage of Goods by Road Act 1965, c. 37, s. 1.

41 - 45 & 46 Vict., c. 61, s. 72(4).

42 - Supra, footnote 2, at p. 792.

43 - Practice Statement (Judicial Precedent), [1966] 1 W.L.R.


44 - For instance, see A. F. Lowenfeld, Act of State and

Department of State: First National City Bank v. Banco Nacional de Cuba (1972), 66 Am. J. Int. L. 795-, also the comment on the case in (1973), 14 Harv. Int. L.J. 13 1.

45 - (1968) A.C. 58 (H.I,.).

46 - Supra, footnote 5, at p. 829.

47 - Ibid., at p. 828.

48 - Supra, footnote 2, at p. 766,

49 - Ibid,, at p. 798; per Lord Simon of Glaisdale, at p. 779.

50 - Ibid., at p. 775; per Lord Wilberforce, ibid., at p. 769; per Lord Cross of Chelsea, ibid., at p. 798; per Lord Frazer of Tulleybelton, ibid., at p. 804.

51 - Supra, footnote 2, per Lord Denning, at p. 564; see Lord

Stephenson, ibid., at p. 567; per Lord Geoffrey Lane,

ibid., at p. 568.

52 - Administration of Justice Act 1969, Part IL Under these provisions, application may be made to a judge of first instance for a certificate allowing an appeal directly to the House of Lords. The applicant must have a "Sufficient case" for such an appeal and in exercising his Discretion to issue the certificate the judge must be satisfied that the point of law is one of "general public importance" relating either to the construction of a piece of legislation or the application of a previous "fully-considered" decision of the House of Lords or the Court of Appeal.

53 - It might be thought that the defendant in Miliangos was dissuaded from appealing more by the force of the Treaty of Rome argument than the argument against Havana Railways. The former argument was carried unanimously in the Court of Appeal whereas the latter was carried only by a majority of two to one. In fact, a majority of the House of Lords in Miliangos doubted the validity of the Treaty of Rome

argument, per Lord Wilberforce, supra, footnote 2, at p. 768;

per Lord Simon of Glaisdale, ibid., at p. 779; per Lord Cross

of Chelsea, ibid., at p. 799.

54 - [1944] K.B. 718, at pp. 729-730.

55 - Supra, footnote 2, at p. 780.

56 - Ibid., at p. 797.

57 - Supra, footnote 5, at pp. 833-834.





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