[QUEEN'S BENCH DIVISION]

GEISMAR v. SUN ALLIANCE AND LONDON

INSURANCE LTD. AND ANOTHER

[1975 G. No. 3758]

Insurance - Public policy - All risks and householders's policies - Indemnity for loss by theft - No customs and excise duty paid on jewellery subsequently stolen from house - Whether contrary to public policy for insurers to pay indemnity for uncustomed jewellery - Whether insurers committing offence by paying - Customs and Excise Act 1952 (15 & 16 Geo. 6 & 1 Eliz. 2, c. 44), s. 304 ¹

The plaintiff had brought into the United Kingdom various items of jewellery which he failed to declare and on which he did not pay customs and excise duty. He had thus committed an offence in relation to the non-payment of duty and the jewellery was liable to forfeiture at any time. He claimed indemnity from the defendant insurers for the loss through theft at his home of the uncustomed jewellery and other items, which as part of the contents of his house were covered by three contracts of insurance with the defendants. They refused to indemnify the plaintiff in respect of the loss of the uncustomed items on the grounds of public policy and they claimed also that if they did indemnify the plaintiff they would be committing an offence under section 304 of the Customs and Excise Act 1952. On the plaintiff's claim for indemnity under the insurance policies:-

Held, (1) that the defendants would not commit an offence under section 304 of the Customs and Excise Act 1952 by mere payment to the plaintiff but only if they dealt with uncustomed goods with intent to defraud and, therefore, that plea of the defendants failed (post, p. 387B).

(2) That to allow the plaintiff to recover under the policies for goods illegally imported would be to allow him to recover the insured value of goods which might have been confiscated at any moment and were potentially without value to him; that the policies would be unenforceable if to enforce them would conflict with public policy; accordingly, since there had been a deliberate breach of the law, the court would not assist the plaintiff to derive a profit from it even though it was sought indirectly through an indemnity under an insurance policy: the plaintiff's claim thus failed in respect of the uncustomed jewellery and he could only recover under the insurance policies for the value of the undisputed articles (post, pp. 390D, 395B,C, E, F).

Parkin v. Dick (1809) 11 East 502 and dictum of Lord Denning M.R. in Mackender v. Feldia A.G. [1967] 2 Q.B. 590, C.A. applied.

Hardy v. Motor Insurers' Bureau [1964] 2 Q.B. 745, C.A.; Bird v. Appleton (1800) 8 Term Rep. 562 and Gordon v. Chief Commissioner of Metropolitan Police [1910] 2 K.B. 1080, C.A. distinguished.

[Reported by MRS. H. WHICHER, Barrister-at-Law]

1 Customs and Excise Act 1952, s. 304: see post, p. 386C, D.

Per curiam. In cases of unintentional importation or innocent possession of uncustomed goods, different considerations would apply (post, p. 395E).

The following cases are referred to in the judgment:

Alexander v. Rayson [1936] 1 K.B. 169, C.A.

Armstrong v. Toler (1826) 11 Wheat. (U.S. Reports) 258.

Askey v. Golden Wine Co. Ltd. [1948] 2 All E.R. 35.

Beresford v. Royal Insurance Co. Ltd. [1938] A.C. 586. H.L.(E.).

Bird v. Appleton (1800) 8 Term Rep. 562.

Brown v. New Jersey Insurance Co. (1932) 14 P. (2d) 272.

Castellain v. Preston (1883) 11 Q.B.D. 380, C.A.

Erb v. Fidelity Insurance Co. (1896) 69 N.W. 261.

Erb v. German-American Insurance Co. of New York (1896) 67 N.W. 583.

Gordon v. Chief Commissioner of Metropolitan Police [1910] 2 K.B. 1080, C.A.

Hardy v. Motor Insurers' Bureau [1964] 2 Q.B. 745; [1964] 3 W.L.R. 433; [1964] 2 All E.R. 742, C.A.

Janson v. Driefontein Consolidated Mines Ltd. [1902] A.C. 484, H.L.(E.).

Leggate v. Brown [1950] 2 All E.R. 564, D.C.

Mackender v. Feldia A.G. [1967] 2 Q.B. 590; [1967] 2 W.L.R. 119; [1966] 3 All E.R. 847, C.A.

Northwest Amusement Co. Inc. v. Aetna Casualty and Surety Co. (1940) 107 P. (2d) 110.

Parkin v. Dick (1809) 11 East 502.

Rayner v. Preston (1881) 18 Ch.D. 1, C.A.

Redmond v. Smith (1844) 7 Man. & G. 457.

St. John Shipping Corporation v. Joseph Rank Ltd. [1957] 1 Q.B. 267; [1956] 3 W.L.R. 870; [1956] 3 All E.R. 683.

Vita Food Products Inc. v. Unus Shipping Co. Ltd. [1939] A.C. 277, P.C.

Wellston Trust Co. v. American Surety Co. of New York (1929) 14 S.W. (2d) 23.

The following additional cases were cited in argument:

Amicable Society v. Bolland (Fauntleroy's Case) (1830) 4 Bli.N.S. 194, H.L.(E.).

Archbolds (Freightage) Ltd. v. S. Spanglett Ltd. [1961] 1 Q.B. 374; [1961] 2 W.L.R. 170: [1961] 1 All E.R. 417, C.A.

Dudgeon v. Pembroke (1874) L.R. 9 Q.B. 581.

Fender v. St. John-Mildmay [1938] A.C. 1, H.L.(E.).

Gray v. Barr [1971] 2 Q.B. 554; [1971] 2 W.L.R. 1334; [1971] 2 All E.R. 949, C.A.

Upfill v. Wright [1911] 1 K.B. 506, D.C.

West v. National Motor and Accident Insurance Union Ltd. [1955] 1 W.L.R. 343; [1955] 1 All E.R. 800, C.A.

Wilson v. Rankin (1865) L.R. 1 Q.B. 162.

ACTION

The plaintiff, John L. Geismar, had two policies of insurance with the first defendants, Sun Alliance and London Insurance Ltd., by the terms of which the defendants agreed to indemnify the plaintiff against losses by theft to the contents of his house belonging to or being the responsibility of the plaintiff or members of his family. The second defendants, Alliance Assurance Co. Ltd., by another insurance policy, agreed to indemnify him

against all risks to certain property. On December 7, 1974, when those three policies were in force, various property, including jewellery and small items of furniture, was stolen from the plaintiff's house and was not recovered.

The defendants refused to indemnify the plaintiff under the terms of the insurance policies. They required proof of the loss and of the value of the property and they claimed that certain items of jewellery had been imported into the United Kingdom by the plaintiff without being declared to the customs and excise authorities and without duty being tendered or paid on them, contrary to section 34 of the Customs and Excise Act 1952. The defendants therefore claimed to be relieved from indemnifying the plaintiff first, on the ground of public policy and secondly because if they did so, they would themselves be committing an offence contrary to section 304 of the Act of 1952.

By a writ dated September 12, 1975, the plaintiff claimed indemnity under the policies from the defendants. In his statement of claim he put the value of all the stolen items at £2,327. The value of the uncustomed jewellery was about £900, certain other items were agreed at £220, which was sent to the plaintiff in January 1976, and the rest of the undisputed property was agreed at £629.80 but was not paid. In January 1976 the defendants paid £725 into court.

The facts are stated in the judgment.

George Cheyne for the plaintiff.

Michael Hutchison Q.C. and Simon Willans for the defendants.

The main submissions of counsel are indicated in the judgment (post, pp. 386H - 387A, B - 388C, 390D-H, 391C - 392C, 393A - 394G).

February 18. TALBOT J. read the following judgment. By three policies of insurance dated August 30, 1968, September 27, 1971, and March 15, 1973, the plaintiff insured with the defendants the contents of his house at 116, Station Road, London, S.W.13, and the defendants agreed to indemnify him against losses by theft. Copies of the relevant policies are contained in the agreed bundle of documents.

On December 7, 1974, whilst the policies were in force, the articles set out in paragraph 5 of the statement of claim were stolen from the plaintiff's house and have not been recovered. Seven articles are the subject of the dispute between the parties and in a schedule to the claim form there are set out the countries where each of these articles was purchased, the date of purchase and the price paid. Each of these articles was imported into this country by the plaintiff and though each article was dutiable and should have been declared on entry by the plaintiff to the customs and excise officers the plaintiff did not declare them and has not paid duty upon them. Furthermore, from what was said by the plaintiff to Mr. Mackrill, a loss adjuster acting for the defendants, he had no intention of paying the required customs duty if he could avoid it and it is conceded that duty ought to have been paid on each item.

These are the short, undisputed facts of this case and the point, though short, is a difficult one. It is whether the defendants should, in these circumstances, be called upon to indemnify the plaintiff.

The defendants claim to be relieved from indemnifying the plaintiff on two grounds. The first is on the ground of public policy and the second is because were they to do so they would themselves be committing a criminal offence under the provisions of section 304 of the Customs and Excise Act 1952. Mr. Hutchison has relied principally on ground one and concedes that there are difficulties about ground two, though he does not abandon it.

It is necessary to look at some of the provisions of the Act of 1952. Section 34 provides for duty to be paid on imported goods and forbids removal until duty is paid. Section 44 renders goods improperly imported liable to forfeiture. Section 45 provides for penalties for improper importation, namely, three times the value of the goods or £100, whichever is the greater, or to imprisonment not exceeding two years or to both. Section 304: the relevant provisions are as follows:

"Without prejudice to any other provision of this Act, if any person (a) knowingly and with intent to defraud Her Majesty of any duty payable thereon ... is in any way concerned ... in any manner dealing with any goods which have been unlawfully removed ... which are chargeable with a duty which has not been paid ... he may be detained and, ... shall be liable to a penalty of three times the value of the goods or £100, whichever is the greater, or to imprisonment for a term not exceeding two years, or to both."

Section 283 provides that proceedings for any offence under the Act shall not be commenced later than three years from the date of the commission of the offence.

Before dealing with the submissions made by counsel, I will briefly refer to certain terms of the policies. All Risks Policy (which insured a diamond ring): Condition 4. By that condition on payment of a claim any part of the property in respect of which payment was made belonged to the defendants subject to the plaintiff's right to reclaim it on repayment. Cover Plan Policy: Condition 2b. The defendants reserve the right on discovery of any event which might give rise to a claim to take possession of the property and to deal with the salvage in any reasonable way. Home Plan Policy: Condition 2b. Contains a similar condition to that in the cover plan policy.

The effect of the statutory provisions to which I have referred is that the plaintiff was liable to penalties for improper importation and remains so liable for three years from the date of importation - this was shortly after acquisition except in the case of a silver scarf clip, which was in August 1965. A further effect is that the articles are liable to forfeiture for all time in whosoever's hands they may come. Evidence as to the system and methods of the customs authorities was given by Mr. Powell, an officer of the customs and excise, which evidence was not disputed, and of course I accept it.

Dealing first with the second ground upon which the defendants rely, the submission was that if the defendants were in a position to exercise

their rights under the policies and take possession of these articles or any of them which might be found, they would be "dealing" with them, and if they transferred them back to the plaintiff in return for repayment they would be going even further in "dealing" with these articles, and in either case render themselves liable to prosecution under section 304 of the Act. Mr. Hutchison pointed out, however, the qualifying words of the section: "knowingly and with intent to defraud." In my view, this plea of the defendants is not sustainable. It is not correct that if the defendants indemnify the plaintiff they would commit an offence by virtue of section 304; they would not commit an offence under that section by mere payment to the plaintiff but only if they dealt with the goods and then only if they had an intent to defraud.

I come now to the principal ground relied upon, namely: are the defendants relieved on grounds of public policy? Mr. Hutchison's submissions involve what he suggested would be the consequences if the defendants were held liable to indemnify the plaintiff. The first point was that the position of the plaintiff would be improved. He would have achieved an unimpeachable title to the insurance moneys in place of a title to the goods which were liable to forfeiture at any time. Secondly, he submitted that the plaintiff would have effectively made a profit in that the duty part of the value of the goods would be to him a clear profit. Thirdly, he pointed out that the plaintiff was in a better position than if he had sold the goods. If he had sold them and the purchaser had become liable to forfeit them, then he would be liable to the purchaser under the Sale of Goods Act 1893. That was the position so far as the plaintiff insured is concerned.

Mr. Hutchison then went on to point out what would be the position so far as the defendant insurers are concerned. The first point he made was that if the goods were recovered and the title were to be vested in the insurers their position would be very precarious in that the goods would be liable to forfeiture and they, the defendant insurers, would be put in an invidious position by reason of section 304. Next, he submitted, even if the defendant insurers were not entitled to recover the goods their position would be prejudiced as their cover for moneys paid out to the plaintiff insured would be liable to forfeiture. Whether or not they would have any title they would be in the dilemma of risking proceedings under section 304 if they gave the goods back to the insured, or if they gave them to the customs and excise they would not be able to reclaim any moneys as they would not be in a position to provide the plaintiff with his goods.

To sum up, Mr. Hutchison submitted that if the plaintiff should recover under his indemnity he would rid himself of the disadvantages that he suffered when in possession of the goods and he would be burdening the defendant insurers with the disadvantages to which he had referred. There were indirect consequences, too, Mr. Hutchison submitted, if the policies were enforced. First, the result would be that a smuggler who insures the value of his smuggled goods has a positive interest in their loss, theft or destruction as a means of converting his impeachable title to an unimpeachable title to a sum of money. This, he said, might induce a degree of carelessness and an attitude inconsistent with that which would be required of an insured person. A second consequence, he submitted,

might be that the trust and confidence between insured and insurer would be undermined. A third indirect consequence might be that insurers, who would be obliged to inform the customs authorities, might use that obligation as a threat in order to contest claims and the value of the claims. That might put the insured in a weaker position. A fourth indirect consequence might be that the public would see a smuggler enjoying a windfall.

The main point that emerges from these submissions is that the plaintiff insured will be in a better position and therefore derive an advantage by reason of the defendants' indemnity. No authority need be cited to support the proposition that in general courts refuse to enforce a claim for a benefit which results from the commission of a crime or a tort or a claim to be indemnified against the consequences of such act, this being an application of the maxim ex turpi causa non oritur actio. It would be wrong, it was submitted, to allow the plaintiff to obtain a benefit or a profit and would be contrary to public policy because he would, in effect, be profiting from his crime of illegal importation of these articles.

To illustrate this principle I was referred to Beresford v. Royal Insurance Co. Ltd. [1938] A.C. 586. The facts, briefly, were that a personal representative of a person who had committed suicide whilst sane was held unable to recover the policy moneys on a policy of insurance which that person had taken out on his life on the ground that it was contrary to public policy to permit personal representatives to recover those moneys, the fruits of the crime committed by the assured. Lord Atkin said, at p. 596:

"The contract between the parties has thus been ascertained. There now arises the question whether such a contract is enforceable in a court of law. In my opinion it is not enforceable. The principle is stated in the judgment of Fry L.J. in Cleaver v. Mutual Reserve Fund Life Association [1892] 1 Q.B. 147, 156. 'It appears to me that no system of jurisprudence can with reason include amongst the rights which it enforces rights directly resulting to the person asserting them from the crime of that person.' The cases establishing this doctrine have been fully discussed by Lord Wright M.R. in his judgment in the present case. I mention some of them in order to call attention to the fact that, while in the earlier cases different reasons have been given for the rule, the principle can now be expressed in very general terms."

After discussing various authorities Lord Atkin said, at p. 598:

"I think that the principle is that a man is not to be allowed to have recourse to a court of justice to claim a benefit from his crime whether under a contract or a gift. No doubt the rule pays regard to the fact that to hold otherwise would in some cases offer an inducement to crime or remove a restraint to crime, and that its effect is to act as a deterrent to crime. But apart from these considerations the absolute rule is that the courts will not recognise a benefit accruing to a criminal from his crime."

Lord Macmillan said, at p. 603:

"The first question must always be - what is the principle of public

policy which would be infringed by the enforcement of the contract? In the present instance, the principle which, it is said, would be infringed is the principle that no court ought to assist a criminal to derive benefit from his crime; it has also been put in this form - that no court ought to enforce stipulations tending to induce the commission of a crime. That there are such principles of public policy to which the courts ought to give effect, I do not doubt. But in the present case would the enforcement of the respondents' obligation enable a criminal to take benefit from his crime?"

The application of this principle was sought in St. John Shipping Corporation v. Joseph Rank Ltd. [1957] 1 Q.B. 267. By section 44 of the Merchant Shipping (Safety and Load Line Conventions) Act 1932, merchant ships must not be loaded beyond a certain maximum depth. The facts were that a ship was overloaded and the defendant holders of a bill of lading in respect of part of its cargo withheld part of the freight moneys due and contended that the shipowners were not entitled to recover that part which they had withheld as the charter had been performed in an illegal manner. Devlin J. considered the defendants' submission that public policy demanded that that particular contract should be declared unenforceable because of the infringement of the Act of 1932, and for reasons that I need not go into held that that principle did not apply to that case. But what he did say, in the course of the argument of counsel, at p. 274 was that he accepted the view that public policy was not a doctrine which ought to be extended in the sense of making new heads. It is quite plain from other authorities to which I have been referred that it is of the highest importance that courts do not attempt to extend the doctrine of public policy in order to hold that contracts are unenforceable thereby, and that it is necessary to look to the accepted application of that doctrine and not go beyond that.

Another case to which I was referred was Askey v. Golden Wine Co. Ltd. [1948] 2 All E.R. 35, where the plaintiff who had been sold contaminated spirits by the defendants sought to recover damages but was unable to do so because he was held to have been guilty of such gross negligence that he could not recover those damages. Denning J., having held that the plaintiff was grossly negligent in his acquisition of the contaminated spirits, said at p. 38:

"Does that debar him from claiming damages from those guilty of the contamination? I think it does. Speaking generally, public policy requires that no right of indemnity or contribution or damages should be enforced in respect of expenses which the plaintiff has incurred by reason of being compelled to make reparation for his own crime. That principle is to be gathered from Haseldine v. Hosken [1933] 1 K.B. 822 and Beresford v. Royal Insurance Co. Ltd. [1938] A.C. 586. This case comes within that principle."

Another case which foundered upon illegality was Parkin v. Dick (1809) 11 East 502. In November 1807, the export of naval stores was forbidden by proclamation, and it was illegal to sail with such stores on board. In January 1808 a contract of insurance was entered into in respect of the cargo of a ship, part of which was made up of naval stores,

the export of which was forbidden. It was held that the contract of insurance was unenforceable because it covered goods illegally exported even though it formed only a part of the total cargo on the ship. For further illustration of this rule I was referred to MacGillivray & Parkinton on Insurance Law, 6th ed. (1975), para. 537 and other paragraphs. There have been numerous marine insurance cases where an insurance on a ship or cargo was vitiated by reason of the fact that the ship was bound upon an adventure which was prohibited by statute.

I was also referred to two authorities dealing with motor insurance: Hardy v. Motor Insurers' Bureau [1964] 2 Q.B. 745 and Leggate v. Brown [1950] 2 All E.R. 564. In the latter case it was held that a policy of insurance covering a motor tractor when it was being used with not more than two trailers attached was not vitiated by the fact that the assured used it on the highway with two laden trailers contrary to section 18 of the Road Traffic Act 1930. I do not consider that these two cases on motor insurance are of very much assistance in the present problem as they, as has been pointed out, fall into rather a special category by reason of the fact that there is a countervailing public policy of great importance, namely that there should be effective insurance against loss or injury caused by the use of motor vehicles on the highway.

Coming back, therefore, to his principal proposition, Mr. Hutchison submitted that the plaintiff ought not to be permitted to profit from his crime of illegal importation of goods nor should he be permitted to have an indemnity against the consequences of his crime, and the ultimate proposition is that goods illegally imported and possessed by the importer which are liable to forfeiture cannot be protected by insurance cover.

Before passing to the submissions of Mr. Cheyne on behalf of the plaintiff there are two authorities I should mention which Mr. Hutchison directed my attention to as being helpful in this matter. First there was Mackender v. Feldia A.G. [1967] 2 Q.B. 590. In that case Lloyd's underwriters insured diamond merchants incorporated in three different European countries against loss or damage to their stock. In January 1965 diamonds and pearls were lost in Naples. From investigation it was alleged that the defendants made a practice of smuggling diamonds into Italy. The insurers rejected the claim on the ground that it was contrary to English policy to insure goods which were intended to be smuggled into a friendly foreign country. The case turned on a jurisdiction point under the contract but Lord Denning M.R. said, at p. 598:

"As to illegality, I would only say this: the underwriters were clearly innocent. The diamond merchants may have had an unlawful intention to smuggle goods into a friendly foreign country. But their illegality would not affect the formation of the contract. It would only make it unenforceable. It would mean that they could not recover on the policy."

The other authority was Redmond v. Smith (1844) 7 Man. & G. 457 and the reference in that report was to some words of Tindal C.J. In that case it was held that a policy on an illegal voyage could not be enforced. Tindal C.J. said, at p. 474:

"A policy on an illegal voyage cannot be enforced; for it would be singular, if, the original contract being invalid and therefore incapable to be enforced, a collateral contract founded upon it could be enforced."

The question therefore remains: was this contract of insurance between the plaintiff and the defendants unenforceable because it was contrary to public policy as in Beresford v. Royal Insurance Co. Ltd. [1938] A.C. 586 or that it was prohibited as in St. John Shipping Corporation case [1957] 1 Q.B. 267 and the other marine cases, or that it was a contract to cover goods illegally imported as in Parkin v. Dick (1809) 11 East 502 (I have substituted "imported" for the word "exported")?

Again, is the contract unenforceable because the goods were smuggled into this country, as the dictum of Lord Denning M.R. in Mackender v. Feldia A.G. [1967] 2 Q.B. 596 would appear to indicate, or because it was a collateral contract resulting from the illegal importation of the goods?

The submissions made on behalf of the plaintiff included principally the submission that the importation of these goods was the background of the case but was in no way connected with the loss nor was it in any way concerned with the valuation of the insured's interest. In fact, as between the parties, valuations in respect of the disputed items have been agreed between the parties, should the plaintiff succeed. Mr. Cheyne pointed out that the only contract under consideration here was this contract of insurance and that by that contract of insurance it was his insurable interest that had to be considered and not his interest in the jewellery.

Mr. Cheyne referred me to a number of authorities: the first being Rayner v. Preston (1881) 18 Ch.D. 1. That case dealt with a matter of insurance on the sale of a house which had been destroyed by fire. He drew my attention to some words of Brett L.J. on contracts of insurance which he submitted were of general application. Brett L.J. said, at p. 9:

"Now, in my judgment, the subject-matter of the contract of insurance is money, and money only. The subject-matter of insurance is a different thing from the subject-matter of the contract of insurance. The subject-matter of insurance may be a house or other premises in a fire policy, or may be a ship or goods in a marine policy. These are the subject-matter of insurance, but the subject-matter of the contract is money, and money only. The only result of the policy, if an accident which is within the insurance happens, is a payment of money."

In Castellain v. Preston (1883) 11 Q.B.D. 380, in which there was further litigation about the destroyed house which had been contracted to be sold, Mr. Cheyne drew my attention to the judgment of Bowen L.J. where he pointed out that in fire insurance (and it is submitted he speaks for all insurance contracts of indemnity) what is insured is the assured's interest in the subject matter of the insurance whether legal or beneficial.

Coming to transactions which are remote from the contract of insurance, where it was held that the insurance was not avoided by reason of illegality in an earlier transaction, I was referred to Bird v. Appleton (1800) 8 Term Rep. 562. One of the questions raised in that case was whether a contract of insurance was legal because it covered cargo which had been bought with

the proceeds of a former illegal cargo. The Court of King's Bench had little difficulty in holding that such a contract was legal. Lord Kenyon C.J. said, at p. 566:

"If this objection were well founded, it would go to an alarming extent. In deciding on a claim made on a policy of insurance, it would be necessary to examine and scrutinise the past conduct of the assured, in order to see whether or not, by their former transaction in life, they had illegally acquired the funds with which the particular goods insured were purchased: but we cannot enter into considerations of that kind; we must confine ourselves to the immediate transaction before us ..."

One can see how Mr. Cheyne wishes to apply this case to the present facts. If the plaintiff's jewellery had been purchased by money illegally acquired that would have been no ground for avoiding the insurance contract. The question is therefore: why does not the same reasoning apply where the plaintiff's jewellery was legally acquired, though smuggled into the country? Does one not have to look only at the contract of insurance?

I turn now to the authority Alexander v. Rayson [1936] 1 K.B. 169. There the rental of a flat had been agreed at £1,200 per annum. It was alleged that in order to cheat the rating authorities the plaintiff had drawn up two agreements, one at £450 a year for rent and the second at £750 for services. The defendant tenant failed to pay her rent and the plaintiff sued her. One of the defences was that the contract was void for illegality and was unenforceable by reason of public policy. The Court of Appeal held that the intention to use the agreement for an unlawful purpose rendered it unenforceable, but Scott L.J., reading the judgment of the court, observed, at p. 182:

"It is settled law that an agreement to do an act that is illegal or immoral or contrary to public policy, or to do any act for a consideration that is illegal, immoral or contrary to public policy, is unlawful and therefore void. But it often happens that an agreement which in itself is not unlawful is made with the intention of one or both parties to make use of the subject matter for an unlawful purpose, that is to say a purpose that is illegal, immoral or contrary to public policy. The most common instance of this is an agreement for the sale or letting of an object, where the agreement is unobjectionable on the face of it, but where the intention of both or one of the parties is that the object shall be used by the purchaser or hirer for an unlawful purpose. In such a case any party to the agreement who had the unlawful intention is precluded from suing upon it. Ex turpi causa non oritur actio. The action does not lie because the court will not lend its help to such a plaintiff. Many instances of this are to be found in the books."

Scott L.J. said, at the foot of p. 183:

"It will be observed that in all these cases the plaintiff was endeavouring to enforce by action an agreement, or a clause in an agreement, which was tainted by the unlawful intention of the plaintiff, or the unlawful intention of the defendant known to the plaintiff, as to the purpose for which the subject matter of the agreement was to be used. To such an action the maxim, ex turpi causa non oritur actio applies.

But the maxim does not require, nor does the language of it suggest, that a completely executed transfer of property, or of an interest in property, made in pursuance of such an agreement must be regarded as being invalid."

As I understand Mr. Cheyne's argument it was that the plaintiff had acquired property rights in his jewellery, albeit his possession of it was tainted with illegality and subject to confiscation and therefore his interest in his rights was insurable.

He also relied on Gordon v. Chief Commissioner of Metropolitan Police [1910] 2 K.B. 1080, where the defendant had seized money belonging to the plaintiff which had been acquired by street betting. The Street Betting Act 1906, while making street betting illegal, did not provide for forfeiture of moneys so acquired and the majority of the Court of Appeal held that the money belonged to the plaintiff and was his property and therefore there could be no application of the maxim ex turpi causa non oritur actio. It would seem, therefore, that if one acquires property, provided the actual acquisition is not unlawful and only the means whereby the receipt was brought about, then one would have the right to protect that property by resorting to the usual legal means. So here, argues Mr. Cheyne, the law does not object to the acquisition and importation of goods, but it requires payment of duty in respect of them. So, just as Gordon could have insured the money against theft and recovered from the insurers, so also, it is submitted, can the plaintiff here recover on his insurance policy with the defendants.

Mr. Cheyne reinforced the authority of Lord Devlin's remarks as to public policy in the St. John Shipping Corporation case [1957] 1 Q.B. 267 by reference to Janson v. Driefontein Consolidated Mines Ltd. [1902] A.C. 484, and in particular to what Lord Halsbury L.C. had to say on this subject. One of the points made by Lord Halsbury L.C. was that it is not open to the court to deny a party his rights under accepted law because the court has a notion that in his particular case it would be against the interests of the community. Secondly, in his view, the heads of public policy are fixed and known to the law and the court must not go beyond the known principles. Lord Davey, in the same appeal, said at p. 500: "Public policy is always an unsafe and treacherous ground for legal decision."

In addition, Mr. Cheyne pointed to Lord Wright's words in Vita Food Products Inc. v. Unus Shipping Co. Ltd. [1939] A.C. 277. Lord Wright said, at p. 293:

"Nor must it be forgotten that the rule by which contracts not expressly forbidden by statute or declared to be void are in proper cases nullified for disobedience to a statute is a rule of public policy only, and public policy understood in a wider sense may at times be better served by refusing to nullify a bargain save on serious and sufficient grounds."

Mr. Cheyne referred to a number of American cases. The first was Wellston Trust Co. v. American Surety Co. of New York (1929) 14 S.W. (2d.) 23. There a bank, through an employee, had received a deposit from a depositor outside the bank, i.e. at the depositor's office. This was ultra vires and violative of a statute. The question was whether the transaction was void

because of public policy and it was held that the contract of deposit was not void by the statute although the receipt of the money was in contravention of it.

Two similar cases were Erb v. Fidelity Insurance Co. (1896) 69 N.W. 261 and Erb v. German-American Insurance Co. of New York (1896) 67 N.W. 583. In the first case it was held that an insurance on store fixtures was not void on the ground of public policy because they were used by the insured, who was an unregistered pharmacist, contrary to a statute. The court said that the issue of the policy of insurance did not necessarily have effect to encourage and promote the unlawful purpose nor did the plaintiff obtain the insurance in order to aid an illegal business. In the second case, where a policy of insurance had been written on a stock of drugs and liquors, the use of a part of the property that was susceptible of legitimate use for an unlawful purpose did not render the insurance void as against public policy.

A much earlier case in the Supreme Court of the United States was Armstrong v. Toler (1826) 11 Wheat. (U.S. Reports) 258. The law on this point was stated by Marshall C.J. as follows, at p. 268:

"That where the contract grows immediately out of an illegal act, a court of justice will not enforce it, the court proceeds to say, 'But if the promise be unconnected with the illegal act, and is founded on a new consideration, it is not tainted by the act, although it was known to the party to whom the promise was made, and although he was the contriver and conductor of the illegal act.'"

I have not dealt with the full quotation from this authority, but the effect of it for these purposes is that a contract which is not tainted by the preceding illegal act will be enforced by the courts.

This old authority was followed in a more recent case in the Supreme Court of Oregon: Brown v. New Jersey Insurance Co. (1932) 14 P. (2d) 272. This case recited at p. 274 yet another old authority, which said:

"'The test of a violation of the rules of public policy is whether the plaintiff requires the aid of the illegal transaction to establish his right; for, if he cannot open his case without showing that he has transgressed the law, a court will not assist him.'"

A more recent case in the Supreme Court of Oregon is Northwest Amusement Co. Inc. v. Aetna Casualty and Surety Co. (1940) 107 P. (2d) 110. The plaintiff had a contract of insurance to cover slot machines. They were forbidden by the law and it was held that he could not recover under his contract of insurance when the slot machines were stolen because the court would not assist him when he founded his cause of action upon his own illegal act. The basis of the decision appears to have been that he was forbidden by law to have possession of these slot machines.

Applying these cases to the present problem it would seem that a contract of insurance, which is separate and apart from the illegal act, is not rendered unenforceable, but if the contract of insurance purports to cover property which the law forbids him to have, then the contract is directly connected with the illegal act and is unenforceable. In the present case it is argued that the plaintiff's contract of insurance is quite apart from and

does not in any way spring from his illegal act of importation of some of the articles insured under the policy. Moreover, the law of this country does not forbid possession of property brought in from foreign countries. What it requires is that the importer shall pay for its importation. The fact that property is liable to confiscation under the relevant Act does not negative the plaintiff's right of property in it until the act of confiscation is carried out.

All these authorities, with their application to problems related to the present one, though of assistance, do not cover the precise point. I start with the fact that the contracts of insurance are separate from the illegal importation. Next, there is no contractual point taken here and there has been no repudiation of the contracts by the defendants. It is clear that the plaintiff has an insurable interest in the property, though subject to defeasance. It is also clear that to allow the plaintiff to recover under the policies would be to allow him to recover the insured value of the goods which might have been confiscated at any moment and which, therefore, were potentially without value to him.

So far as the defendants were concerned, they being unaware of the illegal importation, the policies were not tainted with illegality, but the question is: ought the court to enforce these policies against them in favour of the plaintiff?

It seems to me that from what Lord Denning M.R. said in Mackender v. Feldia A.G. [1967] 2 Q.B. 590 the policies would be unenforceable, provided that to enforce them would conflict with public policy. So these smuggled articles are in the same category as the forbidden cargo in Parkin v. Dick (1809) 11 East 502. No new area of public policy is involved here. The plaintiff is seeking the assistance of the court to enforce contracts of insurance so that he may be indemnified against loss of articles which he deliberately and intentionally imported into this country in breach of the Customs and Excise Act 1952.

I am not concerned with cases of unintentional importation or of innocent possession of uncustomed goods. I would think that different considerations would apply in those cases. But where there is a deliberate breach of the law I do not think the court ought to assist the plaintiff to derive a profit from it, even though it is sought indirectly through an indemnity under an insurance policy.

The claim therefore fails so far as the disputed items are concerned.

Solicitors: Harold Stern & Co.; Berrymans.