The Doctrine of Judicial Binding Precedent in the English Legal System - Literature review Example

Doctrine of Judicial Binding Precedent In 1998, the House of Lords decided the case of Kleinwort Benson v Lincoln Council under appeal in a manner that established the legal precedent of restitution and payment under mistake of law. Lord Browne-Wilkinson stated in the case, ‘In truth judges make and change law. The whole of the common law is judge made.’ Thus, in establishing an error in previous interpretation of the law and setting legal precedent, the judges by course of nature determine the actual social application of legal statutes in business, government, or other relationships between citizens and organizations referenced under legislative accords bound by Common Law. In recognizing and ruling for a mistake in law, the judges “held(,) ‘the mistake of law rule no longer forms part of English law.’ Where the law was deemed to have changed after a court decision, money paid under a view of the previous settled law became recoverable. The law is deemed always to have been as now found. The limitation period ran from the date of the discovery of the error of law. The old rule is not to be followed. Money paid under a mistake of law should be recoverable on the same footing as money paid under a mistake of fact, subject in the same way to the defences available in the law of restitution, which include the defence of change of position.” (Casefinder, 2010) The main influence of a ruling such as Kleinwort Benson v Lincoln City Council (1998) is to create through judicial interpretation a possible retroactive re-evaluation of statutes and a re-calculation of tariffs, fees, taxes, levees, etc. based on the newly established judicial precedent, which can impact society in larger ways across sectors and in manners that would not have been possible to predict before the judges’ decision. Furthermore, this can have an impact for individuals, private organizations, corporations, or governmental agencies with regard to budgeting, calculation of operating costs, and in social legislation, the democratic mandate itself can be changed through judicial review and precedent. In analyzing the effects of the doctrine of judicial binding precedent, all of these aspects must be taken into consideration as well as current initiatives to change this power through legislative amendment to Common Law statue. According to Graham Virgo, "It has been a fundamental rule of English law for nearly 200 years that where the plaintiff has made a mistake of law then usually he or she could not base a restitutory claim on that mistake." (Virgo, 1999) The case law on which this is established is taken to be: Bilbie v. Lumley (1802) 2 East 469 Brisbane v. Dacres (1813) 5 Taunt. 143 Henderson v. Folkestone Waterworks Co. (1885) 1 TLR 329 Bilbie v. Lumley (1802) related to an instance of an insurance claim being paid to a party which would not have been required had the agent known the full extent of legislation, and as such, it is frequently cited as an example of the legal precedent that “ignorance of the law is no excuse”. (Casefinder, 2010) When compared to the precedent established under Kleinwort Benson v Lincoln City Council (1998), the circumstances of the agreement are taken to be similar. Kleinwort Benson paid a number of local government agencies a mutually agreed upon sum of capital under a contract taken to be valid as understood at the time by both parties. When judicial interpretation altered the understanding of the statute through legal interpretation, the effect is equivalent to the passage of a new law, with retroactive and cross-sector applicability. Neither plaintiff nor defendant can claim ignorance to the law as understood in the new interpretation, and thus must calculate their responsibilities and agreements in accord with the statute as newly interpreted. In this manner, Kleinwort Benson v Lincoln City Council (1998) is fully consistent with the legal precedent understood and accepted since Bilbie v. Lumley (1802) in English Common Law tradition. However Lord Goff of Chievely cites a division in previous judicial precedent that is overturned in Kleinwort Benson v Lincoln City Council (1998). "Previous authority, such as it was (see Jackson, History of Quasi-Contract, pp. 58-61), shows no distinction being drawn between mistakes of fact and law; on the face of the law reports the suggestion that a mistake of law did not ground recovery appears to have emerged for the first time in an obiter dictum of Buller J. in Lowry v. Bourdieu (1780) 2 Doug. 468, 471, the rule of non-recovery being based by him on the maxim ignorantia juris non excusat--an observation invoked by Lord Ellenborough in Bilbie v. Lumley, 2 East 469, 472... In a later publication in 1806 (his translation of Pothiers Treatise on Obligations), Sir William, disappointed by his dedicatees decision in Bilbie v. Lumley four years earlier, maintained at greater length but with great courtesy his opinion that money paid under a mistake of law was generally recoverable on that ground." (Judgment: Kleinwort Benson LTD. v. Lincoln City Council, 1998) In this manner, Kleinwort Benson v Lincoln City Council (1998) can be viewed as establishing the equivalence of recovery between contract mistakes undertaken in both mistakes of law and mistakes of fact. It is through this reasoning that Lord Browne-Wilkinson concluded, “in these circumstances I find myself in a quandary. I am convinced that the law should be changed so as to permit monies paid under a mistake of law to be recovered. I also accept, for the reasons given by my noble and learned friend Lord Goff, that the relevant limitation period applicable to such a claim would be that laid down by section 32(1)(c) of the Limitation Act 1980, i.e. six years from the date on which the mistake was, or could with reasonable diligence have been, discovered.” (Judgment: Kleinwort Benson LTD. v. Lincoln City Council, 1998) The relevance of this is that law can be changed, both in scope and course, by the judiciary review and appeals process, with a retro-active applicability of six years from the establishment of the new precedent introduced given for the affected parties to take course of redress or make amends. Certainly, in one aspect, the judicial mood or whim and its opposite representation in institutional operation and budgetary limitations, can all combine to increase or decrease judicial activity by establishing or re-establishing legal precedent that requires further docket review. In large scale industries, banking, or finance, the recourse following a change of judicial precedent can involve potentially thousands of cases and billions of pounds sterling, making a very legitimate and important question the matter of complete judicial independence from influence that might sway interpretation to favor a sector or industry. The limited number of individuals with focused authority for instituting the change is by nature a risk to society as it is dependent on the altruism and progressive insight of the judiciary to review and support legislation in the public interest, not private, though there are few explicit means of regulating and controlling this in application. It remains the choice of the judiciary to be in accord with public interests, but they may just as forcefully rule for private corporations or profit, in examples where case law changes may overtly benefit one sector or corporation, as in monopolistic regulation. This represents the undemocratic risk inherent in the doctrine of binding judicial review and precedent which cannot be addressed outside structural reform. Related to this is the legal problem of unjust rewards that may result from an error in the law or a mistake in fact, as well as the retroactive application of legislative changes resulting from judicial review and new precedents. As Lionel Smith writes, "In Kleinwort Benson Ltd. v. Lincoln City Council, the House of Lords allowed a claim based upon mistake of law, even though the swap transaction under which the payments had been made was fully executed. One of the arguments by which the defendants tried to resist payment was based upon the logic of mistake. It was said that in such a case, the force of the mistake was spent. The argument in those terms was rejected, as it had been in earlier litigation where the claim was based on failure of consideration. In other words, the ‘executed transaction’ defence does not seem to work when it is tied into the logic of unjust factors. A mistake is a mistake, and a failure of consideration remains one, even where the transaction is fully executed... The discussion of Kleinwort Benson Ltd. v. Lincoln City Council emphasises that in some cases, liability in unjustified enrichment is not based on the defective consent of the plaintiff to the transfer of wealth in question." (Smith, 2000) As a compromise to this issue, the House of Lords promotes a six year statute of limitations for retroactive changes to be implemented, though some such as the Singapore Academy of Law and others, have suggested legislative reform to prevent the retroactive application of liability adjustment stemming from judicial interpretation. (Law Reform Committee, 2010) Lord Browne-Wilkinson states in Kleinwort Benson v Lincoln City Council (1998) the relation of changes to judicial precedent concerning a regulatory statute were clearly delineated in Common law tradition through Henderson v. Folkestone Waterworks Co. (1885). “In Henderson v. Folkestone Waterworks Co. (1885) 1 T.L.R. 329, the plaintiff had paid water rates to the defendant calculated in accordance with the law as it was held to be by the Court of Appeal. Subsequent to the date of payment, the House of Lords in the Dobbs case changed the law: if calculated under the changed law the plaintiff had overpaid. He sought to recover the overpayments on the ground that he had paid under compulsion and under a mistake of law. It was apparently accepted by the Court that if both these factors (i.e. compulsion and mistake of law) were present, the overpayment could be recovered.” (Judgment: Kleinwort Benson LTD. v. Lincoln City Council, 1998) By their decision in the Kleinwort Benson case, the House of Lords extends the precedent of Henderson v. Folkestone Waterworks Co. (1885) by implying that compulsion is inherent in regulatory requirements and that mistake of law was present, even though not understood as such professionally or officially as such before the precedent setting ruling by the Appeals court. This is the main point of controversy surrounding the Kleinwort Benson v Lincoln City Council (1998) and the reason that legislative reform is being introduced to limit the extend or retro-active alteration or punitive damages as interpreted ex post facto by judicial authority. In summary, the doctrine of binding judicial precedent is a subject of controversy over the extent of the judicial mandate to legislate through interpretation, and the extent to which retro-active interpretations should be applied in regulatory concerns. This effects questions of risk management on behalf of private industry, commerce, and finance, as well as budgetary maintenance and reliability in estimates, as given, by a government agency in regard to its financial obligations under law. In recognizing the equality of mistakes of law and mistakes of fact, the House of Lords created a binding precedent of retro-active applicability for judicial re-interpretations to be undertaken within a period of six years from the time of the judicial decision. This decision carries with it the interpretation of unjust rewards that may have occurred unknowingly, under ignorance of the new decision as had not been outlined previously lacking judicial review of the statute, as well as after the new precedent has been established that need to be re-balanced. Kleinwort Benson v Lincoln City Council (1998) brings judicial activism and legislative ability to the center of social debate on the process of reform and appeals, while opening the process up to a critique of minority interests colluding with private profit over the democratic mandate and public interest. In considering judicial interpretation as retroactive, de facto legislative intent, Kleinwort Benson v Lincoln City Council (1998) calls into question the realistic ability of businesses, individuals, and organizations to plan and build with foreknowledge of later judicial interpretation concerning legal review and precedent. 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