Scottish Court of Session Decisions

At advising on 29th March 1950,—

LORD JUSTICE-CLERK (Thomson).—[After the narrative quoted supra)—

The first matter to be determined is whether the pursuer was in breach of the Regulation. Broadly, what the Regulation does is to prohibit work in the construction, reconstruction, alteration, demolition, repair and decoration of a building or required for the purposes of providing water, light, heating or other services for a building being done without a licence. It is not contended that a licence was in force in respect of the disputed items, but it is contended that no licence was required.

I deal first with the items other than the grate. It is clear that these items are all new and independent matters and not just things which emerged as sequelœ of the licensed work. Obviously in matters of this kind there must be a reasonable margin of error, and the defender recognises that this is so in conceding that he must pay £43, 7s. 7d. for the work actually licensed, though in fact the permitted figure was £40. But, where a new departure has been made, the pursuer must, if he can, rely on the provisos in the Regulation. He relies on provisos (a) and (b) to par. 6. There was some controversy as to whether (a) was applicable at all to the present situation. I do not require to decide that point, since, on the assumption that it is applicable, I am satisfied that the Sheriff was right in his view that there were no sufficiently relevant averments to bring the pursuer under it. So far as proviso (b) is concerned, I again take the Sheriff's view. I can find no relevant averments of urgency or emergency.

No dispute arose between the parties as to the propriety of the course adopted by the Sheriff of remitting the item of £4, 9s. 2d. to probation.

The position as regards the grate is unfortunate for the pursuer. There was obviously some misunderstanding of the position, and it appears to have been shared by the licensing authority. There can be little doubt that a licensing authority which licenses the installation of a grate must contemplate that there is to be a grate. Nevertheless, when one looks at the legal situation, it is difficult to resist the conclusion that, as this grate was acquired for the purpose of being installed as part of the work being carried out, its cost should have been covered by the licence specifically. It is clear that the necessity for a licence is not confined merely to labour costs. Just how wide the scope of the Regulation is so far as concerns materials used and articles supplied it is unnecessary to decide. We were pressed with many examples of domestic appliances which, it was argued could be obtained without licence by anybody in the appropriate shops. Like the Judges in Bostel Brothers, Limited, I can see that difficult questions may arise. But I have come to the conclusion that this particular grate was so much an integral part of the reconstruction which was being carried out that it falls within the contemplation of the Regulation and ought therefore to have been specifically covered by the licence.

It follows that, except as regards the item of £4, 9s. 2d., it is possible to say without more ado that the pursuer in incurring the items in respect of which he sues was in breach of the Regulation. That being so, Is he to be permitted to invoke the aid of the Courts to enforce his claim for payment?

To this question the law of England in a long series of cases culminating in Bostel Brothers, which deals with this very Regulation, replies in an unequivocal negative. It does so on the ground of public policy. I am satisfied that in Scotland the answer is the same. The decision of the House of Lords in Stewart v. Gibson puts the matter beyond doubt. If a pursuer cannot maintain his cause of action without establishing that he acted in breach of a statute, the Courts will not listen to him. This proposition was not directly controverted either by the Sheriff-substitute or by the appellant. The case advanced for the pursuer invoked the doctrine of recompense, and it was argued that, as he had enriched the late Mr Watt's property to the extent of a grate and the additional work, equity demanded that the defender should reimburse him. It was submitted that in the interests of commerical morality the Court was bound to intervene to prevent the defender obtaining an advantage to which he was not entitled. It is obvious that, if these arguments were given full effect to, the general principle that the Courts will not assist the party in breach of a statute would be completely undermined. The only logical result of the refusal of the Courts to assist the party in breach is that the opposite party, who has gained an advantage, is entitled to keep it. The appellant's argument at its highest involves that the Courts should be prepared to assist the party in breach to the whole extent of his claim and at its lowest to the extent of allowing him to recover his out-of-pocket expenditure.

The appellant's argument in the end of the day came to rely on Cuthbertson v. Lowes (1870) 8 M 1073 . There, statutes intended to secure uniformity of weights and measures contained a provision that agreements with reference to any weight or measure established by local custom, if they did not specify the ratio which that measure bore to imperial standards, should be "null and void." A penalty was imposed on parties contravening the statutes. Potatoes were sold at a price per Scotch acre without mentioning the ratio borne by the Scotch to the imperial acre. Both parties to the contract were liable to penalty. In an action for the price, the buyer pleaded that the contract was null and wholly illegal. It was held that the contract could not be enforced but that the defender was not entitled to retain the potatoes without accounting to the pursuer for their value at the date at which they came into his possession. I regard Cuthbertson as a special case turning on its own circumstances. The effect of the statute was to make the contract void, and, as Gloag points out, a distinction can be drawn between agreements which the law will not allow to operate as contracts and contracts which are contrary to law. The position in Cuthbertson was that the contract did not operate, and, as a result, there was nothing to prevent the Courts from regulating the rights of parties. It is different where, as in the present case, one party to a contract comes forward to seek relief in respect of his own breach of a regulation committed in the carrying out of the contract.

Accordingly, I move that the appeal be dismissed.

LORD MACKAY .—The pursuer of this action for £114, 8s. 6d. occupied, during Mr Watt's lifetime, a rather strange double or treble capacity in relation to the repairs and new works connected with 14 Fife Street, in Banff, which belonged to Watt, an absent marine engineer. It was a house all along in possession of a tenant—one Wood, no party to the action. Jamieson represents himself first as "factor" for the owner and as having a somewhat strange general mandate in that character; secondly, he was a carpenter and himself undertook the "joinery work involved"; thirdly, he was something in the nature of a general contractor, as he arranged to spread the necessary details of plumbing work, masonry work, and decoration work, among other appropriate tradesmen contractors.

At the time covered by the averments, the Defence Regulations, 1939, Part IV—"Essential Supplies and Work" according to the authoritative heading—applied, under which, in my judgment, for important national purposes, strong limitations and controls were exercisable over both expenditure on various materials, and also on unnecessary work. The existence of these controls was well known to Jamieson in any of the three capacities. In particular, we have to do with the compulsitors of Regulation 56A of the Defence Regulations as varied up to date.

The factor or undertaker estimated for all the works directly ordered by the late Mr Watt a sum of £161 in all. He obtained the essential licence from the burgh surveyor, the officer detailed by the Minister of Works for such issue. He then sublet the three departments not apt for his own joinery undertaking, and he obtained the sum broken up, at the sight of the said officer, into £40 (self), £80, 10s., £30 and £10, 10s. (others). It goes without saying that what he ultimately did had necessarily (in order to be legal) to fall within his own £40, and, indeed, it follows that he must so have represented his portion of the divisible whole to the burgh surveyor.

But while this historical origin requires a short statement, in my judgment that is all highly irrelevant to the issues raised with Watt's trustee, to which I now come. The work went on and, so far as the original joinery is concerned, the £40 was exhausted but only by a very little. The items covered turned out to come to £43, and, that being a matter of de minimis, the defender is perfectly willing and offers to meet the whole of that part of the account.

But, having done all he was bound and entitled to do, the carpenter found other things in the house—as "factor" he tries to say he had sufficient mandate without special knowledge of the owner—to order or to do.

Prolonged detail as to how these things occurred is undesirable, but his own averments are long and interesting. [His Lordship referred to the averments, and continued]—

To be short, his account as rendered came to £114, 8s. 6d. for his own work alone, as contrasted with a licence for £40. The difference is £74, 8s. 6d., nearly twice the earlier licensed sum.

The defender, as trustee following his author, tables the defence that, while he did not authorise any such additional works, Regulation 56A, sidenoted "control of building operations, &c.," forbade them by a general provision, and enacted that they "shall be unlawful except in so far as is authorised by the authority specified in the second column" of a table. Various other subsections of the long paragraph might be cited to show the total illegality of "carrying out such operations" (except for limited specific purposes) except in so far as there is in force in respect thereof a licence granted by the Minister—paragraph 2. Paragraph 6 provides (subject to two provisos which I shall touch upon) that "If any operation is executed or work is carried out in contravention of any of the first three paragraphs of this Regulation the person … undertaking the execution of the operation or the carrying out of the work, … shall … be guilty of an offence."

Now, the quite new operations or works I have referred to, after the expenditure of the first £43, are not capable of being expressed as anything like being mere expansions or accidental overlappings by a narrow margin of the prices in the original job, so as to be saved by Dennis & Co. v. Munn . The extra £74 was all incurred before the pursuer awoke to his danger. Long after, he applied for a post-licence and did so, not in his owner's name, but in his own name.

I have diligently compared the six numbered and very distinctly stated heads of these new ventures with the works on the original licence; and no one of the six can possibly be described as merely an overflow of anything covered by the old licence to trade. In short, they are new works and new undertakings, every one.

Now, to my mind in these circumstances, (first) the carrying out of them all cannot possibly be excused under the recent English citation given to us of Bostel Brothers, Limited v. Hurlock; (second) unless some way may be found in Scotland to avoid a conflicting doctrine to that established, as I hold, by two Lord Chancellors in England, by a House of Lords decision for Scotland, and by numerous later applications right up to the present time, that, as to works or operations which are authoritatively pronounced "illegal" (and punishable by fine), in their actual execution, the Courts of both countries will not lend their aid in any manner whatever to enforce or empower them, or in any manner to give any validity to them; unless, I say, that mass of authority can be set aside, the pursuer comes to the Sheriff, and to us, in vain. This doctrine strikes me as unqualifiedly sound. How can any Court lend itself to carry into force (whoever pleads for it) a contract, or an operation, which the law bans and calls illicit?

I have never from the first hearing hesitated to hold the view that the doctrine so stated, and in many exampled forms, as to the natures of the illegalities in question, is a sound and an established doctrine, and that it has had as much force and vigour in Scotland as in England. I shall leave to others of your Lordships to derive the history from Langton v. Hughes in 1813, through Lord Ellenborough and Lord Mansfield, through Lord Fullerton and Judges concurring with him in Bruce v. Grant, down to Lord Lindley in Scott v. Brown, Doering, M'Nab & Co.; Brightman & Co. v. Tate; and so on to Jackson, Stansfield and Sons v. Butterworth; and even to Boissevain v. Weil, in 1949.

Truth to tell, it became rapidly obvious that, to escape the net of the consequences of his illegality, the pursuer must endeavour to show that Scots law had not followed the lead of these old Chancellors, or of the English reasoning, or indeed of Lord Fullerton and others. And for that end, the chief and only reliance came to be a case decided in 1870, Cuthbertson v. Lowes .

I have been interested to understand and to explain this judgment, standing alone and never yet followed, and standing so as promulgated many years after the classical cases, several years after Stewart v. Gibson, long after Bruce v. Grant, also after Alexander v. M'Gregor and Handyside v. Pringle and M'Dougal, both in Scotland; and forty-four years before Professor Gloag, in his first edition, expressed himself to this effect, that the effect of pacta illicita is that the loss falls where it lights; and that it may be different when parties are not in pari delicto (pages 688 and 689 of the work). Incidentally, Alexander and Handyside were also concerned with purported sales of potatoes at £x per Scots acre. In Alexander, while in fact Lord Mackenzie (at p. 917) had said:

"The statute was meant to be severe and ill-natured,"

he had also said (at p. 918):

"I don't think the bargain as libelled is illegal; … But … is not proved."

Further, one notices that the case in England of Scott has been cited with full approval in Scots Courts, and that there Lord Lindley said:

"No Court ought to enforce an illegal contract or allow itself to be made the instrument of enforcing obligations alleged to arise out of a contract or transaction which is illegal, if the illegality is duly brought to the notice of the Court, and if the person invoking the aid of the Court is himself implicated in the illegality. It matters not whether the defendant has pleaded the illegality or whether he has not."

What then is the true place and effect of Cuthbertson v. Lowes ? On a full and careful reading of the reported matter for our apprehension, I have come to think there are not one but many ways of refusal to give it any effect contrary to the many years of law stretching out on either side of it. The real embarrassment of riches is to sever out any one ground of distinction sufficient for Cuthbertson but which saves the general proposition, as unshaken in our law.

Firstly, I feel for myself that here is one case where a faulty headnote in a rubric has contributed to decades of misunderstanding. The first among the headlines is "Sale—Pactum Illicitum." Now I find that the statutes concerned, two of the Weights and Measures Acts, do not in fact pronounce the words "illicit" or "illegal," but merely make certain bargains "null and of no effect." And further, anything struck at under the ban of old measures must necessarily have been two-sided bargains of sale. (Here, of course, it is not the bargain of Watt and Jamieson that is attacked at all. It is the unlicensed man going on to "carry out.") The leading judgment, that of the Lord President, who commenced by saying "it is necessary to distinguish it" (i.e., from the several decisions cited), uses only the words "which are the subject of a prohibited contract"—a phrase that might strike a sort of mean between "void and of no effect" and "illegal"; but does not, in my opinion, amount to a statement of illegality in the full sense.

Secondly, Mr Hunter sought in his early address to content himself with a statement that there is a difference between a malum prohibitum, or an out-and-out illegality, and a mere statutory pronouncement that a bargain, if attempted will be "null." It may be that this alone would do to set such a narrow judgment to one side, but I dislike to found on a possibly over-forced distinction, if other courses are open. For, indeed, the Lord Ordinary in that very case had said "… but it is not less clear that, while, … the original contract cannot be here enforced, the defender is bound to pay a just value for the potatoes as at the date or dates when he removed them from the ground." He therefore allowed a proof, and all that the First Division did, after discussing the argued alternatives, was to "adhere," and so to send the matter to proof. What resulted we do not know. It is quite conceivable that by the time the proof was heard counsel had fortified their views with higher authority.

But (thirdly) I find it much more illuminating to consider what was in fact the matter their Lordships were dealing with; and particularly to observe that they neither overruled Alexander v. M'Gregor nor Handyside v. Pringle and M'Dougal, nor commented on the force of the English decisions to which they were referred. I have looked with care into the actual provisions of the two Weights and Measures Acts. They wished to discourage or disallow the use of old "Scots" measures, or any other "local" measures; and instituted "imperial" ones, and in particular "acres." They did not ban or pronounce illegal any sale; but they definitely rendered any sale by the seller employing old measures non-enforceable by him. No provision and no ban was directed to the buyer—the taker takes such measures. And accordingly, I am, for my part, clear that, of the four classes into which Lord President Inglis placed irregular bargains of sale, this one in truth fell into the third special class outlined, to wit, where the nullity was pronounced against one party, and in order to protect the other party, to the bargain. The thing prohibitum was forbidden only to the seller, who, it was plainly conceived, was in the position, for all the "gill," "bushel" container cases and so forth, of the provider and user of all such old containers from which goods were dispensed. The buyers did not possess or use such, in at least the typical case. It seems possible to me to say without undue disrespect that the Lord President, by a slight error, treated the facts as if they fell into this fourth category, that of both partakers in a sale being in pari casuas regards forbiddance. The authority which has not ever, so far as known, been followed, seems thus to be a precedent of that kind that it can only now be held authoritative for its very own case—a sale "by the Scots acre." Moreover, the whole statutory basis of such limited decision has, since 1878 and 1897, been repealed, so that the exact case can probably not recur.

There is, then, a call upon us for a decision now, that, according to our Scots law, in any case of proper and full illegality, whether it is pronounced in matter of contract or in the matter of operation, there is no room for avoiding the bar to a Court's aid by reason of the illicit character, by applying a quantum meruit or (better) a quantum lucratus est method of affording some relief to the person versans in illicito. I do so give my decision.

On what were called "subsidiary matters" I have not much to say. These were, one might say, crumbs which the pursuer as carpenter felt he might at least save, and recover some little part of the cost. The chief one was a "grate for the fireplace in the living-room." But this item is not worth anything to him, for it actually appeared as forming part of his first licence for his £40 under the plain words "new grate for living-room with H.P. boiler." And it equally does not "appear" in the belated application of December. The argument then necessarily came to take the form that all separate materials, if identifiable like this, required no licence at all, although they formed part of one operation or job; that one could "buy" them separately, and still fill them in as part of the "work" authorised, without obtaining a price limit by the licence, or any licence, to cover the original cost. The argument therefore was compelled to take the broad form that the scope of such licences was only the workmen's wage and time. This is simply, in my view, a misreading of the whole Part (IV) of the Act, which aims at limitation of materials—"Supply"—just as much as at restriction of labour.

An attempted reference by a sort of construction argument to Regulation 56A, paragraph 4, seems self-destructive. That paragraph makes it too plain for words that "the value of goods" as well as of "services" is to be "computed" in the costs of an operation; and can alone be split up and only partly split up, where one element may suffice to serve two jobs.

[His Lordship then dealt with questions arising in connexion with the sum of £36, 0s. 11d., and continued]—

It remains to note only that the Sheriff here reversed the Sheriff-substitute, who was for allowing a proof. I concur in most of his reasoning, but find it necessary to say that I cannot quite share his views about "nothing sinister" (this sinister aspect has nothing to do with this affair); nor the bold line he seems to suggest that, if there were set the results of the English law against the law of the Scottish Division (i.e., Cuthbertson), he would prefer the English doctrine. He speaks, however, of following "the Glasgow case," with which we were not favoured. My firm opinion is that the doctrine is as much a Scottish as an English one, and cannot be shaken by any proper reading of Cuthbertson.

LORD JAMIESON .—I am well satisfied with the way in which the learned Sheriff has dealt with the case, and it is only in deference to the excellent argument which was presented to us from both sides of the bar that I add a few observations of my own.

[His Lordship then dealt with questions arising in connexion with the sum of £36, 0s. 11d., and continued]—

As regards the cost of the grate, I am of opinion that this should have been included in the figure authorised to be expended by the licence. The facts here are not, I think, such as were contemplated in the question put, but not answered, at the end of the opinion of the Court, in Bostel Brothers, Limited v. Hurlock, as to the position of a builder installing an article previously in his possession. Here the grate was bought by the pursuer in November 1946 for the purpose of being fitted into the house as part of the work he had long previously been instructed to carry out. If a builder were permitted, prior to beginning operations, to buy articles or materials necessary for carrying out work on a house and not include the cost in the licence he obtains, the purpose of the Regulation, to prevent unnecessary or excessive use of materials and expenditure on buildings, would be defeated.

The main controversy turned on the pursuer's argument that he was entitled to payment quantum meruit for the work done. It was founded on the case of Cuthbertson v. Lowes .The case appears to stand by itself, and the researches of counsel did not bring to light any case in which it had been judicially commented on. The ratio of the decision appears to be, as explained by the learned editor of Bell's Principles, that "when a statutory nullity is enacted, not on the ground of turpitude or on account of any inherent vice in the nature of the contract prohibited, … the Court, while it cannot enforce such a contract, will not allow either party to take unfair advantage of the nullity, but if the contract has been partly performed will require restitution or payment of quantum meruitor market price"—Bell's Principles, sec. 35 (note). Professor Gloag draws a distinction between contracts the illegality of which rests merely on a statutory avoidance, which renders them unenforceable but does not make them illegal in the wider sense of depriving the parties of any rights against each other enforceable by law, and contracts involving an element of illegality, as distinguished from mere statutory avoidance, the effect being to debar the parties concerned from the right to appeal to Courts of Justice—Gloag on Contract, (2nd ed.) pp. 550, 585. The present case, I think, clearly falls under the second category. What the pursuer did is in terms declared to be unlawful by a regulation passed in defence of the realm and fenced with severe penalties. The case is, therefore, entirely different from Cuthbertson, where, as Lord President Inglis pointed out, there was no turpitude in entering into the contract. Mr Reith argued that there was no room for a distinction between a contract which was merely declared void by statute and one which was illegal in the wider sense, and that, while in England the Courts would not give access to the wrongdoer, in Scotland, where the contract had been performed, the Court would in both cases give an equitable remedy, on the principle of quantum lucratus or quantum meruit. I cannot agree. I think in both countries the Court will not lend its aid in any way to one who has to found on what he has illegally done or on his own turpitude. In Scott v. Brown, Doering, M'Nab & Co., Lindley, L.J., (at p. 728), put the matter thus:

"No Court ought to enforce an illegal contract or allow itself to be made the instrument of enforcing obligations alleged to arise out of a contract or transaction which is illegal, if the illegality is duly brought to the notice of the Court, and if the person invoking the aid of the Court is himself implicated in the illegality."

That the same applies in Scotland is illustrated by the cases of Hamilton v. Waring and Stewart v. Gibson .

LORD PATRICK .—I agree that this case should be disposed of as your Lordships propose. I shall deal only with the alternative claim of the pursuer.

That claim is not founded upon contract but upon recompense. It is a principle of equity by no means universally applied in Scots law. Considerations other than the mere fact that one party has benefited by the other's loss may prevent its application to a particular case. Where the transaction in relation to which the claim arises is prohibited by law, the enforcement of equitable adjustment as between two individuals may be outwith the province of the Courts. Gloag puts the matter thus:—

"Illegality in contract admits of degrees. It may range from a statutory prohibition of a particular method of entering into a contract which may be lawfully completed in other ways, at the one end of the scale, to contracts intended to secure the commission of a crime, of some act generally recognised as immoral, or subversive of the interests of the State, at the other. And, as the degree of illegality varies, so do the legal results. On the one side are cases where, though a contract cannot be enforced, the incidental rights of parties arising under it may be the subject of action; on the other, cases where a party may be entirely deprived of legal redress on the ground that to give it would involve the recognition of acts of which the law will not take cognisance except to visit them with penalties"

—Gloag on Contract, (2nd ed.) pp. 549, 550. It will be noticed that Gloag attributes the highest degree of illegality to acts "subversive of the interests of the State." These are acts of which the Courts cannot take cognisance except to visit them with penalties, and, indeed, it seems monstrous to suggest that the Courts of the State should be asked to adjust accounts as between parties in respect of claims which arose out of their being jointly engaged in acts subversive of the interests of the State.

The Regulations which were broken in this case were made under the Emergency Powers (Defence) Act, 1939. The Act and Regulations were originally passed and made, inter alia, to conserve the nation's resources for the prosecution of war in a time of great national danger. They were continued in being by Parliament, inter alia, to control the disposal of goods and services during a crisis in the national economy. The prohibited acts were declared to be unlawful, and the doing of them to be offences involving heavy penalties. I cannot regard breach of such Regulations as other than acts subversive of the interests of the State, acts of which the law will not take cognisance except to visit them with penalties. In my opinion, the Courts cannot be invoked to compel recompense to a person whose claim to recompense arises out of his diverting goods and services to projects which, ex hypothesi, Parliament has declared to be against the national interest.

The pursuer's request for a remedy was founded solely on the case of Cuthbertson v. Lowes . This case is rightly put by Gloag into the very special category of cases where an act was unobjectionable at common law and is subsequently declared void by statute, there being no statutory declaration of illegality—Gloag on Contract, (2nd ed.) p. 550. In a few cases, which he notices, Cuthbertson v. Lowes being one of them, the Courts have lent their aid to adjust the claims of parties arising out of the performance of an act declared to be void. The distinction is again emphasised by Gloag on page 585 when he considers the effect of illegality. He points out that, where a contract involves an element of illegality, the effect is to debar the parties concerned from the right to appeal to the Courts of Justice. In this respect he distinguishes contracts declared to be illegal from contracts merely declared by statute to be void. For the limited effect of mere voidability he refers to the passage on page 550, to which I have drawn attention. By contrast he points out, with reference to contracts declared to be illegal, that the necessary consequence of the refusal of judicial assistance in the expiscation of rights resulting from an illegal agreement is that the party who has gained an advantage keeps it. In the passages I have quoted and referred to, Professor Gloag, in my opinion, accurately expresses the result of the authorities which are binding on this Court.

It was suggested that on this matter the law of Scotland was not so severe as the law of England. There is no warrant for the suggested distinction between the laws of the two countries—Stewart v. Gibson .

The case of Cuthbertson v. Lowes cannot therefore justify us in enforcing a claim for recompense arising out of the breach of an Act and Regulations wholly different in outlook and effect from the statutes with which that case was concerned.