The cases of Yam Seng Pte Ltd v ITC Ltd [2013] and Bristol Groundschool Ltd v Intelligent Data Capture Ltd and others [2014] seem to be the latest in a series of steps towards the worrying world of ‘touchy-feely’ commercial justice. I trace this journey back to the latest, and still current, economic crash.
There has been a reaction to what appears to be, in general terms, a collapse of moral fibre within the wide commercial world. We now have a growing number of situations where what is perceived (often by the media and sometimes only by the media) to be morally right or wrong is taken as an acceptable basis for what is legally right or wrong.
That is a very dangerous slope to start to slide down because its pitch and greasiness will tend to vary over time with the scale of moral outrage on the issue in question.
I start with the furore over personal and corporation taxes. We seem to have arrived at the following: if there was a ‘window tax’ today, we would have moved from a position of (for example) six windows = £X in tax, to one in which blocked-up windows would also be taxed, because blocking up windows is ‘tax avoidance’ and, ipso facto, morally wrong.
That view allows HM Revenue & Customs to assert its right to tax blocked-up windows, even though the law says that tax applies only to ‘windows’ which, reasonably, should not include – and until the introduction of the ‘touchy-feely’, morality-based justice did not include – ‘blocked up windows that can no longer serve the purpose of windows’.
With the cited cases, we have moved closer to ‘good faith’ as an implied term of commercial contracts. This opens boxes of bangers and throws in a lighted match.
Can a contracting party no longer make an honest, but rather ‘fast’, buck on a deal, to the detriment of the other party? How about a duty to disclose otherwise unseen benefits of a deal that will flow to one party at the expense of the other? After the contract is formed, does a contracting party need to disclose all ‘material benefits’ that it foresees in the deal? If there are more than two parties to a contract, how does ‘good faith’ apply between them all?
There are many examples where the pure commercial nature of a business contractual relationship argues against a generally implied, overriding obligation for each party to act in good faith relative to the other(s).
Surely, just as with taxing statutes where it is possible for the legislature to draw a law in wide or narrow terms, it is possible for contracting parties to be left to negotiate obligations of good faith, and definitions of what that term means in that particular context?
Inevitably, uncertainty is the greatest problem generated by the ‘moral compass’ approach to contract interpretation. How do I advise my clients on their duties under a contract if those duties can be varied by the judge’s, or the media’s, moral position at the time the issues fall to be considered?
Christopher Parr, Asia regional corporate contracts counsel, ON Semiconductor Trading Sarl, Fribourg, Switzerland
