Uncertainty in Commercial Law

In this sense, legal certainty is not directly concerned with the substance of the law, a point made by Lord Mansfield in Vallejo v Wheeler (1774) 1 Cowp 143 at 153: “In all mercantile transactions the great object should be certainty: and therefore, it is of more consequence that a rule be certain, than whether the rule is established one way or the other. Because speculators in trade then know what ground to go upon.”

See generally R Goode, “The philosophy and concepts of commercial law” (1988) 14 Monash Law Review 135.

In some instances, predictability has been characterised as serving legal advisers as much as persons subject to the law. See e.g. O'Neill v Phillips [1999] 2 All ER 961 at 967 per Lord Hoffmann.

One explanation of how this may occur is offered in B.(5) below.

See S Waddams, Dimensions of Private Law (2003) 206 regarding the distinction between clarifying or applying an existing rule and creating a new rule.

For discussion of how this may operate when courts choose to distinguish or “not follow” previous authority, see R H S Tur, “Time and law” (2002) 22 OJLS 463.

[1897] AC 22, discussed at F. (1) below.

Similarly, the decision of the Court of Appeal in Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2002] QB 679 dealt with the problem of reconciling the respective approaches of common law and equity to mistakes in law by “disapproving” the leading decision made under the equitable jurisdiction, Solle v Butcher [1950] 1 KB 671.

The growth of securitisation in recent years is an example of such a process.

A modern example is In re Spectrum Plus Ltd (In Liquidation) [2005] 2 AC 680. In that case the House of Lords provided a justification for overturning settled law on the basis that (a) those who rely on a decision at first instance must be taken to be aware of the possibility of it being overturned and (b) the statutory priority given to the holder of a fixed charge over preferential creditors must be regarded as superior to the need to preserve legal certainty through upholding prior case law.

Morgan Guaranty Trust Co of New York v Lothian Regional Council 1995 SC 151.

Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349. For criticism, see M Bridge, “Restitution and retrospective law: Kleinwort Benson v Lincoln City Council” (1999) 14 Butterworths Journal of International Banking and Financial Law 5.

In Kleinwort Benson Lord Hope (at 410B) distinguished a mistake of law from the presence of some doubt over the law. Moreover, as is made clear by Brennan v Bolt Burdon [2005] QB 303, it is a matter of interpretation whether a party to an agreement or compromise has surrendered rights of which that party is unaware or could not be aware because they have not yet been recognised by the courts. See also Mahmud v BCCI [1998] AC 20.

Kleinwort Benson at 378 per Lord Goff. It remains something of a mystery why so few cases based on mistake of law come before the courts. In some areas, such as insurance law, where the law has been in flux in recent years, there would seem to be scope for claims paid or refused on the basis of the law at the time of payment to be re-opened on the basis of a mistake of law. While Brennan v Bolt Burdon [2005] QB 303 can be viewed as restricting the scope for holding a contract void as a result of mistake, it does make clear that a compromise of a claim can also be held void as a result of a mistake of law. A rare example of the application of the principle is BCCI v Ali [2002] 1 AC 251.

Kress (n 18) at 285.

See e.g. A Halpin, Reasoning with Law (2001) 104, arguing that there may be questions posed...