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7 S.Ac.L.J. Contractual Illegality and Conflict of Laws

CONTRACTUAL ILLEGALITY AND CONFLICT OF LAWS

The subject of illegality in contract law is difficult and complex.

With the interplay ofprinciples of conflict of laws, illegality as a
defence in contractualclaims becomes an area of the law which is
fraught with difficulties. In this article, an attempt is made to
consider the various connectingfactors in conflict of laws which
bear on illegality as a defence in contractual claims.

I. INTRODUCTION

Illegality has often been pleaded as a defence to defeat actions for

enforcement of contractual rights. Given that contracts in the modern age
invariably involve contacts with different legal systems, it is imperative
that legal advisers appreciate the various ways in which illegality may affect
contractual rights. To this end, an understanding of the relationship between
the defence of contractual illegality and conflict of laws is especially
important. This article* examines the various aspects of contractual illegality
in relation to the situations where the illegality arises by reason of the
proper law of the contract, the law of the forum, the law of the place of
contractual performance and the law of the place where the contract is
made. Illegality in this context refers to statutory illegality' and common
law illegality2 and includes both existing or initial illegality and supervening
illegality.

While contracting parties may attempt to reduce the instances where

illegality defeats contractual rights by stipulating a law to govern their
contractual relationship, illegality may arise independently of the parties'
choice of law to govern their contractual relationship. The illegality may
arise from contravention of a positive law (in the sense of a written law)

4 This article is a substantially revised version of the paper of the same title presented by
the author at the Faculty of Law Continuing Legal Education Workshop on Conflict of
Laws in Commercial Practice held on 31 March 1995.
1 For an example of statutory illegality, see Lim Xue Shan & Anor. v. Ong Kim Cheong
[1990] 3 M.L.J. 449 which concerned a contract made in contravention of the Residential
Property Act, Chapter 274,1985 Revised Edition of the Singapore Statutes. See also the
decision of the Singapore Court of Appeal in Tokyo Investment Pte. Ltd. & Anor. v. Tan
Chor Thing [1993] 3 S.L.R. 170 where it was held that since one of the objects of the
Futures Trading Act, Chapter 116, 1985 Revised Edition of Singapore Statutes, was to
regulate trading on futures contract and since there was a clear prohibition in section 11
in that Act against any unlicensed person trading as a futures broker, the contract made
in contravention of section 11 was illegal and unenforceable. This was a case where the
relevant statute was construed as prohibiting the making or entering of the contract by
an unlicensed futures broker.
2 For an example of common law illegality, see Suntoso Jacob v. Kong Miao Ming & Anor.
[1984] 2 M.L.J. 95 where Lai Kew Chai J. dismissed the plaintiff's claims as the plaintiff
had practised a deception on the Registrar of Singapore Ships by concealing the fact that
the plaintiff, an Indonesian national, was the true owner of shares in the ship-owning
company which owned a Singapore registered vessel.
 Singapore Academy of Law Journal (1995)

of the forum. In addition, a contract may be illegal by reason of public

policy considerations of the law of the forum (lex fori). Illegality may also
defeat contractual rights where the contract, legal by its proper law, is
illegal by the law of the place where the contract is to be performed.3

As every legal practitioner knows, the general rule is that a party relying
on illegality as a defence must specifically plead illegality. However, it is
also clear from Sim Tony v. Lim Ah Ghee (t/a Phil Real Estate & Building
Services)4 that a court has the duty to take cognisance of the illegality of
a contract where the contract is exfacie illegal or when it so appears from
the evidence adduced before the court notwithstanding the failure to plead
illegality.5 As Lindley L.J. (as he then was) stated in Scott v. Brown, Doering,
6
McNab & Co.

"No court ought to enforce an illegal contract or allow itself to be

made the instrument of enforcing obligations alleged to arise out of
a contract or transaction which is illegal, if the illegality is duly brought
to the notice of the court, and if the person invoking the aid of the
court is himself implicated in the illegality. It matters not whether ' 7
the
defendant had pleaded the illegality or whether he has not.

Having said that, it must be pointed out that the Federal Court, sitting as
the appellate court of Singapore, in Seven Seas Supply Co. v. Rajoo8
emphasised that where the defence of illegality has not been pleaded and
not all the relevant facts on the issue of illegality are before the court, the
court ought not on its own initiative refuse to enforce contractual rights on
the ground of illegality.

However, where foreign illegality is relied on, the foreign law which is
alleged to give rise to the illegality must be pleaded and proved as foreign
law is a question of fact. 9 Where foreign law is not proved, then the
Singapore court as the lexfori will assume that the foreign law is the same

3 There is a debate as to whether this rule is founded on the domestic law of the lexfori
or is a rule of conflict of laws. See the discussion in the text at pp, 26 and 27.
4 [1994] 3 S.L.R. 224 at 239 where Lai Siu Chiu J. stated that "the requirement to plead
illegality under Order 18 rule 8 is ... displaced when all the necessary facts are placed
before the court." The High Court decision was affirmed on appeal, see [1995] 2 S.L.R.
466.
5 See also Edler v. Auerbach [1950] 1 K.B. 359.
6 [1892]2 Q.B. 724.
7 Ibid., at 728. See also Theresa Chong v. Kin Khoon & Co. [1976] 2 M.L.J. 253 at 256,
Malaysian Federal Court.
8 [1966] 1 M.L.J. 71. The Federal Court comprised Tan Ah Tah Ag. C.J. (Singapore),
Buttrose and Ambrose JJ.
9 See Singapore Finance Ltd. v. Soetanto & Ors. [1992] 2 S.L.R. 407 at 410 and Shaikh
Faisal Bin Sultan Al Qassim t/a Gibca v. Swan Hunter Singapore Pte. Ltd. (formerly
known as Vosper Naval Systems Pte. Ltd. and Vosper-QAFPte. Ltd.) [1995] 1 S.L.R. 394.
7 S.Ac.L.J. Contractual Illegality and Conflict of Laws

as the law of the forum] 0' In the words of Willes J. in Lloyd v. Guibert,"
where one party to a contract relies on a right or an exemption by foreign
law excusing him from liability, he must "bring such law properly before
the court and to establish it in proof ...Otherwise the court is not entitled
to notice such law without judicial proof and the court must proceed
according to the law of England."' 2

Moreover, where one party alleges that the contract is illegal by a law
(statutory or otherwise) other than the lexfori, the foreign law would be
relevant only if it is the governing law of the contract (i.e., the proper law)
3
or the law of the place of contractual performance (the lex loci solutionis).

It is also clear from section 94(a) of the Evidence Act 4 that the prohibition
against the admission of oral evidence for the purpose of contradicting,
varying to or subtracting from the expressed terms of a contract does not
apply where it is sought to show by parol evidence that the contract in
writing was really made for objects forbidden either by statute or common
law.'5 As matters of procedure are governed by the lexfori,16 the provisions
of the Evidence Act are relevant in any case involving foreign illegality.

In the field of conflict of laws, the identification of the connecting factor

or factors relevant to the legal topic under consideration is of prime
importance. Staughton J. (as he then was) in Euro-Diam Ltd. v. Bathurst
put it in the following terms:

"in every case involving a foreign element it is necessary to consider

three preliminary matters. First, what is the legal topic with which
the claim is concerned? Secondly, what is the connecting factor
prescribed by the rules of conflict of laws, for assigning cases on that
topic to a particular system of law? Thirdly, what system of law does
the connecting factor point to in the case before the court?"1 8

10 It would appear from National Shipping Corporationv. Arab [1971] 2 Lloyd's Rep. 363
that the presumption that foreign law is the same as the lexfori will not apply where the
plaintiff seeks summary judgment. This limitation to the presumption that foreign law is
the same as the law of the forum has not met with universal acceptance.
i1 (1865) 1 L.R.Q.B. 115, a decision of the Court of Exchequer Chamber.
12 Ibid., at 129.
13 By reason of the operation of the rule in Fosterv. Driscoll [1929] 1 K.B. 470 and the rule
in Ralli Brothers v. Compania Naviera Sota y Aznar [1920] 2 K.B. 287.
14 Chapter 97, 1990 Edition.
15 See Amalgamated Steel Mills Bhd. v. Ingeback (Malaysia) Sdn. Bhd. [1990] 2 M.L.J. 374.
16 See Lloyd v. Guibert (1865) 1 L.R.Q.B. 115 and Leroux v. Brown (1852) 12 C.B. 801. In
the latter case, it was held that the requirements laid down in the Statute of Frauds were
procedural in nature.
17 [1987] 1 Lloyd's Rep. 178.
18 Ibid., at 190. It suffices to say that this approach was applied by K.S. Rajah J.C. in the
Singapore case of Overseas Union Bank Ltd. v. Chua Kok Kay [1993] 1 S.L.R. 686 at 698
and 699.
 Singapore Academy of Law Journal (1995)

With regard to the legality of a contractual claim, the proper law of the
contract, the law of the place of contractual performance and the law of
the forum where the claim is being adjudicated are the various connecting
factors which may be applicable.' 9 It suffices to say that it is the element
of foreign law in a contract which calls into play the relevant rules of
conflict of laws applicable to the resolution of the issue of illegality of the
contract.

With those preliminary points out of the way, the discussion proper of
contractual illegality in the conflict of laws shall proceed under four heads
viz., illegality and the proper law of the contract, illegality and the lexfori,
illegality and the lex loci solutionis, illegality and the lex loci contractus and
illegality by tainting,

II. ILLEGALITY AND THE PROPER LAW

It is hornbook law that the material or essential validity of a contract is

governed by the proper law of the contract?10 In the succinct words of Lord
Halsbury L.C.,

"... there may be stipulations [in a contract] which one country may
enforce and which another country may not enforce, and that in
order to determine whether they are enforceable or not you must
have regard to the law of the contract, by which I mean the law
which the contract itself imports is to be the law governing the
2
contract." '
2
Where the contract, by its proper law,& is illegal in the sense that it is made
in contravention of a written law or the public policy of Singapore, the
result is clear - the Singapore court will not enforce such a contract.

19 See Euro-Diam v. Bathurst [1987] 1 Lloyd's Rep. 178 at 190. In English and Singapore
conflict of laws, the law of the place where the contract was made (where that law is not
the proper law or the lex loci solutionis or the lexfori) is, irrelevant to the resolution of
the issue of enforceability of the contractual claim. See also Overseas Union Bank Ltd.
v. Chua Kok Kay [1993] 1 S.L.R. 686 at 699.
20 See Mackender & Ors. v. Feldia A.G. & Ors. [1967] 2 Q.B. 590 and Kleinwort, Sons &
Co. v. Ungarische Baumwolle Industrie Actiengesellschaft and Hungarian General
Creditbank [1939] 3 All E.R. 39 at 44. The proper law of the contract also governs the
construction of the contract in regard to its substance, see Jacobs, Marcus & Co. v. Credit
Lyonnais (1883-84) 12 Q.B.D. 589.
2t In re Missouri Steamship Company (1889) 42 Ch. D. 321 at 336.
22 The law which the parties have expressly or impliedly agreed shall govern their contractual
relationship. In the absence of such an expressed or implied agreement, the particular
system of law with which the contract has the closest and most real connection is the
proper law of the contract, see Amin Rasheed Shipping Corporationv. Kuwait Insurance
Co. [1984] 1 A.C. 201 at 219. See also Hang Lung Bank Ltd. v. Datuk Tan Kim Chua
[1988] 2 M.L.J. 567, decision of Lai Kew Chai J.
7 S.Ac.LJ. Contractual Illegality and Conflict of Laws

The proper law of the contract may be expressly provided for by the
contracting parties. Where the contracting parties have not expressly
provided for the proper law to apply to their contract, their intention is to
be inferred or "presumed by the court from the terms of the contract and
the relevant surrounding circumstances. 23 As was pointed out by Lai Kew
Chai J. in Hang Lung Bank Ltd. v. Datuk Tan Kim Chua, the intention
of the contracting parties may be inferred in one of two ways, viz.,

"(a) by looking at the terms of the contract to see if taken as a whole

they by necessary implication led to the inevitable conclusion
that it was the parties' intention that their mutual rights and
obligations under it should be governed by a particular system
of law ... or

(b) by objectively determining whether a contract had its closest

and most real connection with a particular system of law .... 25

It is pertinent to state that every contract must have a proper law as

"contracts are incapable of existing in a legal vacuum."26 As Lord Lloyd of
Berwick (as he now is) recently observed in The Star Texas' 27 "A contract
without a proper law cannot exist. It is ... no more than an abstraction or
a piece of paper. ' 28 The idea that every contract must, from the time that
it is effective as a contract, have a proper law explains the negative attitude
of both the English and Singapore courts towards the concept of a "floating
proper law". 9 In the felicitous words of Bingham J. (as he then was):

"The proper law is something so fundamental to questions relating to

the formation, validity, interpretation and performance of a contract
that it must ... be built into the fabric of the contract from the start
and cannot float in an indeterminate way until finally determined at
4'
the option of one party."'

The proper law governing a contractual relationship is that law administered

as "a living and changing body of law ' 3' and effect is given to any changes

23 Per Lord Atkin in Rex v. International Trustee for the Protection of Bondholders
Aktiengesellschaft [1937] A.C. 500 at 529.
24 [1988] 2 M.L.J. 567.
25 Ibid., at 570.
26 Per Lord Diplock in Amin Rasheed Shipping Corporation v. Kuwait Insurance Co. [1984]
A.C. 50 at 65C.
27 [1993] 2 Lloyd's Rep. 445.
2S Ibid., 449.
29 See for instance, The Armar [1980] 2 Lloyd's Rep. 450, The Iran Vojdan [1984] 2 Lloyd's
Rep. 380 and The Star Texas [1993] 2 Lloyd's Rep. 445.
30 The Iran Vojdan [1984] 2 Lloyd's Rep. 380 at 385.
31 See generally, Cheshire and North, Private InternationalLaw (1987) 11th ed. at pp. 456
and 457.
 Singapore Academy of Law Journal (1995)

taking place in the law prior to the date of contractual performance. 2

Thus, a contract which is lawful by its proper law at the time of the making
of the contract may be rendered illegal by subsequent statutory amendments
in the proper law. In fact, such a situation occurred in the two cases of
Zivnostenska Banka National Corporation v. Frankman3 3 and Kahler v.
Midland Bank Ltd. where the House of Lords held in each case that the
contract was unlawful by its proper law by reason of the change in the
proper law since the time the contract was concluded.

Illegality by the proper law may consist of statutory illegality 35 or common

law illegality. As the late Winslow J. observed in Raymond Banham &
Anor. v. Consolidated Hotels Ltd.3 ' "In deciding whether a contract is
illegal in itself a distinction must be made between contracts which are
illegal as a result of their
'3 8
prohibition by statute and contracts which are
illegal at common law."

32 See Re Chesterman'sTrusts [1923] 2 Ch. 466 at 478, Re Helbert Wagg & Co. Ltd.'s Claim
[1956] Ch. 323 at 341 and 342 and Rossano v. Manufacturer's Life Insurance Co. Ltd.
[1963] 2 Q.B. 352 at 362.
33 [1950] A.C. 57.
34 [1950] A.C. 24.
35 For a recent Malaysian case on statutory illegality, see Commas Sendirian Berhad v.
Rakyat FirstMerchant Bankers Berhad &Anor. [1994] 1 S.C.R. 126 where the Malaysian
Supreme Court had to consider the defence of illegality on the ground of contravention
of the Banking and Financial Institutions Act 1989. In that case, it was held that
inasmuch as section 48(1) and section 54(1) and (11) of the Banking and Financial
Institutions Act 1989 impliedly invalidated transactions which had been made without
the prior approval of the Minister as required under section 45(1), the transaction
between the plaintiffs and the defendants was void as the plaintiffs had failed to obtain
the approval of the Minister prior to concluding the transaction. The Supreme Court held
that the general provision in section 125 of the Banking and Financial Institutions Act
1989 did not operate to validate the transaction. The said section 125 provides that
"Except as otherwise provided in this Act, or in pursuance of any provision of this Act,
no contract, agreement or arrangement, entered into in contravention of any provision
of this Act shall be void solely by reason of such contravention."
36 The common law viewed certain agreements with disdain and visit upon such agreements
the consequence of unenforceability by reason of illegality, see for instance, the common
law view of a champertous agreement as stated in In re TrepcaMines Ltd. (No. 2) [1963]
1 Ch. 199.
37 [1976] 1 M.L.J. 5.
38 Ibid., at 6. For Singapore cases on statutory illegality, see Lim Xue Shan & Anor. v. Ong
Kim Cheong [1990] 3 M.L.J. 449 and Tan Cheow Gek & Anor. v. Gimly Holdings Pte.
Ltd. [1992] 2 S.L.R. 817. In Chi Liung Holdings Sdn. Bhd. v. Attorney General [1994] 2
S.L.R. 354 at 364, the Singapore Court of Appeal clarified that a contract for the sale of
land to a foreigner would not be illegal and void under the Residential Property Act,
Chapter 274, 1985 Revised Edition of the Singapore Statutes if the contract was
conditional on the foreigner obtaining the requisite qualifying certificates. See also the
recent case of Alrich Development Pte. Ltd. v. Rafiq Jumabhoy [1995] 2 S.L.R. 401 on
the objective of the Residential Property Act and the interplay of that statute with the
Land Titles Act, Chapter 157, 1994 Edition. Other statutes in Singapore which prohibit
the making of contracts or a particular class of contract include the Moneylenders Act,
7 S.Ac.L.J. ContractualIllegality and Conflict of Laws

However, it must be recognised that the distinction between statutory

illegality and common law illegality is only meaningful in common law
jurisdictions. In civil law jurisdictions, the law knows no such distinction
inasmuch as the illegality would be one prescribed by statutory law. For
example, in the Philippines, Article 1306 of the Civil Code states that "The
contracting parties may establish such stipulations, clauses, terms and
conditions as that may deem convenient, provided that are not contrary to
law, morals, good customs, public order or public policy."3 9 In Indonesia,
one of the prerequisites for a valid binding contract is the existence of a
lawful cause.4 0 By a lawful "cause", it is meant that what has to be
performed 4 ' by either party is not contrary to the law, public order or
public morality. A contract whereby one of the parties undertakes to commit
a crime is null and void because of the illegal cause.t 2 And in the United
Arab Emirates (UAE), article 205 of the UAE Law of Civil Transactions,
Federal Law No. 15/1985 (otherwise known as the Civil Code) provides
that "if the law prohibits dealing in a thing' 4or
3
if it is contrary to public
order or morals, the contract shall be void.

Chapter 188, 1985 Revised Edition, Singapore Statutes and the Futures Trading Act,
Chapter 116, 1985 Revised Edition, Singapore Statutes. For the relevant cases, see Lorrain
Esme Osman v. Elders FinanceAsia [1992] 1 S.L.R. 369 and Tokyo Investment Pte. Ltd.
& Anor. v. Tan Chor Thing [1993] 3 S.L.R. 170. However, not all contracts made in
contravention of the statutory law of the proper law result in illegality. A contravention
of the relevant statutory law may attract with it penal sanctions without affecting the
enforceability of the contract. See Mary-Ann Arrichiello v. Tanglin Studio Pte. Ltd. [1981]
2 M.L.J. 60 and Foo Kee Boon & Anor. v. Ho Lee Investments (Pte.) Ltd. [1988] 3 M.L.J.
128. In Mun Hean Realty Pte. Ltd. v. Fu Loong LithographerPte. Ltd. [1993] 1 S.L.R.
713, the court held that a contract which does not contain such terms and conditions as
may be prescribed by the rules made under the Sale of Commercial Properties Act,
Chapter 281, 1985 Revised Edition is enforceable. In other words, the Sale of
Commercial Properties Act does not prohibit the making of contracts in a form other
than the prescribed form.
39 According to Article 1409 of the Civil Code of the Philippines, "The following contracts
are inexistent and void from the beginning: (1) Those whose cause, object or purpose is
contrary to law, morals, good customs, public order or public policy . See also Articles
1411 and 1412 of the Philippines Civil Code on the consequences of illegality. On the
Philippines Civil Code, see generally, Justo P. Tores Jr., Obligationsand Contracts (1981),
8th ed.
40 See Article 1320, Kitab Undang-Undang Hukum Sipil, Buku Ketiga (Perihal Perikatan-
Perikatan).
4i "Prestasi" (in Indonesian language) or prestation, a civilian concept.
42 See generally, R. Subekti, The Law of Contracts in Indonesia, Remedies ofBreach (1982),
3rd ed.
43 In Shaikh Faisal Bin Sultan Al Qassim t/a Gibca v. Swan Hunter Singapore Pte Ltd.
(formerly known as Vosper Naval Systems Pte. Ltd. and Vosper-QAFPte. Ltd.) [1995] 1
S.L.R. 394, the Singapore High Court considered the relevant provisions in the UAE
Civil Code relating to illegality.
 Singapore Academy of Law Journal (1995)

In common law jurisdictions, the general principle applicable in statutory

4
illegality is that a contract the making of which is prohibited by statute
expressly or by implication shall be void and unenforceable unless the
statute itself saves the contract or there are contrary intentions which can
reasonably be read from the language of the statute itself. 45 However, the
general principle has no application where the statute itself provides to the
opposite effect, viz., that while the statute prohibits and penalises certain
agreements or arrangements, the statute nevertheless reveals an intention
that generally they shall be valid and enforceable, 6 the exception being
where it is otherwise provided in the statute or in pursuance of any provision
therein.47 Thus, when a statute of the proper law expressly prohibits the
making of a particular contract or class of contract, a contract made in
breach of the prohibition will be illegal, void and unenforceable unless the
statute otherwise provides either expressly or by implication from its
language.48

Thus, in common law jurisdictions, a distinction has to be made between

statutes in the proper law which prohibit the making of a contract and
those which do not render the contract made in contravention of the statutes
unenforceable. The leading light in this area of the law is Atkin L.J.' s (as
he then was) seminal judgment in Mahmoud v. Ispahani49 where his
Lordship stated:

"When the court has to deal with the question whether a particular
contract or class of contract is prohibited by statutes, it may find an
express prohibition in the statute, or it may have to infer the
prohibition from the fact that the statute imposes a penalty upon the
person entering into that class of contract. In the latter case one has
to examine very carefully the penalty upon the individual. One may

44 In CurraghInvestments Ltd. v. Cook [1974] 1 W.L.R. 1559, it was held by Megarry J. that
before a contract is regarded as illegal as being made in contravention of some statutory
provision there had to be a sufficient nexus between the statutory requirement and the
contract and that where statutory requirements were not linked sufficiently, or at all, to
the contract no question of its illegality arose.
45 See inter alia Chung Khiaw Bank Ltd. v. Hotel Rasa Sayang Sdn. Bhd. & Anor. [1990]
1 M.L.J. 356 and Commas SendirianBerhad v. Rakyat FirstMerchant Bankers Berhad &
Anor. [1994] 1 S.C.R. 126.
46 See Foo Kee Boo & Anor. v. Ho Lee Investments (Pte.) Ltd. [1988] 3 M.L.J. 128 where
it was held that an option agreement which did not comply with the form as prescribed
by the Housing Developers Rules 1976 nonetheless gave rise to an enforceable contract
when it was exercised by the plaintiffs, the grantee of the option. See also Mary-Ann
Arrichiello v. Tanglin Studio Pte. Ltd. [1981] 2 M.L.J. 60.
47 See Commas SendirianBerhad v. Rakyat FirstMerchant Bankers Berhad & Anor. [1994]
1 S.C.R. 126.
48 For a case where the relevant statute properly construed provided otherwise, see Batu
Pahat Bank Ltd. v. Official Assignee [1933] A.C. 691.
49 [1921] 2 K.B. 716. See also Yango PastoralCo. Pry. Ltd. v. First ChicagoAustralia Ltd.
(1978) 139 C.L.R. 410.
7 S.Ac.L.J. Contractual Illegality and Conflict of Lavs

find that the statute imposes a penalty upon the individual, and yet
does not prohibit the contract if it is made with a party who is innocent
of the offence which is created by the statute.""'

In the later case of Archbolds (Freightage)Ltd. v. S. SpanglettLtd., Devlin

L.J. warned that "... it does not follow that because it is an offence for one
party to enter into a contract, the contract itself is void." 53 His Lordship
stated that the principles of interpretation to be applied to statutes for the
purpose of determining whether they prohibit the making of the contract
"are the same as those that arise on the construction of every statute; one
must have regard to the language used and to the scope and purpose of the
statute.5 4

Where the proper law of a contract is a foreign law and it is proved that
by that foreign law, the contract was made in contravention of a written
law which prohibits the making of such a contract, the Singapore court
must enforce the foreign law. This is so as it is not the business of the
courts who have found that a contract is illegal by reason of contravention
of legislation of a foreign law identified as the proper law of the contract,
to postulate that the foreign legislation is contrary to essential principles of
justice or morality. To do so would be a serious breach of international
comity since the foreign friendly country is recognised as a sovereign
independent state. 55

As for common law illegality, the illegality arises because the subject matter
of the contract or the object of the contract violates the public policy of the
law identified as the proper law of the contract. In such a case, it is trite

50 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
it has been observed that "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." See
in Vita Food ProductsIncorporated v. Unus Shipping Co. Ltd. (In Liquidation) [1939]
A.C. 277 at 293 per Lord Wright.
5 [1921] 2 K.B. 716 at 731.
-52 [1961] 1 Q.B. 374.
51 Ibid., at 390.
54 Ibid. The cases do no more than demonstrate that the question whether a statute
prohibits the making of contracts is always a question of fact dependent on the particular
statutory provisions, the scope and purpose of the statute. In Mt. Elizabeth Hospital Ltd.
v. Allan Ng Clinic for Women and Anor. [1994] 3 S.L.R. 639, the Singapore Court of
Appeal considered the provisions, scope and purpose of the Sale of Commercial
Properties Act, Chapter 281, 1985 Revised Edition, Singapore Statutes to conclude that
the statute did not proscribe an agreement for the sale and purchase of commercial
property which was not made in accordance with the statutory rules, the Sale of
Commercial Properties Rules 1985. Hence an agreement made in breach of the statutory
rules remains enforceable save that any terms thereof which are inconsistent with those
prescribed by the statutory rules are null and void.
55 See Scrutton L.J. in Aksionairnoye Obschestvo A.M. Luther v. James Sagor & Co. [1921]
3 K.B. 352 at 558. See also Regazzoni v. K.C. Sethia (1944) Ltd. [1958] A.C. 301 at 320.
 Singapore Academy of Law Journal (1995)

law that a contract which violates the public policy of the proper law is
unenforceable for as Diplock L.J. in Mackender v. FeldiaA.G.5 6 observed,
"the proper law of the contract ... shall regulate the legally enforceable
rights and duties to which their agreement gives rise.' 57

The case of P.T. International Nickel Indonesia v. General Trading

Corporation (M) Sdn. Bhdt s illustrates the principle that Singapore courts
would not enforce contracts which violate the public policy of the proper
law. In this case, the respondents commenced an action against the
appellants for unpaid sums under the contracts for sale of the timber.
Although the judgment of the court does not make the point explicit, it
would appear that the proper law of the contract of sale was Singapore
law. It was alleged that the appellants' agent had fraudulently conspired
with the respondents'agent to inflate the purchase price of timber sold by
the respondents to the appellants. The Singapore Court of Appeal accepted
the appellants' contention that it would be against public policy for the
court to enforce a contract between the briber and the recipient of the
bribe and such a contract was illegal. In the circumstances, the court allowed
the appeal from the lower court's decision which had granted summary
judgment to the respondents:"

In determining whether or not a contract regarded as illegal carries with

it the consequence of a void contract,60 the English as well as the Singapore
courts apply the proper law of the contract. In this regard, it is pertinent
to note that while all illegal contracts are unenforceable, not all illegal
contracts are void. Conversely, there are void contracts which are not
illegal- for instance, wagering contracts in Singapore are by section 6(1)
of the Civil Law Act6t declared to be null and void. Indeed, the Malaysian
decision of Ong Guan Hua v. Chong2 supports the proposition that
wagering contracts in Singapore and Malaysia are merely null and void in

56 [1967] 2 Q.B. 590.

57 Ibid., at 602.
58 [1978] 1 M.L.J. 1.
5'9 Another instance of illegality by the public policy of the proper law is that of a contract
which is entered into by the contracting parties with the object of committing an act
prohibited by a statute of the proper law. These are contracts which are not in themselves
unlawful but are contracts made for an illegal purpose. See the classic case of Pearce v.
Brooks (1866) L.R. 1 Ex. 213. See also Regazzoni v. K.C. Sethia (1944) Ltd. [1958] A.C.
301 at 331. For Australian authority, see McCarthy Brothers Pty. Ltd. v. Dairy Farmers'
Co-operative Milk Co. Ltd. (1945) 45 S.R. (N.S.W.) 266.
60 Mackender & Ors. v. Feldia A.G. & Ors. [1967] 2 Q.B. 590 at 602 and 604.
61 Chapter 43, 1994 Edition.
62 (1963) 29 M.L.J. 6. This was a decision of the Court of Appeal of the Federated Malay
States.
7 S.Ac.L.J. Contractual Illegality and Conflict of Laws

the sense of being unenforceable 63 and are not to be regarded as illegal

contracts. Thus, the object of an agreement cannot be said to be forbidden
or unlawful merely because the agreement results in what is known as a
"void" contract." A "void" contract 6 means that the transaction affected
is treated as never having, in law, occurred and as having no legal effect
66
against the world for all purposes.

In determining whether a contract is affected by illegality, the Singapore

cases of Singapore Finance Ltd. v. Soetanto & Ors.67 and Four Seas
Communication Bank v. Sim See Kee 8 show that the correct approach is,
first, to identify the proper law governing the contract or contractual
obligation in question which is alleged to involve some illegality and
secondly, determine whether by the proper law of the contract, the
performance of the contractual obligation is affected by any illegality. Where
by the proper law of the contract, performance of the contractual obligation

63 It is worthy of note that Diplock L.J. in Mackender & Ors. v. Feldia A.G. & Ors. [1967]
2 Q.B. 590 at 601 stated that unenforceability and voidness are not the same concept.
Where an agreement is wholly unenforceable because it is contrary to English law as the
lexfori, it may if the proper law of the agreement is itself English law, accurately be
said to be void as a contract, i.e., not to be a contract at all as it does not give rise to any
enforceable rights and duties. However, an agreement which is contrary to English law
as the lexfori is not illegal by its proper law (which is not English law), that agreement
cannot properly be said to be void and thus not a contract at all. Such a contract does
give rise to enforceable rights and duties according to its proper law but it is a contract
which is unenforceable in the English courts. For Australian cases on the difference
between void and unenforceable contracts, see Brooks v. Burns Philp Trustee Co. Ltd.
(1969) 121 C.L.R. 432 at 458 61 and Buckley v. Tutty (1971) 125 C.L.R. 353 at 379 et
sequentes.
64 See Firm Pratapchandv. Firm Kotrike (1975) A.I.R. S.C. 1223 at 1228.
65 An example of a void and unenforceable contract is a contract made in restraint of trade.
66 See NationalAcceptance CorporationPty. Ltd. v. Benson and Others (1988) 12 N.S.W.L.R.
213. In Hazell v. Hammersmith and Fulham London Borough Council and Others [1992]
2 A.C. 1, the House of Lords held that swap contracts entered into by the London
borough council were ultra vires and unlawful. The consequence was that all such swap
contracts were void. In later litigation involving interest rate swap contracts, the courts
in Westdeutsche Landesbank Gironzentrale v. Islington Borough Council [1994] 4 All
E.R. 890, Barclays Bank plc v. Glasgow City Council [1994] 4 All E.R. 865, Kleinwort
Benson Ltd. v. South Tyneside Metropolitan Borough Council [1994] 4 All E.R. 972 and
Morgan Grenfell & Co. Ltd. v. Welwyn Hatfield District Council (Islington London
Borough Council, third party) [1995] 1 All E.R. 1 recognised that moneys paid under
such void swap contracts are recoverable on restitufionary grounds. On the other hand,
moneys paid under wagering contracts (which are void contracts) are regarded as
voluntary payments (i.e., gifts) and there is no right to recover such moneys see Lipkin
Gorman (afirm) v. Karpnale Ltd. [1991] 2 A.C. 548. As a general proposition, it may be
stated that where a statute expressly prohibits the implication of a promise to repay a
sum of money paid in respect of the impugned transaction, the sum paid is irrecoverable
as money had and received, see Sinclair v. Brougham [1914] A.C. 398.
67 [1992] 2 S.L.R. 407.
68 [1990] 3 M.L.J. 226.
 Singapore Academy of Law Journal (1995)

is not affected by any illegality, the contract is enforceable in Singapore

69
subject to any impact the lexfori may have on the contract.

In Singapore Finance Ltd. v. Soetanto & Ors., Selvam J.C. (as he then was)
was confronted with the contention that the loan contract in that case
could not be enforced as it was illegal under the Bretton Woods Agreements
Ac" of Singapore. The contract of loan had been entered into in Singapore
by the second defendant who was at all material times a Malaysian resident
in Malaysia. It would appear that the proper law of the loan transaction
was Singapore law.7 The second defendant raised the further defence that
as he had failed to obtain permission to take the loan, the loan was made
illegal by the Exchange Control Act 1953 of Malaysia and a directive
issued by the Malaysian authorities. In dismissing the first defence, the
learned Judicial Commissioner held that since the transaction between the
plaintiffs and the defendants was not an exchange contract within the
meaning of the Bretton Woods Agreement, the transaction was not illegal
nor unenforceable under the Bretton Woods Agreement Act. On the
defendants'reliance on Malaysian statutory law as rendering the transaction
illegal, Selvam J.C. held that since the contract was to be performed in
Singapore (in that the loan was extended in Singapore and was repayable
in Singapore) and since the repayment of the loan was not illegal by the
law of Singapore, the plaintiffs were entitled to succeed against the
defendants.

In the earlier case of Four Seas Communication Bank v. Sim See Kee, A.P.
Rajah J. had considered a defence similar to that raised in Singapore Finance
Ltd. v. Soetanto & Ors. and his Honour rejected it as the proper law of the
contract in that case was Singapore law. According to A.P. Rajah J., as the
proper law of the contract recognised the legality of the contract and since
the place of performance of the contract (Singapore) recognised the legality
of the contract, it was irrelevant that the party liable to perform the contract
would by doing so violate the laws of a foreign country in which he is
resident or carries on business or of which he is a national. According to
his Honour,

"[t]he result is that a borrower or lender could be committed to

perform a contract even though the performance of the contract
violated the laws of the country of its incorporation, e.g., an exchange

69 On the impact that the lexfori may have on a contract which is legal by its proper law,
see the discussion in the paper under the rubric "ILLEGALITY AND THE LEX FORI"
Additionally, if the issue before the court relates to procedure or remedies, the court
would apply the lexfori as matters of procedure and remedies are governed by the leax
fori, see, supra, note 16.
70 Chapter 27 of the 1985 Revised Edition of Singapore Statutes.
?i The judgment of the court did not expressly make this finding but from the many
contacts with the Singapore system of law in the case, it is likely that objectively
ascertained, Singapore law is the proper law of the loan contract.
7 S.Ac.L.J. Contractual Illegality and Conflict of Laws

control law, provided that there is an external proper law' 72and the
illegality does not arise where payments have to be made.

Thus, where a contract is not illegal by its proper law, illegality of such a
contract by the law of the nationalities of the contracting parties or the law
in which the parties are resident is irrelevant. As Rajah J. observed in Four
Seas Communication Bank Ltd. v. Sim See Kee, if a contract is lawful by
the proper law, then "it is immaterial that the party liable to perform
would by so doing violate the laws of the foreign country in which he is
resident or carries on business or of which he is a national. 73

In the celebrated English case of In re Missouri Steamship Company,74 the

English Court of Appeal made it clear that where a contract is valid by its
proper law, the fact that the contract is void by reason of the public policy
of the country where the contract was concluded (the lex loci contractus)
did not affect the enforcement of the contract in an English court. In that
case, the public policy of the state of Massachusetts where the contract of
carriage was concluded regarded the exceptions in the contract of carriage
as void. The relevant exception was that the contracting carrier was not to
be liable for any loss or damage caused by the negligence of the master or
crew of the vessel. The Court of Appeal held that the contract itself showed
that the contracting parties intended the contract to be governed by English
law and that the relevant exemption clause not being in contravention of
a positive law of Massachusetts (the lex loci contractus) but only void as
being in contravention of the public policy of Massachusetts would be
enforced in England.

A contract which is valid and legal by its proper law is enforceable

notwithstanding that it contravenes the written law of the place where the
contract was made. This was made clear by the Judicial Committee of the
Privy Council in Vita Food Products Incorporated v. Unus Shipping Co.
Ltd. (In Liquidation) (hereinafter referred to as "the Vita Food Products
case").7 5 In that case, the Privy Council pointed out that as it was sitting
as a Nova Scotian court, it was not compelled to apply the relevant

72 [1990] 3 M.L.J. 226 at 227.

73 [1990] 3 M.L.J. 226 at 227. See also Kleinwort, Sons & Co. v. Ungarische Baumwolle
Industrie Actiengesellschaft and Hungarian General Creditbank [1939] 3 All E.R. 39.
74 (1889) 42 Ch. D. 321. It is significant to note that the stipulations in the contract were
not impeached on the ground that they were of a criminal or wicked or immoral nature,
or such as ought not to be permitted according to the law of civilised countries. See
(1889) 42 Ch. D. at 325. See in this connection, Lemenda Trading Co. Ltd. v. African
Middle East Petroleum Co. Ltd. [1988] 1 Q.B. 448.
75 [1939] A.C. 277. In this case, the Privy Council expressly disapproved of The Torni [1932]
P.78.0
316 Singapore Academy of Law Journal (1995)

Newfoundland statute as Newfoundland law was not the governing law of

the contracts of carriage. 76
While the contracting parties may select any system of law to govern their
contractual relationship,77 it must be borne in mind that the courts retain
a residual power to disregard the chosen proper law where the choice of
governing law is not bona fide and legal. Furthermore, the contracting
parties' choice of governing law may also be disregarded if there be a
reason for avoiding the choice on the ground of public policy. 78 The
exceptions to party autonomy in the selection of the governing law to
regulate the contractual relationship were acknowledged by the Privy
Council in the Vita Food Products case. Thus far, there has been only one
reported instance where the court disregarded the chosen governing law of
the parties on the ground that the choice was not bonafide and legal.79 In
such a case, only the choice of the proper law is struck down but the
contract remains valid and is governed by that system of law which has the
closest and most real connection with the contract.
Just as the issue of whether there is a valid binding contract is determined
by the putative proper law,80 the legality or bonafides of the choice of the
governing law should be judged by the putative proper law of the contract
objectively ascertained."1 Support for this view may be found in The Star

76 Even if the language of the Newfoundland statute had been apt to prohibit parties from
contracting out of the regime of that statute (and therefore prohibit parties from agreeing
to omit the clause paramount in bills of lading issued in Newfoundland), that in itself
would not have compelled the Privy Council as a Nova Scotian court applying Nova
Scotia law as the lexfori to apply the Newfoundland statute. In this connection, see the
view of Professor FJVI.B. Reynolds in "The Implementation of Private Law Conventions
in English law: The Example of the Hague Rules", Butterworths Lectures 1990-91, p. 1
from pp. 4 to 9. Thus, even if the contract in In re Missouri Steamship Company (1889)
42 Ch. D. 321 had contravened the written law of the place where it was made, that by
itself, would not compel the English court as the lexfori to hold that the contract was
illegal.
77 In the Vita Food Products case, the Privy Council held that a choice of proper law wholly
unconnected with the contract of carriage was permissible.
'78 [1939] A.C. 277 at 290. See for example, Tzortzis v. Monark Line A/B [1968] 1 W.L.R.
406 at 411, English v. Donnelly (1958) S.C. 494 at 499 and Brodin v. AIR Seljan (1973)
S.C. 213.
'79 Golden Acres Ltd, v. QueenslandEstates Pry. Ltd. [1969] Qd. L.R. 378.
SO See The Parouth [1982] 2 Lloyd's Rep. 351 where the English Court of Appeal applied
the putative proper law of the contract to determine whether there was a binding
contract between the parties.
S1 The putative proper law is that law which objectively ascertained (disregarding the
chosen law if the chosen law is not the proper law as objectively ascertained) would be
the proper law if the contract was validly concluded. The other view is that the legality
of the choice of the proper law is to be determined by a consideration of the proper law
as one of the relevant factors to be taken into account together with the surrounding
circumstances. According to this view if there is no rational commercial basis for the
parties' choice of law to govern their contractual relationship, the chosen proper law may
be disregarded as being not bona fide. This test admits of difficulties in application as it
would be rare for an expressed choice of the proper law to be without a logical commercial
7 S.Ac.L.J. Contractual Illegality and Conflict of Laws

Texas8 2 where the English Court of Appeal applied the putative proper law
to decide the issue of whether a clause in a time charterparty was null and
void as being a clause providing for a "floating proper law"."

II. ILLEGALITY AND THE LEX FORI

While in most cases, the lawfulness of a contract is determined by the

proper law, Singapore law as the lexfori may render the contract unlawful
if Singapore law stipulates for the application of overriding mandatory
rules to the particular contract. 4 Additionally, Singapore law as the lexfori
would not enforce a contract (which is valid and lawful by its foreign
governing law) which is inimical to the public policy of Singapore.85 The
choice of a foreign law as the governing law or proper law will not prevent
a Singapore court as the lexfori from disregarding the choice of law if its
application would be manifestly incompatible with Singapore public policy.
In the words of Salleh Abas F.J. (as he then was):

"It is a general principle of law that any transaction taking place

outside the jurisdiction can only be enforced in the local courts if
they are not contrary to the local law and regulations. Under the
continental system86 the priority of lex loci over lexfori 7 (sic) is
based on the doctrine of odre public orjus cogens under which any
domestic law designed to protect public welfare and morals must
prevail over an inconsistent foreign rule. In English legal system,
foreign law is recognised only if it is not repugnant to the distinctive
policy of English law, be it statute or common law."8 s

basis. See generally, Dicey & Morris, The Conflict of Laws, 12th ed. (1993) at pp. 1253
and 1254 and Cheshire and North, Private InternationalLaw, 12th ed. (1992) at pp. 506
and 518.
82 [1993] 2 Lloyd's Rep. 445.
83 It was contended by the disponent owners that clause 35 of the time charterparty
provided that the proper law of the contract was to be either Chinese law or English law
depending on where the arbitration of disputes under the charterparty took place.
84 See Carriage of Goods by Air Act, Chapter 32A, 1989 Revised Edition of Singapore
Statutes and Carriage of Goods by Sea Act, Chapter 33, 1985 Revised Edition of
Singapore Statutes. In The Epar [1985] 2 M.L.J. 3, the Singapore High Court took the
view that section 3(1) of the Carriage of Goods by Sea Act mandated that the scheduled
Hague-Visby Rules apply regardless of the choice of law expressly agreed by the
contracting parties. For a contrary view of the import of section 3(1) of the Carriage of
Goods by Sea Act, see Pacific Electric Wire & Cable Co. Ltd. & Anor. v. Neptune Orient
Lines Ltd. (Tokyo Kaiun Kaisha Ltd., thirdparty and Prima Shipping Sdn. Bhd., fourth
party) [1993] 3 S.L.R. 60.
85 See In re Missouri Steamship Company (1889) 42 Ch. D. 321.
k6 That is, the civil law system.
97 It is respectfully submitted that his Lordship meant to say that any priority of the lexfori
over the lex causae.
88 Ngui Mui Khin & Anor. v. Gillespie Brothers & Co. Ltd. [1980] 2 M.L.J. 9 at 10. See also
Vita Food Products Incorporatedv. Units Shipping Co. Ltd. (In Liquidation) [1939] A.C.
277.
 Singapore Academy of Law Journal (1995)

Thus, illegality by the lex fori may arise from contravention of the written
law of the forum or the public policy of the forum.

A. Contracts contrary to written law of forum

The fact that a contract, legal by its proper law, infringes a written law of
the forum does not without more result in that contract being unenforceable
in the forum. As the legality (or otherwise) of a contract is determined by
its proper law, the written law of the forum is irrelevant. However, there
may be overriding mandatory statutory law in the forum which affects
contracts made in 89 the forum.90

One example of an overriding mandatory statutory law in Singapore is the

Carriage of Goods by Sea Act0 ' which provides that the Hague-Visby Rules92
"shall have the force of law" with regard to, inter alia, contracts of carriage
covered 4 by bills of lading for shipments out of Singapore. The legislative
technique of ascribing to certain provisions or rules the force of law is
intended to prevent parties from contracting out of the identified rules
ascribed as having the force of law. Thus, any attempt on the part of the
contracting carrier to provide that the Hague Rules apply to the contract
would be struck down.98 However, the striking down of the offensive
provisions in a contract of carriage regulated by a bill of lading does not

89 This is a case where the lexfori is also the lex loci contractus.
90 For an early case of an overriding mandatory law which applied to all British subjects
carrying out the transaction of buying or borrowing any foreign currency regardless of
the proper law of the transaction, see the Defence (Finance) Regulations 1939,
regulation 2 as amended by Statutory Regulations & Orders 1940, No. 1484 as interpreted
by the House of Lords in Boissevain v. Weil [1950] A.C. 327 at 343.
91 Chapter 33, 1985 Edition, Singapore Statutes as amended by the Carriage of Goods by
Sea (Amendment) Act 1995 which came into effect on 31 March 1995, see No. S 140/95.
92 The common appellation for the set of rules contained in the International Convention
for the Unification of Certain Rules of Law relating to Bills of Lading 1924 as amended
by the Brussels Protocol of 1968.
93 By reason of Article X of the Hague-Visby Rules read with section 3(1) of the Carriage
of Goods by Sea Act (as amended by the Carriage of Goods By Sea (Amendment) Act
1995), the Rules apply as a matter of mandatory law whenever any of the situations
mentioned in Article X(a), (b) and (c) occurs. See also section 3(2) of the Carriage of
Goods by Sea Act as amended by the Carriage of Goods by Sea (Amendment) Act 1995.
94 As long as the parties contemplated that a bill of lading or similar document of title is
to be issued to cover the contract of carriage, the Hague-Visby Rules shall apply. There
is no need for the issuance of a physical bill of lading, see Pyrene Co. Ltd. v. Scindia
Steam Navigation Co. Ltd. [1954] 2 Q.B. 402. For a recent case where the court held that
the document issued (a consignment note having all three attributes of a bill of lading)
was a "similar document of title" within the meaning of the Hague Rules, see Comalco
Aluminium Ltd. v. Mogal Freight Services Pry. Ltd. [1993] 113 A.L.R. 677.
95 As the provision would be one "relieving the carrier or the ship from liability for loss or
damage to, or in connection with, goods arising from negligence, fault, or failure in the
duties and obligations provided in [Article III] or lessening such liability otherwise than
as provided in [the Hague-Visby] Rules" and thus "null and void and of no effect". See
Article III rule 8 of the Hague-Visby Rules.
7 S.Ac.L.J. Contractual Illegality and Conflict of Laws

mean that the contract of carriage is illegal.96 The contract of carriage

remains in being save that the offensive provisions are rendered "null and
void".

Thus the Carriage of Goods by Sea Act is an overriding mandatory law

which ex nessitate rei precludes the ability of the contracting parties to
choose a different law to govern their contractual relationship. As long as
any of the situations in Article X and section 3(2) and (4) apply, the
Carriage of Goods by Sea Act must be applied to the case before the
Singapore court and any other law chosen by the contracting parties is
disregarded. This was indeed the approach taken by the House of Lords
in The Hollandia97 where the bills of lading covered shipment of goods
from Leith in Scotland to Bonaire in the Dutch West Indies. The House
of Lords held that since the shipment fell within Article X(a) and (b) of
the Hague-Visby Rules" which had the force of law in the United Kingdom,
the Hague-Visby Rules could not be contracted out of by the parties and
the contract of carriage in respect of the shipment was subject to the
Hague-Visby Rules. In addition, given Article III rule 8 of the Hague-
Visby Rules, any contractual terms which lessen the liabilities of the carrier
or the ship otherwise than as provided in the Hague-Visby Rules "shall be
null and void and of no effect."

There may also be overriding mandatory statutory law in the forum which
renders any contract made in Singapore illegal99 if the contract involves a
contravention of the local statutory law. The cases on point are John B.
Skilling v. ConsolidatedHotels4 ' and Raymond Banham v. Consolidated
Hotels.1"" In the former case, Chua J., delivering the judgment of the
Singapore Court of Appeal stated that the agreement in question (whereby
the plaintiffs rendered their professional services as engineers for the
construction of a hotel complex project known as the Singapore Sheraton
in Singapore):

"isillegal as it infringes the provisions of sections 18 and 19 of the

[Professional Engineers] Act.' It is an elementary principle of law
that a court will not enforce a contract which by its own lexfori it
would not enforce because it is tainted with illegality. In this
connection, the foreign law factor is irrelevant. It follows that the
said Agreement cannot be enforced here." 1' 3

96 See The Hollandia [1983] A.C. 565 and The Epar [1985] 2 M.L.J. 3.
97 [1983] A.C. 565.
98 The shipment of goods also fell within section 1(3) of the United Kingdom Carriage of
Goods Act 1971, c. 19.
99 Emphasis added by the writer.
100 [1979] 3 M.L.J. 2.
101 [1976] 1 M.L.J. 5.
102 Then, Chapter 225, 1970 Revised Edition, Singapore Statutes. See now, Chapter 253,
1992 Edition.
103 [1979] 2 M.L.J. 2 at 3.
 Singapore Academy of Law Journal (1995)

In John B. Skilling v. ConsolidatedHotels, the Court of Appeal applied the

provisions of the Professional Engineers Act notwithstanding that the parties
had agreed that the proper law of the agreement was to be the law of the
state of Washington, United States of America.

In the earlier case of Raymond Banham v. Consolidated Hotels, the

Singapore High Court held that the parties' ignorance of the local law, viz.,
the requirement for professional engineers working in Singapore to be
registered, did not alter the conclusion that the agreement was illegal as
having contravened the provisions of the Professional Engineers Act of
1970. The result was the dismissal of the plaintiffs' claim for remuneration
in respect of their services rendered as unregistered professional engineers.""'
The view that the parties' knowledge of their contravention of the law is
irrelevant is, with respect, entirely correct when one is dealing with an
overriding mandatory law of the forum. In other words, "where a contract
is to do a thing which cannot be performed without a violation of the law
it is void, whether the parties knew the law or not."105

In Singapore, it is clear from the case law that the provisions of the
Moneylenders Act 1 6 and the Residential Property Act'0 7 will be treated as
overriding mandatory law. In Malaysia, it is clear from the Federal Court

1C4 Winslow J. dismissed the plaintiffs' claim with costs. See also John B. Skilling v.
ConsolidatedHotels [1976] 1 M.L.J. 5 where the Singapore Court of Appeal in dismissing
the appeal from the High Court's decision that the plaintiffs' claim was unenforceable by
reason of illegality, awarded costs to the respondent. On whether the court may award
costs to a party who has successfully relied on the defence of illegality, see Nova
ManagementPte. Ltd. v. Amara Hotel PropertiesPte. Ltd. [1993] 2 S.L.R. 289 at 295 and
296 and Tan Cheow Gek & Anor. v. Gimly Holdings Pte. Ltd. [1992] 2 S.L.R. 817 at 827.
It suffices to say that the Court of Appeal in Nova ManagementPte. Ltd. v. Amara Hotel
Properties Pte. Ltd. [1994] 1 S.L.R. 263 reversed the decision of the High Court on a
point of the proper construction of the relevant statutory regulations. For a case where
the High Court of Singapore made no order as to costs where a party had successfully
relied on the defence of illegality, see Cheng Mun Siah v. Tan Nam Sui [1980] 2 M.L.J.
269.
105 See Waugh v. Morris (1873) 8 L.R.Q.B. 202 at 208. It suffices to say that the Singapore
Court of Appeal in Tokyo Investment Pte. Ltd. & Anor. v. Tan Chor Thing [1993] 3
S.L.R. 170 at 176 cited with approval the decision in Raymond Banham v. Consolidated
Hotels Ltd. [1976] 1 M.L.J. 5.
1(f Chapter 188, 1985 Revised Edition, Singapore Statutes. For the latest judicial
pronouncement on the ambit of the Moneylenders Act, see the Singapore Court of
Appeal decision in Brooks Exim Pte. Ltd. v. Bhagwandas [1995] 2 S.L.R. 13.
10O?See Lim Xue Shan & Anor. v. Ong Kim Cheong [1990] 3 M.L.J. 449. Approved inAlrich
Development Pte. Ltd. v. Rafiq Jumabhoy [1995] 2 S.L.R. 401 at 420D.
I (I It is also likely that a contract for the sale of one 's kidney is illegal in Singapore
notwithstanding its proper law as the making of such a contract is expressly prohibited
by the Human Organ Transplant Act, Chapter 131A, 1988 Revised Edition. See section
14(1) and (2) of the Human Organ Transplant Act. Section 14(1) provides that "... a
contract ... under which a person agrees, for valuable consideration ... to the sale or
supply of any organ or blood from his body ... whether before or after his death ... shall
be void." Section 14(2) makes it an offence for any person to enter into a contract of the
kind referred to in section 14(1) and the person "shall be liable on conviction to a fine
not exceeding $10,000 or to imprisonment for a term not exceeding one year or to both."
7 S.Ac.LJ. Contractual Illegality and Conflict of Laws

decision in Ngui Mui Khin & Anor. v. Gillespie Brothers & Co. Ltd.,"9 that
the Moneylenders Ordinance 1951"' is an overriding mandatory legislation.

The recent Singapore Court of Appeal decision in Brooks Exim Pte. Ltd.
v. Bhagwandas"'lends support to the view that the Moneylenders Act is
an overriding mandatory statute. In that case, the court pointed out that
any person1 carrying out moneylending transactions in Singapore is subject
to the Moneylenders Act whether or not the person carrying out such
moneylending transactions is resident in Singapore. In so deciding, the
Singapore Court of Appeal explained that its earlier decision in Lorrain
Esme Osman v. Elders Finance Asia Ltd.'1 must be read in subjectam
materiam and is not to be understood as confining the ambit of the
Moneylenders Act to the carrying on of moneylending transactions by
4
persons resident in Singapore."

One question which arises in Singapore is whether the provisions of the

Unfair Contract Terms Act1 5 constitute overriding mandatory statutory
law. In the United Kingdom, the view has been taken that by reason of
section 27(2) of the Unfair Contracts Terms Act 1977,"6 the Act is intended
to be an overriding mandatory statute."' However, there are difficulties of
construction arising from the language employed in section 27(1) and (2)
of the Unfair Contract Terms Act 1977 and as the Singapore Act is a
replication of the United Kingdom statute, the same difficulties are to be
found in the Singapore Act.

Turning to the type of rules and regulations which may be regarded as

written law in Singapore, the recent case of Sir Tony v. Lir Ah Ghee
(tia Phil Real Estate & Building Services)" s is worthy of note. In this case,

10) [1980] 2 M.L.J. 9. In this case, the Moneylenders Ordinance 1951 was held to apply to
a transaction concluded in Singapore and expressed to be governed by English law.
While the guarantee on which the plaintiffs commenced their action was expressed to be
governed by English law, it is not entirely clear from the report of the case whether the
original transaction (which gave rise to the guarantee) was governed by English law.
Nonetheless, it is clear from the report that Singapore was the place where the original
transaction took place.
110 Act No. 42 of 1951.
iii [1995] 2 S.L.R. 13.
112 Whether that person is a natural person or a body corporate.
113 [1992] 1 S.L.R. 369.
114 Of course, it is clear from Cheong Kim Hock v. Lin Securities (Pte) Ltd. (in liquidation)
[1992] 2 S.L.R. 349 at 358A that the Moneylending Act prohibits the business of
moneylending without licence and the giving of a number of loans to friends does not
constitute the business ofmoneylending unless there is a system and continuity about the
transactions.
115 Chapter 396, 1994 Edition.
116 C. 50.
11 7 See the excellent discussion on this point in Cheshire and North, Private International
Law, 11th ed. (1987) at pp. 467 to 470.
118 [1994] 3 S.L.R. 224.
 Singapore Academy of Law Journal (1995)

the plaintiff who was at the material time a Corrupt Practices Investigation
Bureau (CPIB) officer, carried on business as a property agent and sought
recovery of his share of the sale commission from the defendant. At first
instance, Lai Siu Chiu J. held that the plaintiff's breach of the general
prohibition in the instruction manual' 9 against public servants engaging in
any trade or business did not amount to contravention of law since the
instruction manual does not carry the force of law and are merely internal
regulations concerning the conduct and behaviour of a public servant. 12
The instruction manual was in essence the terms of employment for a
public servant as laid down by the Public Service Commission. Moreover
as the plaintiff was not legally bound not to engage in trade, the agreement
was not tainted with illegality. 121 On appeal, the Court of Appeal upheld
the trial judge's decision and elaborated on the status of the Instructions
Manual in the following terms:

"The provisions in the Instructions Manual are clearly not law. They
are made by the Permanent Secretary of the Finance Ministry and
may be amended from time to time as the Permanent Secretary may
deem fit. They govern the conduct of public officers. The failure by
a public officer to observe such rules may render the2 officer liable to
disciplinary action... The IM has no force of law.""

Similarly, in Shaikh FaisalBin Sultan Al Qassim t/a Gibca v. Swan Hunter

Singapore Pte. Ltd. (formerly known as Vosper Naval Systems Pte. Ltd.
and Vosper-QAF Pte. Ltd.), Chao Hick Tin J. held that a directive issued
by the executive arm of the state and the prohibition contained in article
24.1 of the standard contract did not constitute written law as both were
not provisions laid down in any Federal law or decree of the lawmaking
authorities in the United Arab Emirates. 2-

In Malaysia, it has been held that the bye-laws of the Stock Exchange are
the bye-laws of a private body which have no force of law. Consequently,
any contravention of the bye-laws of the Stock Exchange would not amount
to contravention of a written law and a contract made with an unregistered
remisier, though contravening a bye-law 2of the Stock Exchange which bound
the remisier, is not an illegal contract.1 4

119 Regulation 145, Section L, IM No. 2 prohibits a public servant from engaging in any
trade or business without the written approval of the Permanent Secretary (Finance)
(Public Service).
120 See also Cheong Seok Leng v. Public Prosecutor [1988] 2 M.L.J. 481 at 487 on the
distinction between executive acts like the issuance of administrative guidelines not having
legislative effect and the enactment of regulations having legislative effect.
121 The learned judge applied the public conscience test to determine whether the contract
on which the plaintiff sued on was tainted with illegality. See [1994] 3 S.L.R. 224 at 240.
Quaere whether this aspect of the case requires reconsideration in the light of the House
of Lords' decision in Tinsley v. Milligan [1993] 3 W.L.R. 126.
122 [1995] 2 S.L.R. 466 at 473F.
123 [1995] 1 S.L.R. 394 at 410.
124 Theresa Chong v. Kin Khoon & Co. [1976] 2 M.L.J. 253 at 256, Federal Court of Malaysia.
7 S.Ac.L.J. Contractual Illegality and Conflict of Laws

B. Contracts contrary to public policy of forum

Where the lex fori is Singapore, a contract legal by its proper law (not
being Singapore law) may nonetheless be unenforceable in Singapore if
the contract contravenes a public policy of Singapore. It is trite law that
there are some contracts to which the law will not give effect;"and therefore,
although the parties may enter into what, but for the element which the
law condemns, would be perfect contracts, the law would not allow them
to operate as contracts, notwithstanding that, in point of form, the parties
have agreed. Some such contracts may be void on the ground of immorality;
some on the ground that they are contrary to public policy; as for example,
in restraint of trade: and contracts so tainted the law will not lend its aid
to enforce."' 25

In the words of Turner L.J. in Hope v. Hope' 26 "A contract may be good
by the law of another country, but if it be in breach, fraud or evasion of
the law of this country, or contrary to its policy, the Courts of this country
cannot ...be called upon to enforce it."12 7

As Lord Parker of Waddington put it in Dynamit Actien-gesellschaft

(Vormals Alfred Nobel Company) v. Rio Tinto Company Ltd.ZS:

"Whenever the Courts of this country are called upon to decide as to

the rights and liabilities of the parties to a contract, the effect on such
contract of the public policy of this country must necessarily be a
relevant consideration. Every legal decision of our Courts consists of
the application of our own law to the facts of the case as ascertained
by appropriate evidence. One of these facts may be the state of some
foreign law, but it is not the foreign law but our own law to which
effect is given, whether it be by way of judgment for damages,
injunction, order declaring rights and liabilities, or otherwise. As has
been often said, private international law is really a branch of
municipal law, and obviously there can be no branch of municipal
law in which the general policy of such law can be properly ignored.
If the policy of our law renders it unlawful for a subject of the Crown
to contract with a foreigner that if war break out between this country
and the State of which the foreigner is subject the latter shall be
indemnified against or be relieved from or receive compensation for
a loss which he would otherwise incur, no subject of the Crown can
be allowed to evade the rule by entering into such a contract out of
the jurisdiction and stipulating expressly or impliedly that the contract
shall be governed by a foreign law ... Where a contract conflicts with

125 Per Lord Halsbury L.C. in Mogul Steamship Co. Ltd. v. McGregor, Gow & Co., T.
Skinner & Co. and Ors. [1892] A.C. 25 at 39.
126 8 D. M. & G. 731.
127 Ibid., at 743.
128 [1918] A.C. 260.
 Singapore Academy of Law Journal (1995)

what are deemed in England to be essential public or moral interests,

it cannot be enforced here notwithstanding that it may have been
' 1 9
valid by its proper law. 2

Speaking of public policy, Jordan C.J. in In re Morris (deceased)3" defined

the phrase to mean:

"the ideas which for the time being prevail in a community as to the
conditions necessary to ensure its welfare; so that anything is treated
as against public policy if it is generally regarded as injurious to
public interest. The 'public policy' which a court is entitled to apply
as a test of validity to a contract is in relation to some definite and
governing principle which the community as a whole has already
adopted either formally by law or tacitly by its general course of
corporate life, and which the courts of the country can therefore
recognise and enforce."' 3

It has been said that public policy is not fixed and stable.3 Since ideas
change from generation to generation as to what may be injurious to the
public interest, 'public policy' is "a variable thing. It must fluctuate with
the circumstances of the time."'' 3 Thus, public policy may change with the
times."

Public policy in Singapore is not the same as public policy in other

countries. 1' 5 That is to say that courts in different jurisdictions may use
public policy in different ways. Indeed, it was trenchantly observed by
Lord Devlin that "Public policy appears in the hands of the New York
courts a more flexible instrument than it is in [the United Kingdom] .' "

However, while the public policy of countries may not be identical, there
appears to be a core of essential 3principles of justice and morality which
is shared by all civilised nations.' '

129 Ibid., at 302.

3) (1943) 43 S.R. (N.S.W.) 352.
131 Ibid., at 355 and 356, It suffices to say that Jordan C.J.'s explanation of the import of
'public policy' was endorsed by the High Court of Australia in Lieberman v. Morris
(1944) 69 C.L.R. 69 and A. and Others v. Hayden and Others (1984) 156 C.L.R. 532.
132 In re Morris (deceased) (1943) 43 S.R. (N.S.W.) 352 at 355.
133 Naylor, Benzon & Co. v. Krainische Industrie Gesellschaft [1918] 1 K.B. 331 at 342.
134 See Lemenda Trading Co, Ltd. v. African Middle East Petroleum Co. Ltd. (hereinafter
referred to as "the Lemenda case") [1988] 1 Q.B. 448 and Shaikh FaisalBin Sultan Al
Qassim t/a Gibca v. Swan Hunter Singapore Pte. Ltd. (formerly known as Vosper Naval
Systems Pte. Ltd. and Vosper-QAF Pte. Ltd.) (hereinafter referred to as "the Shaikh
Faisalcase") [1995] 1 S.L.R. 394 at 410.
35 For example, in Saxby v. Fulton [1909] 2 K.B. 208, while it was against the public policy
of England to enforce a gaming contract governed by English law, it was proved that it
was not against the public policy of French law to enforce gaming contracts governed by
French law. See also Kaufman v. Gerson [1904] 1 K.B. 591.
13Y Bank voor Handel en Scheepvaart v. Slatford [1953] 1 Q.B. 248 at 266.
17/ See the Lemenda case [1988] 1 Q.B. 448 and the Shaikh Faisalcase [1995] 1 S.L.R. 394.
7 S.Ac.L.J. Contractual Illegality and Conflict of Laws

While the public policy of the lex fori plays a large part in rendering
domestic contracts (i.e., contracts which do not involve any elements of
foreign law as the relevant connecting factors) unenforceable, the public
policy of the lexfori plays a less extensive role in militating against the
enforceability of contracts involving elements of foreign law. In other words,
public policy in the conflict of laws sense does not operate with the same
vigour and extent as does public policy in domestic contracts. As Lord
Simon of Glaisdale observed in Vervaeke v. Smith,""' the English court
"will be slower to invoke public policy in the field of conflict of laws than
when a purely municipal legal issue is involved.' 39 The difference in the
role of public policy considerations with regard to invalidating foreign and
domestic contracts is, perhaps, best understood by the use of the civil law
concepts of international ordre public and domestic ordre public 4 0

The English case of Saxby v. Fulton"" demonstrates that English courts

will not necessarily apply purely domestic English public policy to hold
that a contract governed by a foreign law is unenforceable on the ground
of being contrary to the public policy of the English forum.

In Saxby v. Fulton, the English Court of Appeal enforced the plaintiff's

claim for repayment of money which had been lent to the defendant for
the purpose of gaming. The loan contract had been made in Monte Carlo,
France and by French law, gaming was not against public policy. It would
appear that the lex loci solutionis in this case was the law of England as
parties had previously settled their accounts in England after their gambling
spree in Monte Carlo.' 42 It would also appear that French law was the
proper law of the loan contract.143 While the English court accepted that
by English domestic law, a sum of money lent for the purpose of gaming
was irrecoverable as provided for in English legislation, the court was not
persuaded that there was any principle of public policy - whether or not
deducible from the English legislation - which would compel an English
court to hold that the recovery of money lent abroad for the purpose of
gaming was forbidden by the statute law of England or that the lending of
the money for the purpose of gaming was contrary to morality prevailing
in England." Thus, in Saxby v. Fulton, the English Court of Appeal refused

138 [1983] A.C. 145.

-39 Ibid., at 164C.
P40 In civil law countries, while obligations arising under domestic contracts may be invalidated
by reference to domestic ordrepublic, obligations arising under international contracts or
contracts governed by a foreign law are invalidated by reference to international ordre
public.
141 [1909] 2 K.B. 208.
142 See [1909] 2 K.B. 208 at 209.
143 The court relied on the old presumption that the leax loci contractus was the governing
law of the contract. The case was decided at a time before the concept of the proper law
of the contract was fully developed by the courts.
144 See [1909] 2 K.B. at 226, 227 and 230.
 Singapore Academy of Law Journal (1995)

to strike down a foreign contract (i.e., one governed by foreign law and
performed in the foreign country) which was legal by its proper law as
being contrary to English public policy or otherwise illegal.

The principle laid down in Saxby v. Fulton has been applied in Malaysia
by Eusoff Chin J. (as he then was) in The Aspinall Curzon Ltd. v. Khoo
Teng Hock. 145 In that case, the plaintiffs sought to register a judgment
obtained in England under section 4 of the Malaysian Reciprocal
Enforcement of Judgments Act 19 5 8 .MS The plaintiffs had obtained judgment
in the High Court of England against the defendant in respect of moneys
owing by the defendant at the gambling casino run by the plaintiffs in
England. The moneys owing was the sum of the defendant's purchases of
gaming chips to enable him to gamble in the plaintiffs' casino. At the
plaintiffs'casino, the defendant had issued his personal cheques to purchase
the gaming chips. The defendant contended that the English judgment
should not be registered in Malaysia as the cheques were given for an
illegal consideration or alternatively, that as the judgment was for a gambling
debt, it was against the public policy of Malaysia to permit enforcement of
the judgment. Eusoff Chin J. pointed out that the plaintiffs ran a casino in
England licensed under the United Kingdom Gaming Act 1968. The learned
judge also pointed out that under Malaysian law, the Finance Minister
under section 27A of the Malaysian Common Gaming Houses Act 1953
may by licence authorise the promotion and organisation of gaming by a
local company. That being the case, there was no absolute prohibition in
Malaysian law against the enforcement of a judgment founded on the
consideration of the supply of gaming chips to enable gambling at a licensed
gaming house.' 47 As the contract for the purchase of the gaming chips had
been made in England and as the defendant's cheques were issued in
exchange for case and gaming chips for purposes of gaming at a licensed
gaming casino, the contract had not been made for an unlawful purpose by
the law of England.1 4 , Consequently, the learned judge held that the
enforcement in Malaysia of the English judgment obtained by the plaintiffs
"cannot be considered as against the public policy" of Malaysia.1 4 9

145 [1991] 2 M.L.J. 484.

46 Revised 1972.
47 His Honour held that section 31 of the Malaysian Contracts Act 1950 and section 26 of
the Malaysian Civil Law Act 1956 (which render gaming and wagering contracts
unenforceable) are not meant to apply to gaming or wagering in premises run by a
company licensed by the Finance Minister under section 27A of the Common Gaming
Houses Act 1953. See [1991] 2 M.L.J. 484 at 485.
148 Although the court did not expressly state that the contract in respect of which the
English judgment had been obtained was governed by English law, it is clear from the
tenor of the judgment that the proper law of the contract is English law and that by
English law, the contract for the purchase of gaming chips was not unlawful as being
against a written law or against English public policy as the gaming had been carried out
at a licensed gaming house.
140 [1991] 2 M.L.J. 484 at 486.
7 S.Ac.LJ. Contractual Illegality and Conflict of Laws

An unsuccessful attempt was made in the English case of Addison v.

Brown"50 to strike down a separation agreement made in California, United
States of America which included a term requiring the husband to pay
maintenance to the wife and also a term precluding either spouses from
making an application to a court in the state of California on a divorce for
reliefs. The wife commenced an action in the English court for arrears of
maintenance under the separation agreement and the husband contended
that the action was not maintainable in the English courts because the
separation agreement sued on was contrary to public policy. Streatfeild J.
held that "although it is contrary to public policy to oust the jurisdiction
of the English courts in such a case, I cannot think that public policy
forbids a plaintiff in the English courts from suing on an agreement on the
ground that that agreement purports to oust the jurisdiction of a foreign
court."'' In Addison v. Brown, the learned judge pointed out that the
separation agreement had been adopted by the American court by
incorporation in its judgment 5 2 and therefore was not unlawful by its
governing law and/or by the lex loci contractus.

Saxby v. Fulton, Addison v. Brown and The Aspinall Curzon Ltd. v. Khoo
Teng Hock clearly demonstrate that the public policy of the forum is not
identical with the public policy of the law governing the contract and where
by its governing law, the contract is not against public policy, the court of
the forum would not hold the contract to be unenforceable on the ground
of being against the public policy of the forum.

However, there appears to be certain core essential principles of morality

and justice which make up the public policy of the English and Singapore
fora such that where a foreign contract (i.e., a contract governed by a
foreign proper law and made in a foreign country) is made in circumstances
which infringe these core essential principles of morality and justice, that
S3
foreign contract would not be enforceable in England and Singapore.
The locus classicus is Kaufman v. Gerson.1 4 In this case, the English Court
of Appeal refused to enforce a contract governed by French law as the
court took the view that the contract was in contravention of some essential
principle of justice and morality, viz., that the agreement had been made

150 [1954] 2 All E.R. 213.

15: Ibid., at 217. To some extent, the approach of the court in Addison v. Brown in taking
into account the relative public policy of the governing law of the contract and that of
the lexfori is different from that of Phillips J. in the Lemenda case [1988] Q.B. 448.
152 [1954] 2 All E.R. 213 at 217.
153 In In re Missouri Steamship Company (1889) 42 Ch. D. 321 at 336, Halsbury L.C. stated
that "Where a contract is void on the ground of immorality ... then the contract would
be void all over the world, and no civilised country would be called upon to enforce it."
In Singapore, Chao Hick Tin J. in the Shaikh Faisal case proceeded on the premise that
there were certain core principles of morality which apply generally, see [1995] 1 S.L.R.
394 at 410A and 414A.
154 [1903] 2 K.B. 114 and [1904] 1 K.B. 591.
 Singapore Academy of Law Journal (1995)

by means of moral coercion and/or extortion and was to be regarded as

unjust and immoral by an English court.'55

Similarly, in Grell v. Levy, 5 6 the court refused to enforce a champertous

agreement to be carried into effect in England 57 notwithstanding that the
agreement was made in a foreign country where by the lex loci contractus,
such an agreement was legal. 8

A contract which contravenes the public policy of the lex loci contractus is
not by that reason alone a contract which contravenes the public policy of
the forum (which is not the lex loci contractus). The case on point is In re
Missouri Steamship Company where Cotton LJ. stated that an English
court is"not bound, when a contract is entered into with reference to
English law, to abstain from acting on that contract simply because ... the
American Courts, when the contract was entered into in the United States,
would not enforce it, considering, which the Courts of the country do not
consider, that the course they take is in accordance with public policy. ' l5
' 9

In re MissouriSteamship Company is a case concerning a contract of carriage

entered into in Massachusetts but to be entirely performed in England.
Consequently, it was held that the contract of carriage was in all respects
an English contract in the sense that the proper law of the contract was
English law. In the circumstances, the English Court of Appeal held that
a clause exempting the carrier from liability for default due to the fault of
his servants, being a clause which was not void by the law of England as
against public policy, could receive contractual effect. The fact that in
Massachusetts, such an exemption clause would be void as being contrary
to the public policy of the state of Massachusetts was an irrelevant
consideration. 60 In this connection, it is pertinent to point out that both
Cotton and Fry L.JJ. in In re Missouri Steamship Company observed that
it was the public policy rule recognised by the American courts which

155 See [1904] 1 K.B. 591 at 597, 599 and 600. Collins M.R., in his judgment, stated that the
ground for refusing to enforce such an agreement is one which ought to be universally
recognised. See [1904] 1 K.B. 591 at 599. It is worthy of note that the lex loci solutionis
in this case appeared to be French law which did not view the contract as invalid. See
[1904] 1 K.B. 591 at 592.
:56 (1864) 16 C.B. (N.S.) 73, 79.
-57 Thus the lex loci solutionis in this case was English law.
158 It could be said that Grell v. Levy is an early case where the English court refused to
enforce a contract notwithstanding validity by its proper law (in those days, the lex loci
contractus was presumed to be the law governing the contract) where the lex loci solutionis
and the lex fori treat such a contract as being against public policy.
159 (1889) 42 Ch. D. 321 at 340. Cotton LJ. went on to state that the position taken by the
American courts with regard to the rejection of the relevant exemption clause as being
contrary to public policy only applied where the contract was governed by the law of the
United States.
16 The understanding of Lord Dunedin in Dynamit Actien-Gesellschaft (Vormals Alfred
Nobel and Company) v. Rio Tinto Company Ltd. [1918] A.C. 260 at 294.
7 S.Ac.LJ. Contractual Illegality and Conflict of Laws

rendered the relevant exemption clause void and that there was nothing in
the law (in the sense of written law) of the United States which prohibited
a carrier from entering into contracts with such exemption clauses or made
it a criminal offence to do so.' 6 '

Turning to the type of contracts which would fall afoul of the public policy
of Singapore, the cases are instructive.
In PatriotPte. Ltd. v. Lam Hong Commercial Company,' 2 the Singapore
Court of Appeal stated that "It has been settled law ... that if a party to
163
a contract actively engages in an illegal adventure to get goods into a
country in breach of the revenue laws of that country, the court will not
assist the parties to the adventure by entertaining or settling any dispute
between parties arising out of the contract."' 164 In deciding as it did, the
court in PatriotPte. Ltd. v. Lam Hong Commercial Company applied the
rule laid down in the English case of Foster v. Driscoll. 6s Thus, a contract
which contemplates the doing of an act in a foreign and friendly country
in violation of the written law of that country is, by Singapore law,""' illegal
and void.'6 '

In Dimpex Gems (Singapore) Pte. Ltd. v. Yusoof Diamonds Pte. Ltd.,168

Thean J. (as he then was) applied Foster v. Driscoll to hold that mere
knowledge without active participation on the part of the plaintiffs that the
diamonds and gems sold to the defendants would be exported illegally by
the defendants to Malaysia did not constitute a defence to the claim by the

161 See (1889) 42 Ch. D. 321 at 339 and 342. See also per Lord Halsbury L.C. at 336. The
written law of the place where the contract is made may, by prohibiting the making of
the contract in question, constitute an overriding mandatory statute and if this be the
case, the attempt to circumvent the operation of the mandatory statute by a choice of law
may be struck down as not bonafide and illegal and/or as being against public policy with
the consequence that the chosen proper law is ignored. See the Vita Food Products case
[1939] A.C. 277 at 290.
162 [1980] 1 M.L.J. 135.
163 Emphasis added by the writer.
]1I [1980] 1 M.L.J. 135 at 137. In this case, the contracting parties had engaged in an operation
designed expressly to enable the Indonesian buyer to evade Indonesian custom duties.
The appellant's defence that they had no knowledge that the operation was illegal by the
law of Indonesia was rejected by the court.
J65 [1929] 1 K.B. 470. At first instance, Rajah J. in PatriotPte. Ltd. v. Lan Hong Commercial
Co. [1980] 1 M.L.J. 135 at 136 stated that "A contract which contemplates the performance
in a foreign and friendly country and Indonesia is one such country of some act
which is inimical to the public welfare of that country is a breach of international comity
and is regarded as illegal by our courts. It is unlawful to make an agreement in Singapore
to do something in a foreign country which will violate the local law, which is what this
case is all about."
i6 Whether as the lexfori or the lex causae.
167 See the first instance judgment of Rajah J. in Patriot Pte. Ltd. v. Lan Hong Commercial
Co. [1980] 1 M.L.J. 135 at 136.
168 [1988] 1 M.L.J. 87.
 Singapore Academy of Law Journal (1995)

plaintiffs. Thus, mere knowledge on the plaintiffs' part of the illegal design
of the defendants did not result in the contract between the plaintiffs and
the defendants being unenforceable by reason of illegality.' 6"

It will be recalled that in Foster v. Driscoll, a partnership was formed for

the main purpose of deriving profit from the commission of a criminal
offence in a foreign and friendly country, viz., the importation of liquor
into the United States of America contrary to its prohibition laws. The
contract entered into the partners was held to be illegal even though the
parties had not succeeded in carrying out their illegal enterprise."7 Lawrence
LJ. stated that "such a partnership is illegal ...[as] its recognition by our
courts would furnish a just cause for complaint by the United States
government against our government (of which the partners are subject),
and would be contrary to our obligation of international comity ...and
therefore would offend against our notions of public morality. ' 1 7' In similar
vein, Scrutton L.J. in Foster v. Driscoll spoke of "public policy based on
international comity.""' 2

Thus, it is clear that the rule applied in Foster v. Driscoll is founded on the
public policy of the forum and international comity' 7 The rule in Foster
v. Driscoll is a principle of the municipal law of Singapore and England 1 7 '
and its operation is not dependent on proof of universality"7 5 or reciprocity.

In Regazzoni v. KG. Sethia (1944) Ltd.176 where the House of Lords applied
the rule in Foster v. Driscoll, Viscount Simonds said that it was "nothing
else than comity which has influenced [English] courts to refuse as a matter

169 See also Fielding & Platt Ltd. v. Selim Najjar [1969] 1 W.L.R. 357.
170 In fact no criminal offence was in fact committed but the court pointed out that the
contracting parties may have contemplated that if they could not successfully arrange to
commit the offence themselves they would instigate or aid or abet some other person to
commit it. See [1929] 1 K.B. 470 at 510.
171 [1929] 1 K.B. 470 at 510.
172 Ibid. at 496.
113 Regazzoni v. K.C. Sethia (1944) Ltd. [1958] A.C. 301. See also Rajah J.'s judgment in
PatriotPte. Ltd. v. Lan Hong Commercial Co. [1980] 1 M.L.J. 135 at 136.
174 In the English context, see the judgment of Lord Somervell of Harrow in Regazzoni v.
K.C. Sethia (1944) Ltd. [1958] A.C. 301 at 330.
175 Unlike the 'double-barrel' requirement of unenforceability by the public policy of the leax
fori and the public policy of the leax loci solutionis enunciated in the Lemenda case [1988]
1 Q.B. 448.
176 [1958] A.C. 301 at 318. In this case, the House of Lords applied the rule in Foster v.
Driscoll to a situation where the contracting parties had agreed that the respondents
were to sell jute from India to the appellant for the purpose of resale in South Africa.
The contract of sale was governed by English law and both contracting parties knew that
the export of jute from India to South Africa was prohibited by Indian law. The
respondents repudiated the contract by not shipping and delivering the goods to the
agreed place of delivery and the appellants brought an action on the contract in the
English court. The House of Lords upheld the decision of the Court of Appeal which had
proceeded on the principle that an English contract should and will be held invalid on
7 S.Ac.L.J. Contractual Illegality and Conflict of Laws

of public policy" the recognition of the validity of certain contracts 77and

"that public policy demands that deference to international comity."'

It suffices to say that the rule in Fosterv. Driscoll is only applicable where
the contracting parties knowingly conspire to violate a law (other than that
of the forum) - mere knowledge on the part of one party that the other
intends to breach the law is insufficient to attract application of the rule. 178
Thus, it is clear that where parties to a contract knowingly agree to violate
the law of the place of performance (the lex loci solutionis) or the overriding
mandatory law of the lex loci contmctus,179 the contract is unenforceable.
To enforce contractual rights arising under such contracts would be contrary
to the public policy of Singapore as the lexfori. Of course, an agreement
to breach the forum's overriding mandatory law would also be
unenforceable on the ground that its enforcement would be inimical to the
public policy of the forum.

account of illegality if the real object and intention of the parties necessitates them
joining in an endeavour to perform in a foreign and friendly country some act which is
illegal by the law of such country notwithstanding that there may be, in a certain event,
alternative modes or places of performing which permit the contract to be performed
legally. The crux of the principle is the common intention of the parties to breach the
foreign law in the place of performance.
177 Ibid.at 319. On the role of comity in the non-enforcement of contractual rights, Dr. F.A.
Mann wrote that "Comity is one of the most ambiguous and multifaceted conceptions in
the law in general and in the realm of international affairs in particular." See Chapter 7,
p. 135 in ForeignAffairs in English Courts (1986).
178 According to Lawrence L.J. in Foster v. Driscoll [1929] 1 K.B. 470 at 510, a contract
"formed for the main purpose of deriving profit from the commission of a criminal
offence in a foreign and friendly country is illegal even although the parties have not
succeeded in carrying out their enterprise and no such criminal offence has in fact been
committed." According to Dr. F.A. Mann in Foreign Affairs in English Courts (1986) at
p. 155, the crucial enquiry is whether there was intention on the part of both parties to
act in the foreign country in contravention of its criminal laws. The judgment of Selvam
J.C. in Singapore Finance Ltd. v. Soetanto & Others [1992] 2 S.L.R. 407 at 411 where his
Honour referred to the knowledge of the contracting party, at the time of making the
contract, of the breach of foreign law must be understood as doing no more than stating
that such knowledge would amount to connivance or participation in the enterprise to
breach the law in the place of performance. See, in this regard, Regazzoni v. K.C. Sethia
(1944) Ltd. [1958] A.C. 301 at 323, 324 and 330 where the Law Lords stated that from
the knowledge of the parties of the relevant facts, it was clear that they had the common
intention to breach the Indian statute, Sea Customs Act, 1878. As Lord Reid put it, "The
crucial fact in this case ... [is] that both parties knew that the contract could not be
performed without ... procuring a breach of the law of India within the territory of that
country." See [1958] A.C. at 324.
179 On one view, Regazzoni v. K.C. Sethia (1944) Ltd. [1958] A.C. 301 is a decision where
the court considered that the Indian statutory law which prohibited the making of a
contract to export Indian jute to South Africa is an overriding mandatory law of the lex
loci solutionis and the parties' choice of law, viz., English law, was ineffective to outflank
the operation of the Indian statute. The contract in Regazzoni v. K.C. Sethia (1944) Ltd.
was made in Basle, Switzerland, see the report of the proceedings in the Court of Appeal
at [1956] 2 Q.B. 490 at 512.
 Singapore Academy of Law Journal (1995)

The rule in Foster v. Driscoll was recently restated by Lai Sin Chin J.C. (as
she then was) in Bhagwandas v. Brooks Exim Pte. Ltd. 8 " Her Honour
restated the rule in the following terms:

"the principle as derived from the authorities can be summarized as

follows. A contract which involves doing of an act in a foreign and
friendly country in contravention of its revenue laws is void and
unenforceable in Singapore on grounds of public policy,
notwithstanding that it is valid under the proper law of the contract."s

This passage of her Honour's judgment invites three comments. First, it

appears to say that the rule in Fosterv. Driscollis founded on the contracting
parties' "involvement" in the unlawful design. So long as by "involvement",
her Honour meant active participation and/or participation with knowledge
(including Nelsonian knowledge) that the transaction is unlawful by the
law of the place of performance (lex loci solutionis),'8 2 her Honour's
summary of the rule in Foster v. Driscoll is unexceptionable. Secondly, the
rule in Foster v. Driscoll is not limited to revenue laws of the foreign
country which is the place of performance. Thirdly, as was made clear by
her Honour in an earlier part of her judgment, the rule in Fosterv. Driscoll
is applicable notwithstanding that the foreign law which the parties have
conspired to infringe is a revenue law or a penal law.

It is also worthy of note that in Bhagwandas v. Brooks Exim Pte. Ltd., Lai
Sui Chin J.C. pointed out that before the rule in Foster v. Driscoll may be
invoked, it must be shown that the contract requires performance in the
friendly foreign country in a manner contravening the law of that foreign
country.'"' In that case, the court found that "it was not a term of the
arrangement, and thus not part of the performance required under it, that
the plaintiff should breach the revenue laws of Indonesia [the country of
performance] ...In my judgment, therefore, the arrangement, though

18Q [1994] 2 S.L.R. 431. Her Honour's decision was upheld on appeal, see [1995] 2 S.L.R. 13.
181 Ibid., at 438H.
182 It is unlikely that her Honour meant to say that any form of involvement whether
knowingly or unknowingly gives rise to the operation of the rule in Foster v. Driscoll.
This is evident from the later holding that the plaintiff genuinely did not know about the
illegality, see [1994] 2 S.L.R. 431 at 436E and 439G. In this connection, it will be recalled
that in Dimpex Gems (Singapore) Pte. Ltd. v. YusoofDiamonds Pte. Ltd. [1988] 1 MIL.J.
87 it was held by Thean J. (as he then was) that the rule in Foster v. Driscollonly applied
where a party actively participated in the illegal enterprise and mere knowledge possessed
by one party of the illegal design of the other contracting party did not result in the
contract between them being unenforceable by reason of illegality. For good measure, it
ought to be pointed out that the word "involves" in the context of contractual performance
in a foreign country contrary to the laws of that country has been interpreted to mean
"involves of necessity", see Branson J. in Kleinwort, Son & Co. v. Ungarische Baumwolle
Industrie Aktiengesellschaft [1939] 2 K.B. 678 at 687.
183 Emphasis added by the writer.
7 S.Ac.L.J. Contractual Illegality and Conflict of Laws

potentially involving performance in Indonesia, did not require"" an illegal

act to be done in Indonesia."' 5

For the sake of completeness, it should be stated that the rule in Foster v.
Driscoll, as originally conceived, applies only to infringements of written
laws of foreign countries 8 6 and cases of existing illegality. S7

Turning to other contracts which are contrary to the public policy of

Singapore, it is clear that where the object of a contract is to practise fraud
on the revenue or other public authorities of the forum, such a contract is
illegal as being contrary to the public policy of the Singapore forum.'8S The
cause celebre is Suntoso Jacob v. Kong Miao Ming & Anor. where Lai Kew
Chai J. dismissed theplaintiff's claims as the plaintiff, an Indonesian national
had deceived the Registrar of Singapore Ships into registering a vessel
under the Singapore flag by concealing his ownership of the majority of
the shares in the company owning the registered vessel. At the relevant
time, the Registrar of Singapore Ships had issued an administrative guideline
which clearly stated that the administrative policy was that vessels would
not be accepted for registration under the Merchant Shipping Act 89 unless
the corporate owner is itself owned as to at least one-half of its equity by
Singapore citizens.

However, as the Singapore Court of Appeal pointed out in Teo Ai Choo

v. Leong Sze Hian, 9" a party relying on the other contracting party's
deception as giving rise to illegality must establish proof that there was an
intention to deceive the public authority.' 9'

In P. T. InternationalNickel Indonesia v. General Trading Corporation (M)

Sdn. Bhd. ,92 the Singapore Court of Appeal accepted that a contract
between a briber and the recipient of the bribe is against the public policy
of Singapore and cannot form the basis of a claim before the courts.""

184 Emphasis added by the writer.

1S5 [1994] 2 S.L.R. 431 at 439. See also Overseas Union Bank Ltd. v. Chua Kok Kay [1993]
1 S.L.R. 686 at 699.
186 As was pointed out by Chao Hick Tin J. in the Shaikh Faisal case [1995] 1 S.L.R. 394
at 414.
187 Per Staughton J. (as he then was) in Libyan Arab Foreign Bank v. Bankers Trust Co.
[1989] 1 Q.B. 728 at 745F. See also Regazzoni v. K.C. Sethia (1944) Ltd. [1958] A.C. 301
at 320per Viscount Simonds.
133 See Miller v. Karlinski (1945) 62 T.L.R. 85.
139 Chapter 179, 1985 Revised Edition, Singapore Statutes.
190 [1986] 2 M.L.J. 331.
191 Ibid., at 336 where Lai Kew Chai J., delivering judgment of the court, pointed out that
"the respondent's account of the matter in dispute did not necessarily involve proof that
he had intended to deceive the Urban Renewal Authority and Credit POSB into granting
a loan which they would not otherwise have granted."
192 [1978] 1 M.L.J. 1.
193 The Court of Appeal relied on English authorities, viz., Bone v. Ekless 157 E.R. 1450 and
Harrington v. Victoria Graving Dock Company (1878) 3 Q.B.D. 549. See also the
Prevention of Corruption Act, Chapter 241, 1985 Revised Edition of the Singapore
Statutes.
 Singapore Academy of Law Journal (1995)

In Eng Bee Properties Pte. Ltd. v. Lee Foong Fatt,9 4 Judith Prakash J.C.
accepted the contention that an agreement to pay "under the table money"
in a contract for the sale of land is illegal by the public policy of Singapore
where the transaction represents an attempt to evade payment of income
tax and/or stamp duty.9 5

A champertous agreement is an agreement which contravenes the public

policy of Singapore. Such an agreement is unenforceable and void in
Singapore.' 96 In the recent case of Giles v. Thompson,"'7 the House of
Lords stated that the policy underlying the prohibition of champertous
agreements is to prevent wanton and officious intermeddling with the
disputes of others in which the intermeddler has no interest and where his
assistance is without justification or excuse and with a view to division of
the spoils. The House of Lords in that case also took the opportunity to
declare that the law on maintenance and champerty can best be kept in
forward motion by looking to its origins as a principle of public policy
designed to protect the purity of justice and the interests of vulnerable
litigants.0 8

It is also against the public policy of Singapore for a person to be hired for
consideration so that he could use his position to exercise undue influence
on persons in authority to procure a benefit from the government or obtain
a title from the state. Such a contract is unenforceable as it tends to be
injurious to the public interest.1 99 Such an agreement is viewed as being
against essential principles of morality. Thus, it is clear that immorality is
also a ground on which courts refused to enforce contractual rights as
being in contravention of the public policy of the lexfori. In the felicitous
words of Lord Halsbury L.C. in In re Missouri Steamship Company, "Where
a contract is void on the ground of immorality ... then the contract would
be void all over ) the world, and no civilised country would be called upon
20
to enforce it.''

An agreement not to appeal against the decision of a lower court is perfectly

legal and is not void as being contrary to public policy.210' However, an

194 [1993] 3 S.L.R. 837.

195 Ibid. at 847. In the case, the learned Judicial Commissioner held that the defendants had
not proved that there was any agreement to pay "under the table money".
196 Champerty has always been viewed with disdain by the courts with the consequence that
the courts would not enforce champertous agreements. See also Grell v. Levy (1864) 16
C.B. (N.S.) 73 and Grovewood Holdings Plc v. James Capel & Co. Ltd. [1995] 2 W.L.R.
70. It would appear from these two cases, that a champertous contract is illegal. For
maintenance, see the recent case of McFarlanev. E.E. Caledonia Ltd. (No. 2) [1995] 1
W.L.R. 366.
197 [1993] 2 W.L.R. 908.
19S Ibid., at 921.
190 See the Shaikh Faisal case [1995] 1 S.L.R. 394 at 413 and 414.
2-W (1889) 42 Ch. D. 321 at 336.
201 See Ong & Co. Ltd. v. Makin Nominees Pte. Ltd. & Anor [1993] 1 S.L.R. 289.
7 S.Ac.L.J. Contractual Illegality and Conflict of Laws

agreement which tends to pervert or obstruct the course ofjustice is against

public policy. 2

It has been held by the Singapore Court of Appeal that an agreement

entered into by a public officer in breach of the Instructions Manual, is not
unenforceable as being contrary to public policy. In the words of Chao
Hick Tin J., who delivered the judgment of the court in Sire Tony v. Lira
Ah Ghee (t/a Phil Real Estate & Building Services):

"There was nothing illegal per se in the agreement to pay the appellant
[who being a public officer was not permitted by the Instructions
Manual to engage in any trade or business including that of property
agent] a quarter share in the commission. Neither was it per se
injurious to the public. The relevant IM does not impose an absolute
prohibition against a public officer engaging in any trade or business.
But if an officer should engage in such trade or business he should
first obtain the consent of his Permanent Secretary. And if he should
fail to obtain the consent, he would be in breach of that rule and
liable to disciplinary action. No authority has been cited ... to show
that an agreement entered into in breach of such a service condition
should be rendered unenforceable on the ground of public policy

However, the Singapore Court of Appeal emphasised 24 that the agreement

in question did not involve any corrupt element and consequently its
enforcement was not inimical to the public policy of Singapore.

It is pertinent to point out that in the course of its judgment in Sim Tony
v. Lim Ah Ghee (t/a Phil Real Estate & Building Services), the Singapore
Court of Appeal endorsed the following passage in Halsbury's Laws of
2
England: -

"An agreement which tends to be injurious to the public or against

the public good is invalidated on the grounds of public policy. The
question whether a particular agreement is contrary to public policy
is a question of law, to be determined like any other by the proper
application of prior decisions. It has been indicated that new heads
of public policy will not be invented by the courts for the following
reasons: (1) judges are more to be trusted as interpreters of the law
than as expounders of public policy; and (2) it is important that the
doctrine should only be invoked in clear cases in which the harm to
the public is substantially incontestable. However, the application of
any particular ground of public policy may well vary from time to

202 See Howard v. Odhams Press Ltd. [1938] 1 K.B. 1, Egerton v. Brownlow (Earl) (1853)
4 H.L.C. 1 at 163 and Williams v. Bayley (1866) L.R. 1 H.L. 220.
203 [1995] 2 S.L.R. 466 at 474.
204 [1995] 2 S.L.R. 466 at 474E.
205 Paragraph 392 in Volume 9, Fourth Edition, 1974.
 Singapore Academy of Law Journal (1995)

time and the courts will not shrink from properly applying the principle
of an existing ground to any new case that may arise... Public policy
in this context 6 must be distinguished from the policy of a particular
0
government.,
In connection with contracts which are alleged to contravene the public
policy in relation to the administration of law in the forum, it is apposite
to recall that in Monkland v. Jack Barclay ,207 Asquith L.J. warned that "the
courts should use extreme reserve in holding a contract to be void as
against public policy, and should only do so when the 2contract 08
is
incontestably and on any view inimical to the public interest. 1

IV. ILLEGALITY AND THE LEX LOCI SOLUTIONIS

Illegality as a defence would also be available to a contracting party if the

law of the place of performance renders it illegal for a contract (unafflicted
with any illegality by its proper law) to be performed. This is the rule
established in Ralli Brothers v. Compania Naviera Sota y Aznar0 9
(hereinafter referred to as"the Ralli Brothers case").

It is not entirely clear whether the rule in the Ralli Brothers case is a rule
of conflict of laws or is simply a rule of English domestic law as the proper
law of the contract. There is judicial support 24 for the former view but the
preponderant academic opinion is in favour of the latter view.211 Support
for the former view may be found in the judgments of Lord Sterndale and
Warrington L.J. in the Ralli Brothers case where it is stated that a contract
is in general invalid so far as the performance of it is unlawful by the law

206 [1995] 2 S.L.R. 466 at 474.

207 [1951] 2 K.B. 252.
208 Ibid., at 265.
209 [1920] 2 K.B. 287.
210 See Lord Simonds' judgment in Zivnostenska Banka National Corporationv. Frankman
[1950] A.C. 57 at 71 where his Lordship, in regard to a contract which was governed by
the law of Czechoslovakia, stated that"It is ... clear that the courts of [England] will not
enforce ... performance [of a contract which involved the doing of an act in Czechoslovakia,
the loci solutionis, which is illegal by the law of that place]." See also Lord Normand's
judgment in Kahler v. Midland Bank Ltd. [1950] A.C. 24 at 36 where his Lordship
declared that the Ralli Brothers case was decided on the principle that"the courts of
[England] will not compel the fulfilment of an obligation when performance includes the
doing in a foreign country of something which the laws of that country make it illegal to
do." For other dicta which support the former view, see Cheshire and North, Private
InternationalLaw, 12th ed. (1992) at p. 519, note 20 thereof.
21l Professor F.M.B. Reynolds and the editors of Dicey & Morris, The Conflict of Laws,
12th ed. (1993) at p. 1245 take the latter view. See also Dicey & Morris, The Conflict of
Laws, 12th ed. (1993) at p. 1245, note 33 thereof for the other academicians who support
the latter view. Whether or not the former or latter view is correct would be of practical
significance where the proper law of the contract is not English law but the lexfori is the
English court. For in such a situation, if the former view holds sway then illegality in the
place of performance is irrelevant where the contract is enforceable by its proper law.
7 S.Ac.L.J. Contractual Illegality and Conflict of Laws

of the country where the contract is to be performed.21 ' Writing in 1950,

Lord Reid in Zivnostenska Banka National Corporation v. Frankman2 3
declared that:

"it is settled law that, whatever be the proper law of the contract,214 an
English court will not require a party to do an act in performance of
a contract which would be an offence 21 5
under the law in force at the
place where the act is to be done.,

In like vein, Diplock L.J. in Mackender and Others v. Feldia A.G and
Others treated the rule in the Ralli Brothers case as a true conflict of laws
rule when he stated that "the English courts will not enforce performance
or give damages for non-performance of an act required to be done under
a contract, whatever be the proper law of the contract, if the act would be
2 16
illegal in the country in which it is required to be performed.

Be that as it may, it is clear that the application of the rule in the Ralli
Brothers case is dependent on whether the law of the2 7 place of performance
renders performance of the contract unlawful. In this regard, it is germane

212 In the same case, Scrutton L.J. stated that he preferred to base his decision "more
broadly and to rest it on the ground that where a contract requires an act to be done in
a foreign country, it is, in the absence of very special circumstances, an implied term of
the continuing validity of such a provision that the act to be done in the foreign country
shall not be illegal by the law of that country." See [1920] 2 K.B. 287 at 304. In Toprak
Mahsulleri Ofisi v. Finagrain Compagnie Commerciale Agricole et Financiere S.A.
(hereinafter referred to as "the Toprak case") [1979] 2 Lloyd's Rep. 98 at 105, Goff J.
(as he then was) allied himself with Scrutton L.J. when he stated that the principle in the
Ralli Brothers case is that where a contract requires an act to be done in a foreign
country, it is, in the absence of any special circumstances, an implied term of the continuing
validity of such a provision that the act to be done in the foreign country should not be
illegal by the law of that country. Both Scrutton L.J.'s and Goff J.'s formulation of the
operating principle is consistent with the rule being one of domestic English law and thus
applicable only where the proper law of the contract is English law. It suffices to say that
the English Court of Appeal affirmed Goff J.'s decision at [1979] 2 Lloyd's Rep. 112. In
Kleinwort, Sons & Co. v. UngarischeBaumwolle IndustrieActiengesellschaftandHungarian
General Creditbank [1939] 3 All E.R. 39 at 45, Du Parcq L.J. stated that he preferred to
base the rule in the Ralli Brothers case on the principle stated by Lord Sterndale and
Warrington L.J. in the Ralli Brothers case rather than the doctrine of an implied term
favoured by Scrutton L.J. in the Ralli Brothers case. It is worthy of note that Scrutton
L.J.'s formulation of the rule is reminiscent of the doctrine of frustration by way of
supervening illegality in the discharge of contracts. For the sake of completeness, it ought
to be pointed out that in Kleinwort, Sons & Co. v. Ungarische Baumwolle Industrie
Actiengesellschaft and Hungarian General Creditbank,the court held that the proper law
of the contract was English law.
213 [1950] A.C. 57.
214 Emphasis added by the writer.
215 [1950] A.C. 57 at 78.
216 [1967] 2 Q.B. 590 at 601.
217 Emphasis added by the writer.
 Singapore Academy of Law Journal (1995)

to determine, first, the place of performance of the contract ' and, secondly,
the contractual obligation as required to be performed by the contract.: 19

The rule in the Ralli Brothers case220 has been variously explained. One
explanation for the rule is that it is "probably a general principle of law,
evidenced by the practice of all civilised nations, and therefore a principle
of customary international law, that no one is required to do an act which
at the material time and place is unlawful, illegal or criminal and for this
reason in law impossible. ' 22 ' This rule of law finds expression in the Latin
phrase impossibilium nulla obligatio for it is a case where there is frustration
by law as opposed to facts or events. It has been said that the rationale for
the rule is not comity but the prevention of an attack upon the legal
integrity of the foreign country where performance of the contractual
obligation was to have taken place.22

As originally conceived, the rule in the Ralli Brothers case is applicable

where illegality supervenes after the making of the contract such that the
contemplated performance in the foreign country can no longer be lawfully
carried out. However, there have been attempts to apply the rule in cases
of initial or existing illegality.2

In Singapore, the most recent case where the Singapore High Court dealt
with the rule in the Ralli Brothers case is Shaikh Faisal Bin Sultan Al
Qassim t/a Gibca v. Swan Hunter Singapore Pte. Ltd. (formerly known as
Vosper Naval Systems Pte. Ltd. and Vosper-QAF
22 4
Pte. Ltd.) (hereinafter
referred to as "the Shaikh Faisal case").

In the Shaikh Faisal case, Chao J. accepted that it "is settled law that
where a contract which is governed by Singapore lawZ2 5 is to be performed

218 See the Toprak case [1979] 2 Lloyd's Rep. 98.

219 The case of Libyan Arab Foreign Bank v. Bankers Trust Co. [1989] 1 Q.B. 728
demonstrates that in certain situations, it may be necessary to determine the required
contractual performance.
220 It may be said that the proposition established in the case is simply that, as a matter of
English domestic law, a validly concluded contract is discharged if at the time and place
of performance it cannot be lawfully performed.
221 Dr. F.A. Mann in Foreign Affairs in English Courts (1986) at p. 155. See also De Wutz
v. Hendricks (1824) 2 Bing. 314.
222 Ibid. In contradistinction, the rule in Fosterv. Driscoll [1929] 1 K.B. 470 is founded on
international comity and public policy. Pace Goff J.'s view in the Toprak case [1979] 2
Lloyd's Rep. 98 at 107 where he stated that the two distinct rules in Foster v. Driscoll and
the Ralli Brothers case "spring from the root principle of comity".
223 See the Toprak case [1979] 2 Lloyd's Rep. 98 at 1W7.See also Viscount Simonds' approach
in Regazzoni v. K.C. Sethia (1944) Ltd. [1958] A.C. 301 at 322 where he opined that the
rule in the Ralli Brothers case applied to the facts at hand which involved initial or
existing illegality.
224 [1995] 1 S.L.R. 394.
225 Chao J.'s formulation of the rule in the Ralli Brothers case is consistent with the view
that the rule is one founded on Singapore domestic law and thus only applicable in cases
where Singapore law is the proper law of the contract.
7 S.Ac.L.J. Contractual Illegality and Conflict of Laws

abroad and if the law of the foreign country2 6 prohibits the performance
thereof, the contract would be invalid and unenforceable." 2 According to
the learned judge that was the principle laid down in Ralli Brothers v.
Compania Naviera Sota y Aznar and that the principle relates to
infringements of the written laws of the country of performance.228

In the Shaikh Faisalcase, the plaintiff made a claim against the defendants
for recovery of agency commissions in regard to work done for the
defendants in the United Arab Emirates. In their defence, the defendants
contended that the appointment of an agent in the United Arab Emirates
(hereinafter "the UAE") by a foreign arms supplier was unlawful by the
law of the UAE. In particular, it was contended that both article 24.1 of
the UAE Armed Forces General Headquarters standard contract and a
directive issued by His Highness Sheikh Khalifa bin Zayed Al Nahyam,
the Deputy Supreme Commander of the UAE rendered unlawful the
appointment of a local agent. In essence, the contention was that both
article 24.1 and the directive embodied a public policy of the UAE and
that as under the law of the UAE, a contract may be rendered unenforceable
if it is considered to be against the public policy of the UAE, the plaintiffs'
claim against the defendants was unenforceable.

After hearing the evidence of the legal experts on the law of the UAE,
Chao J. ruled that article 24.1 and the directive were not written law in the
sense that they were not provisions laid down in any Federal law or decree
of the lawmaking authorities in the UAE. His Honour also held that article
24.1 and the directive were not regulations having legislative effect as they
were not prescribed by an authority under any Federal law or decree. That
being the case, the rule in the Ralli Brothers case was inapplicable inasmuch
as the rule does not apply to illegality arising solely from infringement of
the public policy of the country of performance. According to his Honour,
"Cases like Ralli Brothers and Regazzoni v. K.C. Sethia (1944) Ltd. ought
to be distinguished as they relate to infringements of the written laws of
foreign countries. 2 2 9 This view of the ambit of the rule in the Ralli Brothers
case is not without support - indeed in Lemenda Trading Co, Ltd. v.
African Middle East Petroleum Co. Ltd. (hereinafter referred to as "the
Lemenda case"), 2-' Phillips J. took the view that the rule in the Ralli Brothers
case is properly applicable to infringement of the written laws of the country

226 Where the contract is to be performed.

227 Per Chao Hick Tin J. at [1995] 1 S.L.R. 394 at 404.
228 [1995] 1 S.L.R. 394 at 414. As to the debate on whether the rule is a conflict of laws rule
or a rule of English domestic law which is applicable whenever English law is the proper
law of the contract, see the discussion at pp. 26 and 27 of the text.
229 [1995] 1 S.L.R. 394 at 414C.
230 [1988] 1 Q.B. 448. In the Irish case of Simon Fraserand another v. Denis Buckle and
others [1994] 1 Irish Reports 1, the High Court applied the principle laid down in the
Lemenda case.
 Singapore Academy of Law Journal (1995)

of performance for his Lordship stated "There is a clear distinction between

acts which infringe public policy and acts which violate provisions of law." 231

According to Chao J., article 24.1 and the directive constituted a "purchasing
policy of GHQ [the UAE Armed Forces General Headquarters] in so far
as arms procurement are concemed" 2 However, the learned judge went
on to find that "up to the date of issue of the directive by [the Deputy
Supreme Commander], the prohibition in what was article 24.1 was not
seriously enforced." Indeed, his Honour stated that the general law of the
UAE did not prohibit the use of an agent as a means of securing business.
Turning to the legal effect of the directive and prohibition in article 24.1,
his Honour held that a breach or violation of the directive or prohibition
would not render the agency agreement between the plaintiff and the
defendants void and unenforceable. 2t ' Instead, his Honour found that the
directive and prohibition in article 24.1 represented the policy of a
government department and/or was a contractual term.)2- 4 Thus, the directive
and prohibition in article 24.1 did not represent the public policy of the law
in the UAE. In this regard, Chao J. stated that "policies of a government
or its department must be distinguished from what is known as public
policy in law. Such governmental or departmental policies do not necessarily
represent public policy which would vitiate contracts." '

Given the nature of the illegality relied on by the defendants, once the
court found that it was not the public policy of UAE to render unlawful
the use of local agents to secure business in the foreign arms trade, the
court upheld the plaintiff's claim. It is imperative to note, as the learned
judge did, that the defendants did not contend that the plaintiff who was
engaged as their local agent was expected to do or had in fact done anything
improper.2 - 6 As there was no other ground - apart from the purported
contravention of article 24.1 and the directive - relied on by the defendants
for their contention that the agency contract between them and the plaintiff
was against public policy or morals of the UAE, Chao J. upheld the
plaintiff's claim.

231 [1988] 1 Q.B. 448 at 452. Consequently, his Lordship went on to enunciate the principle
of 'double-barrel' unenforceability by the public policy of the lexfori (being also the
proper law of the contract) and the public policy of the leax loci solutionis as being
applicable whenever it is sought to strike down a contract on the ground of illegality by
the public policy of the law of the place where the contract is to be performed.
232 At [1995] 1 S.L.R. 394 at 409.
'33 Ibid., at 411 where Chao J. stated that the appointment of an agent as such cannot be
against any public order or morality.
234 Ibid.
235 Ibid., at 410 and 411. Chao J. supported this view by relying on Monkland v. Jack Barclay
Ltd. [1951] 2 K.B. 252. In Monkland v. Jack Barclay Ltd., Asquith L.J., delivering the
judgment of the Court of Appeal stated that public policy was not to be confounded with
political policy, see [1951] 2 K.B. at 266.
236 [1995] 1 S.L.R. 394 at 409 and 411.
7 S.Ac.LJ. Contractual Illegality and Conflict of Laws

It is pertinent to note that in the course of his judgment in the Shaikh

Faisal case, Chao J. referred to the Lemenda case where it was accepted
that an English court would not enforce a contract governed by English
law which fell to be performed in a foreign country where the contract
related to an adventure which was contrary to the public policy of the lex
loci solutionis provided the contract related to an adventure which was
contrary to English public policy founded on principles of morality of
general application.

In the Lemenda case, the plaintiffs were engaged under a commission

agreement by the defendants to procure the renewal of a supply contract
between the defendants and the Government of Qatar. It was agreed
between the plaintiffs and the defendants that the commission agreement
was governed by English law. The defendants contended that the
commission agreement was contrary to English public policy founded on
general principles of morality because the plaintiffs in return for a
commission to be paid by the defendants had used their personal influence
to obtain a benefit for the defendants from a person in public office.2 37 The
benefit to the defendants was the renewal of the supply contract between
the defendants and the Government of Qatar. It was common ground
between the parties that the commission agreement was a transaction which
was contrary to the public policy of Qatar and consequently, such an
agreement was void under the law of Qatar and unenforceable in Qatar. 2 s

Phillips J. in the Lemenda case observed that there was no rule of law
which mandated an English court to refuse to enforce a contract governed
by English law where the performance of the contractual obligation would
be contrary to the public policy (as opposed to the written law)2 9 of the
country of performance. 40 However, his Lordship stated that the public
policy of Qatar, the country of performance was nonetheless a relevant
factor to be considered in the context of whether the English court ought
to refuse to enforce the agreement under principles of English public
policy. 241 According to his Lordship where a contract infringes a rule of
English public policy, the English court will not enforce the contract,
whatever the proper law of the contract and wherever the place of

237 In the Lemenda case, the stand taken by the defendants may be contrasted with the
stand taken by defendants in the Shaikh Faisalcase. While in the latter case, the defendants
did not contend that their local agent was expected to do or had in fact done anything
improper, in the former case, the defendants successfully contended that the consideration
for the payment of commission to their agent was the agent's exercise of his personal
influence to ensure that the defendants would be awarded a state contract.
238 [1988] 1 Q.B. 448 at 454.
239 Where the written law of the place of performance renders the performance of the
contract illegal, the English court as well as the Singapore court will not enforce the
contract. See Ralli Brothers v. Campania Naviera Sota y Aznar [1920] 2 K.B. 287.
240 [1988] 1 Q.B. 448 at 456.
241 Ibid.
 Singapore Academy of Law Journal (1995)

performance. However, in his Lordship's view, an English contract calling

for contractual performance in a foreign country would not be enforced in
England by reason of contravention of the public policy of the lex loci
solutionis only if it can be shown that there is an identical or similar public
policy in England which militates against enforcement of the contract in
England. In his Lordship's view, the applicable conflict of laws rule is as
follows:

"...the English courts should not enforce an English law contract

which falls to be performed abroad where: (i) it relates to an adventure
which is contrary to a head of English public policy which is founded
on general principles of morality, and (ii) the same public policy
applies to the country of performance so that the agreement would
not be enforceable under the law of that country. In such a situation
international comity combines2 with
42
English domestic public policy to
militate against enforcement.

Given that the public policy of English law is not to enforce an agreement
whereby one contracting party was to be paid by the other for using personal
influence to procure a benefit from a third party especially where that
third party represents a public authority,2 3 Phillips J. held that the
commission agreement between the plaintiffs and the defendants was
contrary to principles of morality which were of general application. Hence
the plaintiffs' claim in the Lemenda case was held to be unenforceable.

The proposition laid down by Phillips J. in the Lemenda case on the 'double-
barrel' requirement of unenforceability according to the domestic public
policy of the lex fori (being also the proper law of the contract) and the
public policy of the lex loci solutionis was accepted by Chao Hick Tin J. in
the Shaikh Faisal case.24 4 In the Shaikh Faisal case, his Honour stated that
as the defendants had not adduced evidence to show that the public policy
of Singapore prohibited a foreign arms supplier from appointing a local
agent in relation to a tender, enforcement of the plaintiff's claim arising
out of the agency commissions agreement was not against the public interest
of Singapore. Following the Lemenda case, on the supposition that the
agency commissions agreement was against the public policy of the UAE 2 4 5
his Honour held that the illegality by the public policy of the place of
performance (the UAE) was irrelevant to the question of enforcement of
the plaintiff's claim in Singapore as there was no public policy in Singapore

242 Ibid., at 461.

243 See Norman v. Cole (1800) 3 Esp. 253, Parkinson v. College ofAmbulance Ltd. [1925]
2 K.B. 1 and Montefiore v. Menday Motor Components Co. Ltd. [1918] 2 K.B. 241.
244 [1995] 1 S.L.R. 394 at 412 and 413.
245 Which was not the finding of the court as the court found that the directive or prohibition
in article 24 did not reflect the public policy of the law of the UAE. See the discussion
of the Shaikh Faisalcase at pp. 29 and 30 of the text.
7 S.Ac.L.J. Contractual Illegality and Conflict of Laws

prohibiting the appointment of a local agent in relation to a tender in

connection with public works.

From the Shaikh Faisal case, it is clear that a Singapore court is not to
refrain from enforcing a contract governed by Singapore law where the
only illegality said to afflict that contract is that its enforcement would be
contrary to the public policy of the country of performance. 2 6 In the Shaikh
Faisal case, Chao J. stated that a Singapore court would not enforce a
contract governed by Singapore law which fell to be performed in a foreign
country where the contract related to an adventure which was contrary to
the public policy of the foreign country provided the contract related to an
adventure which was contrary to Singapore public policy founded on
principles of morality of general application.

Thus, the Shaik Faisal case demonstrates that the principle of 'double-
barrel' unenforceability requires that it be shown that the contract which
is contrary to the public policy of the lex loci solutionis is also in
contravention of the public policy of the forum, i.e., Singapore and as that
was not done, the court upheld the plaintiff's claim in that case.

The Shaikh Faisalcase is authority for the proposition that the principle
of 'double-barrel' unenforceability is applicable whenever it is sought to
show that the contract is not enforceable in Singapore as it is contrary to
47
the public policy of a foreign country which is the lex loci solutionis.
Apart from the Shaikh Faisalcase, there are two other Singapore cases
where the rule in the Ralli Brothers case was relied on as militating against
enforcement of the contract. However, in these two instances, the Singapore
courts in purporting to apply the rule in the Ralli Brothers case failed to
appreciate the ambit of the rule and have consequently departed from the
conventional understanding of the rule.

In the early Singapore case of Abdul Shukor v. HoodMohamed,2 8 Ambrose

J. had to consider whether an agreement whereby parties agreed to send
money to India in circumstances amounting to violation of the Indian
exchange control law4'q was illegal. The learned judge held that although
the contract was made in Singapore, the "lex loci solutionis was the law of

246 [1995] 1 S.L.R. 394 at 413 and 414.

247 In both the Lemenda case and the Shaikh Faisalcase, it will be recalled that the lexfori
was also the proper law of the contract. For an earlier case where in response to the
contention that the contract was against some essential principle of justice or morality
(i.e., the public policy) of Malaysia, the Malaysian High Court analysed the public policy
of the lex loci solutionis (which was also the proper law of the contract) and the public
policy of Malaysia being the lex fori, see The Aspinall Curzon Ltd. v. Khoo Teng Hock
[1991] 2 M.L.J. 484 especially at 486.
248 [1968] 1 M.L.J. 258.
249 The arrangement between the parties contravened section 4(2) read with section 1(2) of
the Indian Foreign Exchange Regulations Act, 1947.
 Singapore Academy of Law Journal (1995)

India as the contract was to be performed in India" and concluded that the
contract was not enforceable in Singapore as it was illegal by the lex loci
solutionis. In concluding thus, the learned judge relied on Ralli Brothers v.
Compania Naviera Sota y Aznar.2 50 It is significant to note that the learned
judge found that "both the plaintiff and the defendant knew that the contract
was illegal by the law of India. ' 25' Having made such a finding, the learned
judge could have simply applied the rule in Foster v. Driscoll to hold that
the contract between the parties would not be enforced as its enforcement
was against the public policy of the forum. To refer to the rule in the Ralli
Brothers case and then to allude to the contracting parties' knowledge of
the contract contravening Indian law is unfortunate and unnecessary as the
rule in the Ralli Brothers case operates regardless of the contracting parties'
knowledge that the contractual performance called for is illegal in the
place of performance.
22
Similarly, K.S. Rajah J.C. in Overseas Union Bank Ltd. v. Chua Kok Kay -
conflated the rule in Foster v. Driscoll and the rule in the Ralli Brothers
case.2 53 It is sufficient to say that English cases have consistently treated
the rules in Foster v. Driscoll and the Ralli Brothers case as two separate
and distinct rules. Indeed in Toprak MahsulleriOfisi v. FinagrainCompagnie
CommercialeAgricole et FinanciereS.A., 25" Goff J. (as he then was) declined
the tempting invitation to combine the two rules into a proposition that
English law will not enforce a contract where performance involves doing
in a friendly foreign country an act which is illegal by the law of that
5
country. 2

250 [1968] 1 M.L.J. 258 at 261.

251 Ibid.
2,52 [1993] 1 S.L.R. 686 at 696 and 697.
253 K.S. Rajah J.C. was influenced by the reasoning adopted by the Singapore High Court
in Singapore Finance Ltd. v. Soetanto & Others [1992] 2 S.L.R. 407 at 411 where Selvam
J.C. (as he then was) observed that "In deciding the question of enforcement of an
agreement involving breach of foreign law, a two-fold test should be applied. Firstly,
whether it would be unlawful under the law of the place of performance, and secondly,
whether the person seeking the enforcement had, at the time of making the contract,
knowledge that foreign law would be breached by the performance of the contract." It
suffices to say that in SingaporeFinanceLtd. v. Soetanto & Others, the court was concerned
with the rule in Fosterv. Driscoll and viewed in that context, the observation of Selvam
J.C. in that case is unexceptionable. It remains to be said that Selvam IC.'s reference to
a contracting party's knowledge, at the time of making the contract, of the intended
breach of the foreign law is simply a reference to the conventional understanding that a
contracting party who knows, at the time of making the contract, that the foreign law is
to be breached is knowingly a party to a conspiracy to breach the foreign law or, at the
very least, is to be regarded as conniving in the breach of the foreign law. After all, the
crux of the rule in Fosterv. Driscollis the common intention of the parties to breach the
foreign law. For a contrary view of the import of Selvam IC.'s reference to the knowledge
of the contracting party, see Toh Kian Sing [1993] S.J.L.S. 214 at 220.
254 [1979] 2 Lloyd's Rep. 98.
255 [1979] 2 Lloyd's Rep. 98 at 107 where his Lordship stated that such a combined principle
may raise more problems and ambiguities.
7 S.Ac.L.J. Contractual Illegality and Conflict of Laws

V. ILLEGALITY AND LEX LOCI CONTRACTUS

Consideration of the lex loci contractus in this part excludes those cases
where the lex loci contractus is the proper law of the contract 5 6

At the outset, it must be stated that a contract which is lawful under the
lex loci contractus would not be enforced in Singapore if the contract were
void under its proper law. If authority be needed for this proposition,
25 7
it
may be found in Royal Exchange Assurance Corporation v. Vega.

Contravention of the law of the place where the contract is made does not
necessarily result in the contract being illegal. This proposition emerges
clearly from In re Missouri Steamship Company where the English Court
of Appeal held that a contract which contravened the public policy of the
country in which it was made remains enforceable as long as the contract
is legal by its proper law.2

Where the contract is said to infringe an overriding statutory law of the lex
loci contractus, it may become necessary to determine whether the parties'
choice of the proper law of the contract is bonafide and legal and whether
there is any public policy consideration which militates against giving effect
to the parties' choice of the proper law.'5 9 The point being that the lex loci
contractus in providing for an overriding mandatory law is designed to
preclude contracting parties from opting out of the operation of the relevant
statute. However, the fact that a statute of a foreign lex loci contractus is
said to be by the lex loci contractus an overriding and mandatory does not
preclude a Singapore court from saying that contracting parties may contract
out of the operation of the lex loci contractus.

The case on point is the oft-cited Vita Food Products case2 where the
Privy Council had to consider the effect of the Newfoundland Carriage of
Goods by Sea Act, 1932 (which was enacted in Newfoundland to give
statutory effect to the Hague Rules) on contracts of carriage covered by
bill of ladings issued in Newfoundland. The bills of lading evidenced
contracts of carriage of goods made in Newfoundland and covering

256 The old presumption that the lex loci contractus is the governing law of the contract is
no longer tenable given the modern developments in the concept of the proper law of
the contract. In any case, it may well be that applying the approach sanctioned in Amin
Rasheed Shipping Corporation v. Kuwait Insurance Co. [1984] 1 A.C. 201, the lex loci
contractusbeing the system of law having the closest and most real connection with the
contract is the proper law of the contract.
257 [1902] 2 K.B. 384.
258 Subject to any impact the lexfori may have on the enforceability of such contracts. See
the earlier discussion under the rubric "ILLEGALITY AND THE LEX FORI". In In
re Missouri Steamship Company, the English Court of Appeal left open the question
whether an English court would enforce a contract the making of which being prohibited
by the leax loci contractus, see (1889) 42 Ch. D. 321 at 336, 339 and 342.
259 See the Vita Food Products case [1939] A.C. 277 at 290.
260 [1939] A.C. 277.
 Singapore Academy of Law Journal (1995)

shipments from Newfoundland to New York. Contrary to the Newfoundland

statute which required that all bills of lading issued in Newfoundland contain
a clause paramount,4 1 the issued bills of lading did not contain such a
clause but expressly stated that the governing law of the contracts of carriage
was English law. Sitting as the final appellate court for Nova Scotia, the
Privy Council held that, on a proper construction of the Newfoundland
statute, it did not render illegal contracts evidenced by bills of lading which
did not include the clause paramount. Further, the Privy Council held that
the Newfoundland statute did not preclude to prohibit contracting parties
from agreeing that some other law regulates their contractual relationship.

Thus, the Privy Council in the Vita Food Products case gave effect to the
contracting parties' choice of the governing law (English law) 262 of the
contract of carriage evidenced by a bill of lading issued in Newfoundland.
By acknowledging that the contracting parties may choose English law as
the governing law of the contracts of carriage, the Privy Council necessarily
took the position that the Newfoundland statute was not an overriding
mandatory law of Newfoundland, the lex loci contractus.

In any case, it was clear that as the Privy Council in the Vita Food Products
case was sitting as a Nova Scotian court, it was not compelled to apply the
relevant Newfoundland statute as Newfoundland law was not the governing
law of the contracts of carriage. Moreover, even if the language of the
Newfoundland statute had been apt to prohibit parties from contracting
out of the regime of that statute (and therefore prohibit parties from
agreeing to omit the clause paramount in bills of lading issued in
Newfoundland), that in itself would not have compelled the Privy Council
as a Nova Scotian court applying Nova Scotia law as the lexfori to apply
the Newfoundland statute.2 3

From the Vita Food Products case, one may conclude that the fact that a
contract is made in contravention of ordinary statutory law (as opposed to
overriding mandatory law) of the lex loci contractus is not fatal to its
enforcement in Singapore.

The Vita Food Products case also supports the proposition that a foreign
overriding mandatory law (not being the proper law of the contract)
affecting contractual obligations would not be applied in a forum where
there does not exist the same or similar overriding mandatory law. Where

261 Section 3 of the Newfoundland Carriage of Goods by Sea Act, 1932 which provided that
"Every bill of lading or similar document of title issued in this Dominion which contains
or is evidence of any contract to which the rules apply shall contain an express statement
that it is to have effect subject to the provisions of the said rules as expressed in this Act."
262 Unconnected with the contract of carriage as the port of discharge was New York.
263 See the view of Professor F.M.B. Reynolds in "The Implementation of Private Law
Conventions in English law. The Example of the Hague Rules", Butterworths Lectures
1990-91, p. 1 from pp. 4 to 9.
7 S.Ac.L.J. Contractual Illegality and Conflict of Laws

the forum has the same or similar overriding mandatory law, the forum
will apply the lexfori to the contract sued upon in the forum. In such a
situation, the application of the forum's overriding mandatory law is simply
an application of the lexfori2 4

It is worthy of note that in the Vita Food Products case, the Privy Council
expressly disapproved the earlier case of The Torni265 where the English
Court of Appeal had held that a contract of carriage (evidenced by a bill
of lading) made in Palestine but expressed to be governed by English law
was ineffective to exclude the operation of the Palestine Carriage of Goods
by Sea Ordinance, No. 43 of 1926. In that case, the relevant bills of lading
were issued at Jaffa, Palestine and the relevant Palestinian statute stated
that contracts of carriage covered by bills of lading issued in Palestine
"shall be deemed to have effect subject [to the Hague Rules],
notwithstanding the omission of ...[the clause paramount]." The relevant
bills of lading which were issued at Jaffa did not include the clause
paramount. All three judges in the Court of Appeal were influenced by the
contention that the contracts of carriage covered by the relevant bills of
lading would have been illegal by the lex loci contractus if effect was not
given to the Palestinian statute. However, in the Vita Food Products case,
the Privy Council stated that the Palestinian statute did not make the
contracts of carriage covered by the bills of lading illegal so as to nullify
the contracts where those bills of lading did not include the clause
paramount. 26" Lord Wright who delivered the judgment of the Privy Council
stated that:

"the prima facie rule [is] that an English Court dealing with a contract
made in a foreign jurisdiction, as Palestine was, must first ascertain
what was the bargain of the parties and give effect to that bargain
unless debarred by some provision of the foreign law which binds the
Court. In general ...legislative provisions such as those in question
do not have extra-territorial effect and do not debar the Court from
giving effect to the bargain of the parties ... It may well be that a
Court in Palestine, bound to give effect to the laws under which it
exercises jurisdiction, might arrive at a different conclusion. No opinion
can here be expressed on that matter nor would it be material in
considering the 7 effect which a Court outside Palestine should give to
'
the contract. 26

264 See The Epar [t985] 2 M.L.J. 3 and John B. Skilling v. Consolidated Hotels [1976] 1
M.L.J. 5 where the Singapore courts applied local legislation to contracts governed by a
foreign proper law.
265 [1932] P. 78.
266 [1939] A.C. 277 at 299.
2'67 Ibid., at 300.
348 Singapore Academy of Law Journal (1995)

It remains to be said that a contract which is contrary to the public policy

of the lexfori is unenforceable notwithstanding that it is lawful under the
lex loci contractus. This was made clear by Fry J. in Rousillon v. Rousillon2 68
where he declared that "It appears .... plain on general principles that this
Court will not enforce a contract against public policy of this country,
wherever it may be made. It seems ... absurd to suppose that the Courts
of this country should enforce a contract which they consider to be against
public policy simply because it happens to have been made somewhere
else. 26 9

VI. ILLEGALITY BY TAINTING

A contract which is in itself not illegal may be rendered illegal by tainting.
In Overseas Union Bank Ltd. v. Chua Kok Kay, 270 K.S. Rajah J.C. accepted
that a contract may be rendered illegal by tainting. This occurs when the
contract, which is in itself not illegal, has a connection with some other
illegal transaction which renders it obnoxious. 2 -" The critical inquiry in
cases where it is alleged that the contract is tainted by illegality is to
ascertain the nature and degree of connection which the contract has with
the illegal transaction.272 A contract will be tainted with illegality if the
plaintiff needs to plead or prove illegal conduct in order to establish his
claim m or if the claim is so closely connected with the criminal behaviour
such that enforcing the claim would be tantamount to the court assisting
the plaintiff to derive a profit from the criminal behaviour.274
The concept of illegality by tainting was also accepted by Lai Siu Chiu J.
in Sim Tony v. Lim Ah Ghee (tia Phil Real Estate & Building Services).? 5
It will be recalled that in this case, it was helde 6 that the agreement between
the plaintiff (then a CPIB officer) and the defendant was not tainted by

268 (1880) 14 Ch.D. 351.

269 Ibid., at 369. A more recent statement of the operating principle may be found in In the
Estate of Fuld (No. 3) [1968] P. 675 at 698 where Scarman J. (as he then was) stated that
"an English court will refuse to apply a law which outrages its sense ofjustice or decency."
270 [1993] 1 S.L.R. 686.
271 See Euro-Diam Ltd. v. Bathurst [1987] 1 Lloyd's Rep. 178 at 187. In this case, Staughton
J. (as he then was) reviewed the earlier English authorities on illegality by tainting. It
suffices to say that Staughton J.'s decision was affirmed by the Court of Appeal in [1988]
1 Lloyd's Rep. 228. The other English cases on the subject of illegality by tainting include
Geismar v. Sun Alliance and London Insurance Ltd. [1978] Q.B. 283 and Thackwell v.
Barclays Bank P.L.C. [1986] 1 All E.R. 676.
272 See the approach of Staughton J. in Euro-Diam Ltd. v. Bathurst [1987] 1 Lloyd's Rep.
178 at 193.
273 As in Bowmakers Ltd. v. Barnet Instruments Ltd. [1945] K.B. 65.
274 As in Geismar v. Sun Alliance and London Insurance Ltd. [1978] Q.B. 283, Cleaver v.
Mutual Reserve FundLife Association [1892] 1 Q.B. 147 and Beresford v. Royal Insurance
Co. Ltd. [1938] A.C. 586.
275 [1994] 3 S.L.R. 224.
276 [1994] 3 S.L.R. 224 at 241.
7 S.Ac.L.J. Contractual Illegality and Conflict of Laws

illegality as it was unconnected with any activity or conduct 7which is illegal

in the sense defined under section 43 of the Penal Code!

In contracts involving the element of foreign law, the taint may arise from
acts done in a foreign country where those acts amount to infractions of
the criminal or penal law of that foreign country. Thus, illegality arising
from foreign law may taint a contract and to ascertain whether illegality by
a foreign law has that effect, the twofold inquiry is first, whether if the acts
(which are illegal by the foreign law) had been illegal by the lexfori, the
contract would nonetheless be enforceable, and secondly, if the answer to
the first inquiry is in the affirmative, do the rules of conflict of laws justify
reference to the foreign law and thereby produce the same result in the
case at hand.27T As Staughton J. put it in Euro-Diam v. Bathurst:

"...when an English claim is said to be tainted by foreign illegality,

one must first enquire whether, applying the appropriate connecting
factor,279 the transaction from which the taint is said to arise would be
enforceable here. If not, one has next to decide whether there is
sufficient connection between that transaction and the claim to amount
to taint within the Bowmaker8 0 orBeresford'8 1 principle. If the answer
to that second inquiry is yes, the claim is unenforceable here." 82

211 Chapter 224, 1985 Revised Edition, Singapore Statutes. The proposition that a contract
may be tainted with illegality by the law of Singapore as the lexfori is not novel. Indeed
in Bhagwandas v. Brooks Exim Pte. Ltd. [1994] 2 S.L.R. 431, Lai Sin Chin J.C. (as she
then was), in the context of the applicability of the rule in Foster v. Driscoll, had made
the distinction between contractual acts to be done in a foreign country which are acts
in themselves illegal by the law of the foreign country and contractual acts which are not
in themselves illegal by the law of the foreign country. In respect of the latter category
of contractual acts, her Honour stated that the further enquiry is whether those contractual
acts were tainted with illegality. By making a distinction between contractual acts which
are themselves illegal and acts tainted by illegality, her Honour was treading the path
which was taken by K.S. Rajah J.C. in Overseas Union Bank Ltd. v. Chua Kok Kay
[1993] 1 S.L.R. 686.
278 This was the approach taken by Staughton J. in Euro-Diam Ltd. v. Bathurst [1987] 1
Lloyd's Rep. 178 at 187.
279 In Euro-Diam v. Bathurst, the court held that the proper law of the insurance contract
was English law and the law of the place of performance was English law and by these
two connecting factors, the contract was enforceable in England. The lex fori being
English law did not affect the enforceability of the insurance contract.
280 Bowmakers Ltd. v. Barnet Instruments Ltd. [1945] K.B. 65. This is the principle that the
contract is unenforceable if the claimant has to rely on or plead the illegal conduct in
order to establish his claim.
281 Beresford v. Royal Insurance Co. Ltd. [1938] A.C. 586. This is the principle that a person
is not to be allowed to have recourse to a court to claim a benefit from his crime, whether
under a contract or a gift. The precise degree of proximity between the plaintiff's claim
and the criminal behaviour which is necessary to bring into play the Beresord principle
will vary with the circumstances of a particular case. See Euro-Diam Ltd. v. Bathurst
[1987] 1 Lloyd's Rep. 178 at 189.
282 [1987] 1 Lloyd's Rep. 178 at 192.
 Singapore Academy of Law Journal (1995)

Thus, a transaction which is illegal by a foreign law by reason of

contravention of a written law or a public policy of the foreign law may
taint a contract and render such a contract unenforceable in Singapore.
The foreign illegality will taint the contract if, applying the appropriate
connecting factor, there is a close connection between the illegal transaction
and the contract. In this regard, the connecting factors which the court
considers as relevant are the proper law of the contract and the law of the
place of performance.

It is sufficient to say that in Overseas Union Bank Ltd. v. Chua Kok Kay,
K.S. Rajah J.C. endorsed the principles relating to illegality by tainting
28 3
of
foreign law as distilled by Staughton J. in Euro-Diam v. Bathurst.

More recently, in Bhagwandas v. Brooks Exim Pte. Ltd., Lai Siu Chiu J.C.
(as she then was) had occasion to state that for a contract "To be so
tainted with illegality ...knowledge and assistance on the part of the plaintiff
is required., 2 84 In that case, the learned Judicial Commissioner held that
the contract was not tainted by illegality as the plaintiff was genuinely
unaware of his liability under article 4(1)(f) of the Law of the Republic of
Indonesia No. 7 of 1983 which rendered the plaintiff liable to income tax
on the interest accruing on his deposit money. As the plaintiff had no
knowledge of the illegality in Indonesia, the court held that the transaction
was not tainted by illegality.

It remains to be said that the once in vogue approach of applying the test
of "an affront to the public conscience" (hereinafter "the public conscience
test") to determine illegality by tainting 285 has been discredited by the
House of Lords in Tinsley v. Milligan.2 s The public conscience testi8 is one

283 It has been pointed out that K.S. Rajah J.C. in Overseas Union Bank Ltd. v. Chua Kok
Kay did not actually apply the principles in Euro-Diam v Bathurst inasmuch as the
learned Judicial Commissioner examined the connecting factors in relation to the contract
and not in relation to the transaction which is alleged to be unlawful. On the facts of
Overseas Union Bank Ltd. v. Chua Kok Kay, there was no unlawful transaction and that
being the case, the court could have, given that the claim was enforceable by the proper
law of the contract (Singapore law), the law of place of contractual performance (Singapore
law) and the law of the forum, simply applied Kleinwort, Sons & Co. v. Ungarische
Baumwolle Industrie Actiengesellschaft and Hungarian General Creditbank [1939] 3 All
E.R. 39 to hold that the claim was enforceable in Singapore. See Toh Kian Sing, [1993]
SJ.L.S. 214 at 224.
284 [1994] 2 S.L.R. 431 at 440.
285 The test was applied by K.S. Rajah J.C. in Overseas Union Bank Ltd. v. Chua Kok Kay
[1993] 1 S.L.R. 686 at 698.
286 [1993] 3 W.L.R. 126. It was Dillon L.J. who first questioned the correctness of the public
conscience test in Pitts v. Hunt [1990] 3 W.L.R. 542.
287 It was Hutchison J. in Thackwell v. Barclays Bank Plc. [1986] 1 All E.R. 676 who is
credited with first having applied the public conscience test. For other cases where the
public conscience test was applied in the English Court of Appeal, see Saunders v. Edwards
[1987] 1 W.L.R. 1116, Euro-Diam Ltd. v. Bathurst [1990] 1 Q.B. 1 and Howardv. Shirlstar
Container TransportLtd. [1990] 1 W.L.R. 1292.
7 S.Ac.L.J. Contractual Illegality and Conflict of Laws

where the court must weigh or balance 288 the adverse consequences of
respectively granting or refusing relief on the ground of illegality. All five
Law LordsS 9 in Tinsley v. Milligan affirmed the age-old principle stated by
Lord Mansfield CJ. in Holman v. Johnson290 Lord Goff of Chieveley stated
in categorical terms that the age-old principle encapsulated in the Latin
maxim ex turpi causa oritur non actio is a principle of policy and its
application does not permit the exercise of any discretion by the court in
favour of one party or the other.291

VII. CONCLUSION

While illegality is a defence which may be brandished about by defendants

to defeat claims for enforcement of contractual rights, the High Court in
Bhagwandasv. Brooks Exim Pte. Ltd.19 issued the following timely reminder
to all and sundry:

"The defence of illegality is not a panacea... Judges do not sit to

enforce the laws of another friendly country. Neither are they expected
to, not even under the auspices of comity of nations. 2 93

Having said that, it must be pointed out that a Singapore court will seek
to enforce the law of a friendly foreign country if that foreign law is the
governing law of the contract.2 94 Thus a contract which is illegal by its
proper law on the ground that it contravenes the revenue law of the legal
system identified as the proper law of the contract has been held to be
unenforceable by a Singapore court.0 9 Where the foreign law is the law of
the place of performance of the contract, - 6 the Singapore court will
recognise 297 the foreign law including foreign revenue and penal law and

288 Which means that the court exercises its discretion in weighing and balancing the
consequences of granting relief or refusing relief.
289 The Appellate Committee was divided only on the issue of the correct principle to be
applied in a case where equitable property rights are acquired as a result of an illegal
transaction whereas Lord Browne-Wilkinson together with Lord Lowry and Lord
Jauncey of Tullichettle took the view that a claimant to an interest in property, whether
based on a legal or equitable title, was entitled to recover if he was not forced to plead
or rely on an illegality even though it transpired that the title on which he relied was
acquired in the course of carrying through an illegal transaction, Lord Goff of Chieveley
and Lord Keith of Kinkel held the view that the claimant who sought to recover his
property must come to equity with clean hands.
290 (1775) 1 Cowp. 341.
291 [1993] 3 W.L.R. 126 at 132fL
292 [1994] 2 S.L.R. 431.
293 Ibid., at 436B per Lai Siu Chiu J.C. (as she then was).
294 See for instance, Overseas Union Bank Ltd. v. Chua Kok Kay [1993] 1 S.L.R. 686.
295 See Bhagwandas v. Brooks Exim Pte. Ltd. [1994] 2 S.L.R. 431. For an Irish case, see
Peter Buchanan Ltd. and Macharg v. McVey [1954] I.R. 89 which is also reported as a
note in [1955] A.C. 516.
296 Ibid.
297 For the distinction between recognition and enforcement of foreign revenue and penal
laws, see Attorney-General ofNew Zealand v. Ortiz [1984] A.C. 1 at 20per Lord Denning
M.R.
 Singapore Academy of Law Journal (1995)

have regard to such law in any adjudication of the parties' contractual

rights and liabilities. 98

While Singapore courts acknowledge the existence of the conflict of laws

rule that a Singapore court would not enforce a foreign revenue law or a
foreign penal law,2 9 that does not mean that all foreign revenue laws and
foreign penal laws will be completely ignored by Singapore courts. Like
their English counterparts, Singapore courts have recognised the existence
of foreign revenue and foreign penal laws, and have on the ground of
comity, refused to countenance any transaction which is knowingly designed
to violate a revenue or penal law of a foreign and friendly nation. 0' Similarly,
a fraudulent custom duty evasion scheme aimed at contravening the revenue
law of a foreign friendly country was held unenforceable by the Singapore
courtj"2 Thus, Singapore courts do recognise the laws of a friendly foreign
country 3 and would, in appropriate cases, refuse to enforce contractual
obligations which result in violations of the laws of the foreign friendly
country.

298 See Overseas Union Bank Ltd, v. Chua Kok Kay [1993] 1 S.L.R. 686 at 699 and
Bhagwandas v. Brooks Exim Pte. Ltd. [1994] 2 S.L.R. 431 at 438 and 439.
299 Established in England by the House of Lords in Government of India v. Taylor [1955]
A.C. 491. In Williams & Humbert v. W. & H. Trademarks (Jersey)Ltd. [1986] 1 W.L.R.
24 at 30, Lord Templeman stated that "... the international rule with regard to the non-
enforcement of revenue and penal laws is absolute."
300 Pace Lord Mansfield in Holman v. Johnson (1775) 1 Cowp. 341 at 343.
3(1 See for instance, Bhagwandas v. Brooks Exim Pte. Ltd. [1994] 2 S.L.R. 431.
302 See Patriot Pte. Ltd. v. Lam Hong Commercial Co. [1980] 1 M.L.J. 135. For English
cases, see Re Emery's Investment Trusts [1959] Ch. 410. See also Pye Ltd. v. BG Transport
Service Ltd. [1966] 2 Lloyd's Rep. 300 at 308 and 309.
303 On recognition of foreign countries, it is not clear whether the policy of Singapore is to
confer recognition upon States as opposed to upon governments. It is the policy of the
United Kingdom to confer recognition upon governments, see The Mary [1992] 2 Lloyd's
Rep. 471 at 476 and 477. It is also pertinent to observe that Hobhouse J. stated that
where Her Majesty's Government has dealings with the foreign government, it will almost
certainly be the best and conclusive evidence of the fact of recognition of that foreign
government. Thus, where Her Majesty's Government is dealing with the foreign
government on a normal government to government basis as the government of the
relevant foreign state, it is unlikely in the extreme that the inference that the foreign
government is the government of that state will be capable of being rebutted and questions
of public policy and considerations of the inter-relationship of the judicial and executive
arms of government may be paramount. See The Arantzazu Mendi [1939] A.C. 256 at
264 and GUR Corporation v. Trust Bank ofAfrica Ltd. [1987] Q.B. 599 at 625. It is also
clear from The Mary [1992] 2 Lloyd's Rep. at 480 that the degree of international
recognition of an alleged government is a relevant factor in assessing whether it exists as
the government of a state. But where the regime alleged to be the government exercises
virtually no administrative control at all in the territory of the state, international
recognition of an unconstitutional regime should not suffice and would indeed have to
be accounted for by policy considerations rather than legal characterisation; it is of
course possible for states to have relations with bodies which are not states or governments
of states.
7 S.Ac.L.J. Contractual Illegality and Conflict of Laws

From an examination of the case law, it is apparent that the cases where
the Singapore courts have refused to enforce contractual obligations
involving violations of the laws of a friendly foreign country may be classified
under three distinct categories. First, cases where by the proper law of the
contract (being the law of a friendly foreign country), the contract is
considered illegal or tainted by illegality. Secondly, cases where, although
the contract is lawful by its proper law, the required contractual performance
is in violation of the law of the friendly foreign country where performance
is to take place. 304 Thirdly, cases where enforcement of the contract would
be harmful to international comity and inimical to the public policy of
Singapore,3t s the forum adjudicating the dispute.3

A contract which is legal by its proper law and which does not contravene
the public policy of the forum will be enforced by Singapore courts:3 v
Thus, a contract which is legal by its proper law and does not contravene
the public policy of Singapore (the lexfori) is enforceable notwithstanding
that the contract is made in circumstances amounting to a breach of the lex
3
loci contractus. 08

A contract lawful by its proper law (which is not Singapore law) which
contravenes a written law of Singapore (the lex fori) is enforceable in
Singapore provided the contract is legal by its proper law and the written
law of Singapore is not an overriding mandatory law.' 9

A contract which contravenes the public policy of Singapore as the lexfori

is unenforceable notwithstanding its legality by its proper law and/or by
the lex loci contractus and/or by the lex loci solutionis.1 6

Where the illegality arises from the public policy of the place of performance
(the lex loci solutionis) and the public policy of the lexfori is 1 similar in
3
effect, the lexfori will not lend its aid to enforce the contract. '

304 This category deals with those cases where the rule in the Ralli Brothers case is applicable.
As framed, the rule is perceived as a true conflict of laws rule.
305 These cases call for the application of the rule in Foster v. Driscoll [1929] 1 K.B. 470.
306 See Overseas Union Bank Ltd. v. Chua Kok Kay [1993] 1 S.L.R. 686 at 697.
307 In the Shaikh Faisalcase [1995] 1 S.L.R. 394, the court took the view that the illegality
which arose from the public policy of the lex loci solutionis was irrelevant as the lexfori
did not share the same public policy.
308 See In re Missouri Steamship Company (1889) 42 Ch. D. 321 where the illegality which
arose from the public policy of the lex loci contractus was held to be immaterial and the
Vita Food Products case [1939] A.C. 277 where contravention of a written law of the lex
loci contractus was held to be irrelevant.
KY) Selvam J.C.'s observation in Singapore Finance Ltd. v. Soetanto & Others [1992] 2 S.L.R.
407 at 410 that 'where a contract is to do a thing which cannot be performed without
violation of law, it is void whether the parties knew the law or not' must be understood
in the context of Singapore law being the proper law of the contract.
310 Subject to the point that in relation to foreign contracts (i.e., contracts governed by a
foreign law and lawful by the foreign proper law and contracts made in a foreign country),
Singapore public policy may be different in scope and extent from Singapore public
policy in relation to domestic contracts.
311 See the Lemenda case [1988] 1 Q.B. 448 and the Shaikh Faisalcase [1995] 1 S.L.R. 394.
 Singapore Academy of Law Journal (1995)

Where the contract violates the lex fori by contravening an overriding

mandatory statutory law of the forum, the court would not assist any party
notwithstanding the legality of the contract by its proper law." In this
connection, it is to be noted that where an overriding mandatory statutory
law of the forum has been contravened, it matters not that the illegality
has not been pleaded; as long as the court is cognisant of the contravention
of the law, the court must uphold the law 3 and
13
refuse to enforce a claim
rendered illegal by violation of the lexfori.

Thus, although the principle of public policy is ex dolo malo non oritur
actio i.e., no court will lend its aid to a man whose cause of action is
founded upon an immoral or an illegal act, a Singapore court will not
enforce a contract only if the illegality exists by reason of the proper law
of the contract or the overriding mandatory statutory law of the forum or
the public policy of the forum "1 4 and possibly where by the law of the place
of performance, the contractual acts cannot be lawfully performed. 315
DAVID CHONG GEK SIAN*

312 Which is a law other than Singapore law.

313 See The Epar [1985] 2 M.L.J. 3 and The Hollandia [1983] A.C. 565.
314 The illegality in Suntoso Jacob v. Kong Miao Ming & Anor. [1984] 2 M.L.J. 95 arose by
reason of the lexfori.
315 This is dependent on whether the rule in the Ralli Brothers case is a rule of conflict of
laws or a rule of the proper law of the contract i.e., a rule of domestic law.
LL.B. (NUS); LL.M. (London); Senior Lecturer, Faculty of Law, National University of
Singapore, Advocate & Solicitor of the Singapore Supreme Court.