It is time for the doctrine of precedent to be reformed
Lord Denning suggested a number of times that Court of Appeal judges should be able to go against the decisions of the House of Lords where it was apparent that the House of Lords had made their decision without considering all the relevant authority that applied in the case. It is not surprising that Denning would feel this way. One gets the impression that he was a bit of a loose cannon. The Dirty Harry of the British legal profession. There were certainly many judges who disagreed with his views on any number of things and I sometimes think that the main reason he was made into a Lord was so that when he came up with his more radical decisions they would be watered down by the presence of four other Lords sitting the case rather than only two other Court of Appeal judges. No doubt the feeling of having risen to the top of the legal profession on the merits of your abilities would also give the Lords a greater level of confidence with which to oppose Lord Denning, arguably one of the most famous (infamous?) judges of the twentieth century.
Denning tried to make use of this belief that precedent could be approached with the flexibility of attitude that was a hallmark of his career in the case of Broome v Cassell  2 Q.B. 354; Denning convinced the other judges in the case that the precedent set by the House of Lords in Rookes v Barnard  A.C. 1129 had been made per incuriam, without taking into account previous judgements of the House of Lords. Of course Rookes v Barnard was set before the 1966 practice statement and as such would have been a case in which the Lords did not have the discretion to go against previous decisions of the House.
When the case inevitably went before the Lords the Lord Chancellor was not impressed by the Denning’s obvious attempt to escape the limits of stare decisis.
This did not stop Denning making another attack on precedent in Schorsch Meier GmbH v Henning QB 416 where he tried to use an idea expressed by the maxim ‘cessante ratione legis, cessa ipsa lex’, with the reason for the law ending the law itself also ceases. While some would say that the greater the age of the precedent the stronger its authority others might say that a lot of precedents should simply get old and die. Out with the old and in with the new. The court did not fully back Denning in this instance. The case they were looking at was Re United Railways of Havana and Regla Warehouses  A.C. 1007. Foster J agreed with Lord Denning that the rules had changed and a different result was necessary. Lord Justice Lawton showed the resolve that was wielded with his higher rank and went against the majority with the opinion that the Court of Appeal had no authority to overrule the Lords.
Denning got his way in this case but he tried to use this rule again in the case of Miliangos v George Frank (textiles) Ltd  QB 489 and this time the case went on to the House of Lords where they once again took a very dim view of Denning’s attempts to avoid stare decisis. They then went on to decide the case using exactly the same logic as Denning had used at appeal. The House of Lords has been very certain that they do not wish the Court of Appeal to have a mind of its own. However, as this assertion was not made as the actual ratio decidendi (the reason for the decision of the court in the case) in Miliangos is it a binding assertion? It would seem that this case was an end to the matter but it seems that to be binding, precedent needs to be very strictly tied to ratio decidendi. My evidence for this strictness is actually the main point I wish to address and the previous 600 words or so serve simply as an introduction to the subject.
The case that gave me pause for thought was the case of Malik v Bank of Credit and Commerce International  UKHL 23:
This is a case that is generally listed as setting a precedent that in a contract of employment there is an implied term of mutual trust and confidence. However I was taught in University that the precedent it set was that it is not possible to claim for loss of reputation in a case on contract. It is a view I have since seen set out in a number of text books.
- The claimants in this case were senior employees of the defendant bank. Following the discovery of a major fraud at the highest levels the bank was forced to liquidate and this led to the claimants being made redundant. The fraud was quite severe and involved money laundering, terrorists and extortion on a global scale. Malik and Mahmud found that having been made redundant in such circumstances they were unable to find employment in the financial services industry. They believed their reputations had been destroyed.
- Malik and Mahmud relied on an implied term in their contract of employment in order to sue their former employers. They said that although it was not explicitly written into the contract it was so obvious that it could safely be assumed to be part of the contract. The implied term was such that the employer should at no point during the employment behave in such a way as to damage future employment prospects.
- This idea went through the courts and all the way to the House of Lords. The position held by Malik and Mahmud was contrasted with jobs such as an apprentice or a performer where the relationship was considered to be one such that the employer would be seeking to improve employment prospects while in this case that would not be expected of the employer.
- In the most recent book to take the view that the case was about the impossibility of claiming for loss to reputation in a contract case it was reported that the claim failed and that Malik and Mahmud did not win. The following quote from the Court of Appeal supposedly supports this principle.
- “…damages are not recoverable in contract for damage to or loss of an existing reputation” This was said by Lord Justice Morritt  I.C.R. 406
- However the law is a tricky and complicated beast. Perhaps all these writers have not understood the decision in this case or perhaps it is a case that there is something very wrong with the system of precedent.
- The case went on from the Court of Appeal to the House of Lords where Lord Steyn drew attention to the fact that a claim could only succeed when there was no legitimate reason for the employers’ conduct and that the conduct was of such a nature that the implied condition of trust between employer and employee would be likely to be severely damaged. Lord Steyn says that of course it is very difficult to calculate damages in such a case but he mentions, “no Law Lord said that in breach of contract cases compensation for loss of reputation can never be awarded, or that it can only be awarded in cases falling in certain defined categories.” He goes on to say, “A rule that damages can never be recovered in respect of loss of reputation caused by a breach of contract is also out of line with ordinary principles of contract law.” He goes on to talk about the decision in Marbe v George Edwardes (Daly’s theatre) Ltd  1 K.B. 269 which he says is in complete contrast with cases that were relied on by the judges in the lower courts, “In Marbe on similar facts the Court of Appeal came to the opposite conclusion: damages in respect of loss of an existing reputation was expressly held to be recoverable”. Lord Steyn then backs this up by saying, “in Herbert Clayton v. Oliver A.C. 209 the House of Lords approved Marbe. The House of Lords did so expressly”
- Lord Steyn says that, “In my judgment therefore the authorities relied on by Morritt. L.J. do not on analysis support his conclusion. Moreover, the fact that in appropriate cases damages may in principle be awarded for loss of reputation caused by breach of contract is illustrated by a number of cases which Morritt L.J. discussed: Aerial Advertising Co. v. Batchelors Peas Ltd. (Manchester)  2 All.E.R. 788; Foaminol Laboratories Ltd. v. British Artid Plastics Ltd.  2 All.E.R. 393; Anglo-Continental Holdings Ltd. v. Typaldos Lines (London) Ltd.  2 Lloyd’s Rep. 61. But, unlike Morritt L.J., I regard these cases not as exceptions but as the application of ordinary principles of contract law.”
- He says that there is a natural difficulty in quantifying such damages but ultimately concludes by saying, “The limiting principles of causation, remoteness and mitigation present formidable practical obstacles to such claims succeeding. But difficulties of proof cannot alter the legal principles which permit, in appropriate cases, such claims for financial loss caused by breach of contract being put forward for consideration. “
- Lord Steyn then allows the appeal with the majority of the Lords giving their full backing without contributing anything further to the judgement. This judgement was delivered in 1997. I am at a loss to explain why law books still say that the decision means that there can be no claim for loss to reputation in contract. Fair enough it was stated by Lord Steyn explicitly that his ratio was concerned with the implied clause about trust and confidence but the only way I can imagine the Court of Appeal version still standing for the principal that one cannot claim for loss of reputation is accepted is if the Court of Appeal version set a precedent in its ratio decidendi that still stands despite the fact that the House of Lords allowed the appeal against the case with a ratio decidendi on a different point and therefore did not reverse the CA judgement despite Lord Steyn leaving no doubt that it was decided per incuriam.
The CA case goes down as precedent in history and the HL obiter is left to disappear into the deep pages of the law reports where few students of law will ever see it despite the fact that it represents such incredibly strong persuasive authority that no-one who ever brings an analogous case to court will ever have any doubt that reaching a court with the requisite authority to overturn the decision is a mere formality. If it were overturned by a lower court it would offend against the doctrine of stare decisis and the judges would certainly find that the Lords would disapprove, even if they then followed the same reasoning to reach the same decision themselves.
If this is the case then the only way that a case on similar facts can be decided and a new precedent set is to take the case to the House of Lords and go through the trouble of an additional level of law to set a decision which is so plainly clear that it could be set by a clerk with a rubber stamp. I have reached this conclusion as the only alternative is that everyone who has written a book claiming the case sets a precedent of an impossibility to claim for loss of reputation is either wrong or the court system is ludicrous. I am not so arrogant to believe that I am sharper than numerous writers of law books before me but the fact that the law is an ass is well documented. I have therefore assumed that the system of precedent is plainly in need of reform. If the system of precedent is to blame and the law supposes it is impossible to claim as a precedent these words of Lord Steyn then ‘”If the law supposes that” said Mr Bumble squeezing his hat emphatically in both hands “the law is an ass – an idiot”’ (Dickens (obviously) Oliver Twist 1838)
Although that beautifully conclusive statement would be a delightful point at which to finish writing it does not offer us a solution. Indeed we have been aware that the law is an ass since 1838. In fact as the expression was originally published by George Chapman in the 1654 in the play ‘Revenge for Honour’, which many believe to actually date from 1620 this is not news at all. Given the speed at which the legal profession pushes through reform we can safely anticipate the law still being an ass at the dawn of the next millennium.
Changes can be made though. Of course there are many things to be changed in the law and the world in which the law is used is changing at an extremely rapid pace. If the system of precedent is bound to the extent that I suppose it is then it is in need of change so that it is adaptable enough to cope with this changing world. In fact, even if I am wrong and the law of precedent is only bound to the extent that Denning tried to circumvent then my case is no less weak. Change is necessary.
The common law’s greatest strength is its flexibility to adapt to different situations that are brought before it. However the system of precedent has greatly reduced this flexibility and led to the common law being far too rigid. So rigid in fact that the system of equity was brought in. The greatest strength of the system of equity was its flexibility. However the system of precedent has greatly reduced this flexibility until now equity is seen as too rigid. We cannot continue like this. We desired this flexibility in the past when the pace of change in life was extremely slow. Now the world radically changes shape every few years. The past two decades have seen the necessity for parliament to pass more legislation than it did in its entire history beforehand. This is why we need to get some of this flexibility back.
What should we do? Last time we created Equity. That appears to be a short term solution as equity is now as rigid as the rest of the law. What needs to be reformed is the system of precedent. It has become plain that with the passage of time things change. That was Denning’s observation in Schorsch Meier and Miliangos. Those cases were 50 years ago. Denning never lived to see ‘change’ as it is now. The necessity of the Court of Appeal to make decisions that go against precedents set by the House of Lords is stronger now than it ever was. Of course there will be many people harrumphing quite seriously at this idea. However, I do not propose the Court of Appeal is given free rein to just do as they please, but I think there should be a time limit placed upon precedents.
There should be discretion given to the House of Lords to pick a limit within a certain time frame. If they are offered a maximum of 50 years by statute then this seems quite reasonable to me. In cases that involve very serious seemingly timeless issues they can impose the limit of 50 years before the precedent ceases to be binding and becomes only persuasive. If it is an issue that is affected by the rapid change that goes on around us all the time maybe they can set a limit of 25 years for the precedent to remain binding or perhaps any other figure. If judges can be given discretion to choose a maximum or minimum date for a man to be incarcerated then I am certain they will not have too much difficulty in setting the expiry date of a precedent.
Doing this will save the money and time that is wasted with the formality of taking a case to the House of Lords in order to have a stale precedent overturned. Of course it is likely that many cases overturned by the Court of Appeal will then progress to the House of Lords in order to discover whether their new decision is acceptable in the eyes of the law but some cases will not and every single case in which it is accepted at the level of the Court of Appeal that the change was appropriate will be more money in the public coffers and more time for Lords to deal with issues where they are actually needed.