Illegality and your workplace

Illegality in law

As many of my readers or listeners are those involved in small commercial enterprises, I thought it would be good to explore the doctrine of illegality. Illegality is a simple rule which is subject to many exceptions. At its core, it can completely void a contract in situations where a statute has made the action illegal.

Some may have taken this doctrine for granted believing it unquestionable that contracts for theft, drug dealing or murder were unenforceable in a contract of law. Clearly, illegal acts were the types of contracts that were intended to void with under this doctrine. However, as the society and regulatory standards have evolved so has the application of this principle extended. Leaving some enterprises, contractors and consumers at the mercy of legal interpretation.

Explaining the illegality doctrine

A statute may expressly or impliedly render a contract illegal therefore, requiring courts to make it inoperable leaving neither party with any remedy. Those who have already benefited from the contract will not have to pay back their benefits. However, just because a statute prohibits a contract does not always mean it is unenforceable. ACCC v Baxter found that; A law unilaterally prohibiting the action doesn’t void a contract. It is dependent on factors such as:

-    Language

-    Expertise of the parties

-    Scope

-    Purpose

-    Party intent

For example; if a statute prevents unlicensed homes from breeding animals it does not necessarily prevent a contract to purchase a pregnant dog. Ledlabratories Servier v Apotex Inc puts forward the statement that ‘the decision inevitably turns on their facts.’ The comment shows just how uncontrollable this doctrine can be when dealing with acts that lack the character of illegality.

A statute may encourage the courts to prohibit an action where:

-    There are a variety of public policy factors

-    On balance, it should not be enforced

The precedents in this area must be treated with the same level caution as the statutes because courts may approach the facts differently, leaving much ambiguity. The doctrine of illegality is an excellent example of the importance of courtroom advocacy. An advocate that is capable of disproving the fault of their party has effectively seduced the court for their party.

Applying the doctrine requires that consider ation for the following facts:

-    Prima facie appearance of statutory prohibition

-    Whether illegality applies to the formation or operation of the contract

-    Statutory construction weighed against public policy considerations

There is a vital difference between an illegality that prevents the formation or operation of a contract and one that has a close relationship with public policy. Courts will often consider contracts which are illegal formation or operation more favorably than those that contravene public policy. Mostly, the favorable consideration is because the doctrine is intended to prevent the degradation of law and justice amongst society. It is not designed to circumvent the commercial dealings of general businesses.

Additionally, if the fault between the parties is unequal then the term pari delicito (in equal fault) applies as the presence of fraud, undue influence or oppression prevents the fraudulent party from relying on an illegality defense.

Nelson and Fitzgerald v FJ two prominent precedents in this area support the finding by stating, a contract which is lawful and enforceable upon formation may be binding upon its operation but not those which are against public policy considerations.

If an agreement requires something illegal, it is different to if something illegal must be done to finalize the contract. The statement forms the hard rule of illegality from a Singapore Case; Tien Sew May v Boon Lay Choo. The underlying principle of the case is that while the defense of illegality and public policy isn’t ideal, it may make a contract enforceable if it is beneficial for the general public.

Essentially this means that the courts will enforce an illegal contract if  otherwise more people would suffer unjustly.

When the illegality involves fraud

The principle ex dolo malo non-oritur actio or no right of action can have its origin in fraud, is the underpinning principle of illegality. It means that the defendant will find favor over the plaintiff (the person bringing the action to court) was fraudulent or took part in some of the fraudulent act.

Where they are both equally at fault the courts will apply; potior est conditio defenditis or equal in responsibility better is the state of the possessor. That essentially means that the defendant will benefit more than the plaintiff if the courts see such a case. The holding was applied in Holman v Johnson by Lord Mansfield.

Characterizing the doctrine

This principle is unique as both parties are at fault and not just one. It arises to provide not individual justice but the continued efficacy of the legal system. Therefore, the courts must delicately balance between judging enforceability and not encouraging or frustrating a contract. There are several features that define the leniency and severity of the courts approach to illegal contracts.

The first is the Bowmakers rule; A party to illegality may recover through legal or equitable interest if a claim can establish without reliance on illegality their right to recover. The finding was also seen in part in a later case called Tinsley v Milligan.

Note, the manner in which illegality is articulated in court will alter whether the courts will view the doctrine as a defense, mitigating factor or fundamental limitation. That is essential because it will modify the impact that illegality will have.

The second important factor is windfall gains. Windfall gains is a term used to describe the unexpected benefit of one party at the expense of another. When the plaintiff is likely to receive a windfall gain despite both parties having had a hand in the illegality such as witnessed in Nelson v Nelson the court will not refuse relief as long as the claimant was mistaken or ignorant as to the circumstances which made the contract illegal. It must also be reasonable for them to be ignorant of it, i.e., Signatories to a lease under which a specialty legal statute has recently been enacted. This is interesting because it is one of the few exceptions to the general premise that ‘ignorance is no excuse under the law’.

Thirdly, it may still be the contract may still be enforced when the statute intended to protect a particular class of person for which the claimant is a member. For example, if a law wanted to protect small business construction companies it may continue to enforce the contract if it benefits the small construction company. 

Finally, where the contract's illegal purpose has not achieved the defense of illegality cannot be raised.

As you can see the doctrine of illegality is a very complex area, but with a highly restrictive application. It's nothing to worry about, but it's certainly worth looking into before you engage with any new contracts!

The High Court under the microscope: Crown Melbourne Limited v Cosmopolitan Hotel (Vic) Pty Ltd [2016] HCA 26

High Court of Australia Report and Summary

As a young lawyer living in Australia, one of the things I am most excited about is the access to justice. That means that as Australians and more generally, members of the world we have a right of access to all legal judgments passed down by the courts. Therefore, I would like to summarize a recent high court decision which I’m sure you will all find very exciting. The judgment was handed down on the 20th of July 2016.

The title of the case is Crown Melbourne Limited v Cosmopolitan Hotel (Vic) Pty Ltd. The following is only intended to be a summary of the case and will not include all the detail held by the original judgment.

The judges:

French.

 Robert Shenton French was born in March 1947 and is the twelfth and current Chief Justice of the High Court of Australia. He is from Western Australia and is commonly described as a social progressive judge.

Kiefel.

Susan Mary Kiefel is a Justice in the High Court of Australia and was born in January 1954. She left school at fifteen and is only the third women ever to have been appointed as a judge to the High Court. She’s from Queensland Australia and has a keen interest in comparative law.

Bell.

Virgina Bell is a justice of the High Court of Australia and was sworn in on the 3rd of February 2009. She was one of the first to work at the Redfern Legal Center and has a strong commitment to social justice. However, she does caution against labeling judges and prefers to allow her actions show her true beliefs.

Gageler.

Stephen Gageler is a Justice in the High Court and was previously working as a barrister in Sydney, New South Wales. He was born in July 1958 and has made a name for himself as being someone who is keen to separate himself from the pack. He prefers to write alone and firmly believes in considering public policy when determining a result.

Public policy is a general term meaning to think about the well-being and overall impact on the community.

Keane.

Justice Keane was appointed in 2003 and comes from Queensland Australia. He is often called a ‘speedy judge’ by the media. The term refers to his reputation for fast work and an eye for attempting to minimize the growing complex and expense process that is litigation. In an interview with the Australian, another judge commented that he is ‘a leader in embracing electronic filing and organization of its workload.’

Nettle.

Geoffrey Nettle is called by the attorney general one of Australia’s finest jurists. He caused some controversy as he is the oldest judge to be appointed to the position as judges are required to retire at the age of seventy. With great wit, he told an audience ‘any damage I may do now is limited.’ He’s an approachable judge with an incredible diversity of interest and experience.

Gordon JJ:

Michelle Gordon was appointed to the court in June 2015. Before her appointment, she was a judge in the Federal Court of Australia. Justice Gordon has much experience from her previous experience in the Federal Court.  She is also highly regarded by the legal community.

 The case

Parties (members) to the case:

Appellant: Crown

Respondent: Cosmopolitan

The big issue:

Crown made a statement to Cosmopolitan that they would be ‘looked after at renewal time.’ The court had to consider whether this statement meant that Cosmopolitan had a guaranteed future with the lease.

Court history:

The VCAT determined that the declaration implied that Crown had to renew the leases for five years on terms that they could decide. The Tribunal also concluded that if they were wrong, then the tenants were estopped from denying the existence of the collateral contract.

Terms:

VCAT: Victorian Civil and Administrative Tribunal (Australia)

Estopped: Refers to the legal doctrine of contract law ‘estoppel.’ That means when a promise is made that a second party relied and acted on they are entitled to have it enforced in a court of justice.

Collateral contract: The happens when one contract already exists but another promise or condition connected to that contract forms another contract – called a subsidiary contract.

Facts of the case:

Crown owns the Melbourne Casino and the Entertainment Complex. The tenants then had two leases where they operated two restaurants. In 2005 lease negotiations began and the new leases offered by the Crown were limited to five years. They also did not contain an option for renewal and only required for the Crow­­­­n to give six months’ notice to let Cosmopolitan know whether they would:

A)    Renew the lease and the terms

B)    Allow the tenant to occupy the premises on a monthly basis after the expiry date

C)    Require the tenant to leave

Part of this agreement also mean that Cosmopolitan had to pay for and run a major refurbishment. The resident’s representative did express concern about renovation costs and attempted to solicit a promise of lease extension from the crown. However, Crown was unwilling to do this.

The contract was signed in 2005 and delivered to the Crown in March 2006.

In 2008 tenders were requested by Crown for new leases. Cosmopolitan put their bids in during March 2009. Crown rejected them and required them to vacate the premises by August 2010 when their 2005 lease expired.

In 2010 Cosmopolitan brought the issue to VCAT and complained that Crown had suggested to their legal representative that they'd have an extra five years of tenancy on their lease. They said that the refurbishments would not have occurred without this promise.

They claimed two things:

1.    The promise created a collateral contract

2.    If it did not create a collateral contract, Crown was estopped from not extending their lease.

Both claims have the same effect. The Crown would not be able to refuse to extend the lease.

VCAT did not find these representations in the terms but did find a statement that gave rise to a collateral contract. They rejected evident from Mr. Zampelis, Cosmopolitan’s legal representative but did accept evidence from Mr. Zampelis about assurances sought from Crown about a longer release term. The key piece of evidence was a handwritten note claiming that Cosmopolitan would be ‘looked after’ at renewal time.

VCAT’s original reasoning:

Promissory and Proprietary Estoppel

According to the High Court, VCAT erroneously reasoned in regards to the promissory statement. The promise to renew a five-year lease implied that the renewal would be for the same period. VCAT said that this was the only term that the Crown had to uphold. They did not agree that similar terms and conditions to the 2005 contract had to be applied. The High Court infers that this kind of reasoning is risky as commercial enterprises cannot always be trusted to be fair under circumstances like these.

The enactment of estoppel requires a precise and unambiguous statement; Low v Bouverie. This requires that the person who they are addressed to would understand them in a particular way. They must be capable of misleading a reasonable person in that same situation to believe something that is not accurate. In this circumstance the statement ‘looked after at renewal time’ is not capable of conveying that Crown would extend the lease.

Therefore, the estoppel doctrine does not apply to this circumstance due to the ambiguity of the statement.

Collateral Contract

Hospital Products v US Surgical Corp; a representation made in the course of negotiations may result in an agreement collateral to the main agreement if it can be concluded that the parties intended that representation to be contractually binding or if it has that quality of a contractual promise. The Supreme Court of Victoria said about this case the statement ‘looked after at renewal time’ was too ambiguous to be inferred to mean a contractually binding promise to give an extra five years of lease.

The Supreme Court also said that the statement in question lacked specificity and failed to outline how exactly the Crown would fulfill the promise.

Result:

There was no promise, and there was no contract. The lease was lawfully terminated, and Cosmopolitan are not entitled to a renewal or damages.

What does this mean for me?

It doesn’t add much to the doctrine of estoppel, but overall it does tell you that if you’re in a negotiation process with someone you should always make sure that you’re both being specific. There are a lot of court cases similar to this one where ambiguous statements led to prolonged legal conflict that is often costly and ineffective.

If you’re entering a contractual negotiation like the one above it is advisable that you enlist the services of a registered legal practitioner. You may think solicitors are expensive but court costs are higher!

Highlights from some of the judges:

Gaegeler:

-    The lease did not operate to confer a contractual discretion which is circumscribed by the collateral contract…instead to impose a contractual obligation on Crown to give notice of a decision to be made by Crown outside the terms of the lease.

-    [Crown’s case] assert’s want of contractual certainty [and] contractual completeness.

Keane:

-    The categories of promissory and proprietary estoppel serve a common purpose of protecting a party from a detriment which would flow from a party’s change of position if the assumption or expectation that led to it were deserted. (Giumelli v Giumelli)

-    It would reduce the law to incoherence if a representation to uncertain or ambiguous to give rise to a contract of a variation of contractual rights and liabilities were held to be sufficient to found a promissory estoppel

Nettle:

-    Principal question…is whether the court of appeal was correct to remit the matter back to VCAT on the basis that Crown was estopped from departing from the tenants assumption…that question should be answered no.

-    [about the application of promissory estoppel] The notion of some “lower limit” of the “great area” was misconceived {emphasis not added}

If you'd like to read the judgement in full it is available online here.

Or you can read other high court cases online here.

The fault in our democracies

Safe to say coffee won't be going
near my laptop again!

Hello everyone, sorry for the long break in posting. It was supposed to be a short break – but following some computer problems, it quickly turned into a longer one. – Long story short I managed to spill coffee on my laptop…and didn’t that just ruin my love of coffee? 

There have been a lot of interesting things going on in my absence including but not limited to, the rise of Donald Trump, the Medicare scandal and most famously the Brexit decision. There are a lot of legal issues associated with them, but the most common thread between all of them is misinformation causing a false overall decision.

It is the general rule that you cannot intentionally misinform the public without some consequence for your mistake. We witness this most commonly through media shows like today tonight or consumer affairs, which publicly shame businesses for misinforming the public producing a false or unfair result. A couple of years ago a juice company Ribena was rebuked after its ‘black current health drink’, promoted to children and their families, was shown to be incredibly unhealthy. The drink deliberately misled parents to believe that it was safe to consume regularly when in actuality it could have harmful effects on health if regularly consumed without a healthy diet and regular exercise.

I am sure there are much more examples of penalties for companies that misinform the public. 

The law may seem boring, but it is important
for maintaining an equitable society

However, despite penalties existing for businesses, a cone of immunity surrounds the political arena and its delegates. It is fair to say that the most watched democracies; namely the USA and the UK have been the largest culprits of these political scandals. Obviously, there must be some level of inducement made by political parties to promote their message. However, surely it must stop short of behavior that would be unacceptable anywhere else, like lying or harassment. I would like to pick this topic up later as I feel there are many more sides to this argument.

This situation does bring up the question of freedom of speech. When electing politicians, you would think that you would want to give them the freedom to speak openly. However, this privilege is

clearly being abused, especially in America where the constraints on freedom of speech are so minimal that you could just about defame anyone as long as you have the money to defend yourself. Which is probably why Donald Trump has not been sued for making inappropriate and defamatory public statements such as;

‘Barack Obama’s birth certificate is a fraud.'

‘Ariana Huffington is unattractive, both inside and out.'

‘It does not matter what the media write as long as you have got a young and beautiful, piece of ass.'

‘If I were running ‘The View’ I’d fire Rosie O’Donnell. I mean, I’d look at her right in that fat, ugly face of hers, I’d say ‘Rosie, you’re fired.’”

‘The only card [Hilary Cinton] has is the woman’s card. She’s got nothing else to offer and, frankly, if Hillary Clinton were a man, I don’t think she’d get 5 percent of the vote.’

In all of these quotes, Trump either directly defames a famous person or an entire industry. If you do some research, you will find that Trump has managed to escape liability for all of these statements almost entirely.

A lot of what Trump says makes me think of
'Let them eat cake' - Marie Antoinette

I say almost because the one point at which Trump has suffered and I am sure you will all agree is his personal brand. A personal brand is a term usually referring to a person’s professional reputation and transferring it into a market value. Every person has a personal brand, and you may use it when applying for a job, writing an article or networking at a professional event. Merely mentioning ‘Trump’ can end an entire conversation. His reputation is so socially damaged that some would suggest that it was irreparable.

Terrifyingly, America has continued to support this political figure, despite multiple outrageous and inappropriate statements. Some propose that he is only popular because it is a way of people protesting against the weak leadership shown by other candidates indicating the public’s disillusionment with the overall political system. The landside backing of Barack Obama supports this theory– who, although had a high level of integrity, showed strong leadership and distinction in his policies. This can sway public opinion significantly.

It concerns me that this bears a striking similarity to the Brexit result. I will not give my opinion on the final result because I would prefer to perform an analysis of the actual events leading up to it.  The Brexit was fraught with both misinformation and public confusion. The high level of disillusion in Britain with the decisions of the European Union in the past and the lack of democratic influence that they had over Brussels led to uncertainty about the actual consequences of the decision.

Some individuals were able to inform themselves about the role of the European Union and investigated in depth the effects that the British leaving the European Union would have. Yet the majority of people relied upon the media and its coverage of politicians to determine who they would vote for. Similar as to what occurred in Australia during the Medicare Scandal of 2016, one issue led the decision because of media sensationalism.

Immigration.

Immigration is a contentious problem that has advantages and disadvantages on both sides. It would be unreasonable to suggest that migration does not come with difficulties. Every culture from Africa to Britain has its quirks and melding one culture with another will undoubtedly cause conflict. Therefore, finding cultures that are similar are imperative for positive migration with minimal conflict.

Some may suggest that the geographical location of European countries infers a cultural similarity. However, such a suggestion is outdated and ridiculous. Russians and Britains are not similar despite sharing a continent. Same as Norway and Germany are not similar despite sharing a border. Australians and Britains have a culture that is relatively similar despite a geographical distance. The same is true for Canadians and Australians.

History and culture are part of who we are
and should not be ignored when seeking a
new homeland

The history shared by the countries has created a similar culture that allows for the blending of the three of them to be as simple as possible. Therefore, thought needs to be given to the culture and habits of the country to which migrants are traveling. It is terrifying enough to move countries, and I am sure that anyone who has visited other countries knows the relief of coming to a country which bears similarity to its own. It is not racist or insensitive to suggest that the common characteristics of cultures should be matched to another country for refugee migration but a practical consideration for better immigration.

However, it does leave open the issue of diversity. Diversity encourages the development of thought and broader value appreciation. In fact, Australia has benefited from the integration of cultures like the Italian, Greek and Vietnamese. This migration did not come without issues and occurred in numbers that were carefully monitored by the Australian government.

It does not take much research to discover the racist rebuke of Australia towards the influx of migrants. It was not long ago that Australia sported a ‘white Australia’ policy, which operated to prevent the flow of undesired migrants into the country.

While the application of the policy was culturally insensitive and disappointing in reality, the theory is sound. The original idea behind it was that Australia would apply a selective process to determine the characteristics of entrants into the country that would suit the ideology of Australian culture. This process preserves the idiosyncrasies that make up a diverse culture while ensuring that there was a thread of commonality that maintained the national image of Australia.

It was the same concern that drove the disillusionment of the British people. In a belief that their national image was under threat with the influx of unknown and potentially radically different migrants a reactive protest resulted in Britain leaving the European Union.

The concern, however, is that the people of Britain did not understand the true nature or impact of their vote. A false understanding was promoted to the public at mass by political parties such as the Independence Party – with political member Boris Johnson.

The ex-Mayor of London was so confident in his false promotions that he drove around on a bright red bus proclaiming that leaving the European Union would give the NHS 350 Million pounds extra a week. Unsurprisingly, this was later denied to be true by Nigel Farage. Nigel Farage is a British Political, who is the leader of the Independence Party.

One would assume that the head of the independence party would have prevented the overzealous Boris Johnson from spreading misinformation. However, it appears that in this battle, it was more about getting votes for their party than actually informing the public.

This cruel tactic may sound familiar to Australians who recently found themselves at the mercy of the Labor party. Bill Shorten, the leader of the Labor Party, pitched a claim to the public that the Liberal Party had plans to privatize Medicare.

Researching is a serious business ;)

As a country that has prided itself on the provision of healthcare to all in need, it is understandable why the public reacted so violently to the claim. Similar to the Brexit this was not the only issue at hand, as the economic future of Australia was also important. Through media tactics, the Medicare scare quickly took hold in the minds of most Australians preventing other relevant discussions from taking place.

What is evident in all three situations is that there is fast becoming a culture of sensationalism in politics. Democracies will always run the risk of erring too closely to an ‘American Idol’ type contest, where popularity determines the winner and not political sense. It is evident that currently, the media is taking a front seat in driving politics away from an objective debate to a reality television style throw down.

It would be inappropriate to ban the media from participating in election campaigns. Freedom of speech is perpetuated by the press and should never be lost. It was a right that democracies around the globe fought for by the people. They did not fight for the right to spread misinformation and I am shocked to see this occurring around the globe.

I would love to hear your ideas about how we can prevent media sensationalism in the future so please if you enjoyed or disagree with me - please let me know! You can get in contact with me through email, twitter, instagram or tumblr.