Regazzoni V. Sethia Notes

Regazzoni v. Sethia

Facts

The appellant, who resided in Switzerland, brought the action out of which this appeal arose against the respondents claiming damages for breach of contract. He alleged that the respondents had agreed to sell and deliver to him September/October, 1948, c.i.f. Genoa 500,000 jute bags of the quality and standard known in the trade as new B twills and that they had wrongfully repudiated the agreement. The respondents defended the action on numerous grounds, with only one of which the House of Lords were now concerned, namely, that "the said contract, if any, was to the [appellant's] knowledge an illegal contract and/or was void and unenforceable in that it had for its purpose an object which was illegal and/or contrary to public policy, namely, the taking and shipment of jute goods from India where the ultimate destination was the Union of South Africa, in breach of" a certain Act of the Indian Parliament and Regulations made thereunder.

Regulations in India:

The Act in question was the Sea Customs Act, 1878, which (as modified up to December 1, 1950) provided by section 19 that the Central Government might "from time to time by notification in the [Official Gazette] prohibit or restrict the bringing or taking by sea or by land goods of any specified description into or out of [the States across any customs frontier as defined by the Central Government]"

In exercise of the powers conferred by this Act on July 17, 1946, the Central Government of India duly made an order prohibiting the taking "by sea or by land out of British India of goods from whatever place arriving which are destined for any port or place in the Union of South Africa or in respect of which the Chief Customs Officer is satisfied that the goods although destined for a port or place outside the Union of South Africa are intended to be taken to the Union of South Africa.”

The facts which appeared to Lord Reid to be material were (1) that both parties knew that it was impossible to obtain so large a quantity of B twills for early shipment from any source other than India; (2) that, to the knowledge of the respondents, the appellant intended to sell the goods for shipment to the Union of South Africa; (3) that both parties knew that the law of India prohibited the export from India of goods destined to South Africa directly or indirectly; and (4) that the respondents intended, and the appellant knew that they intended, to evade the Indian prohibition by finding a shipper in India who would not ask inconvenient questions about the destination of the goods and who would be able to get the goods out of India.

Holding

Viscount Simonds

The question then arises - and it is, as I say, the only question for your Lordships' consideration - whether the respondents were justified in repudiating the contract. They claim to be justified on the ground that I have already stated. Their broad proposition is that whether or not the proper law of the contract is English law, an English court will not enforce a contract, or award damages for its breach, if its performance will involve the doing of an act in a foreign and friendly State which violates the law of that State.

My Lords, in the consideration of this matter I deem it of the utmost importance to bear in mind that we are not here concerned with a suit by a foreign State to enforce its laws… but with a very different question, viz., whether in a suit between private persons the court will enforce a contract which involves the doing in a foreign country of an act which is illegal by, and violates, the law of that country.

In the statement of the question I call particular attention to the words "the doing in a foreign country," for it may well be that different considerations will arise and a different conclusion will be reached if the law of the contract is English and the contract can be wholly performed in England, or at least in some other country than that whose law makes the act illegal.

It is, on the other hand, nothing else than comity which has influenced our courts to refuse as a matter of public policy to enforce, or to award damages for the breach of, a contract which involves the violation of foreign law on foreign soil, and it is the limits of this principle that we have to examine. If the principle is, as I think it clearly is, based on public policy, your Lordships will not hesitate, while disclaiming any intention to create any new head of public policy, to apply an old principle to new circumstances.

Public Policy Basis of the Rule

But before examining the cases in which the question has been the...

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