A.: Origin of Judge-made Law

The existence of judge-made law,—that is, of laws or rules created by the Courts of a country in the course of deciding definite cases,—arises from the general acceptance in such country of two ideas.

The one is that a judge or a Court—the two expressions may be here treated as equivalent—when deciding any case must act, not as an arbitrator, but strictly as a judge; or that it is a judge’s business to determine not what may be fair as between A and X in a given case, but what, according to some definite principle of law, are the respective rights of A and X. Hence it follows that every Court in deciding a case must tacitly, or expressly, apply to it some definite principle which is often indeed so clearly known that no special mention need be made of it, but which may be difficult to discover; and when this is so the Court must lay down the rule which guides its decision.

The other idea is that a Court or a judge must follow precedents, by which expression is really meant that a Court having once decided a particular case on a given principle (such e.g. as that an employer is liable to make compensation for damage arising from the negligence of his servants in the course of their employment) must decide all really similar cases in accordance with the same principle, or, to put the same thing in other words, that a Court is bound, as the expression goes, by its own judgments.

One may add that from this very respect for precedents it logically follows that when the judgments of an inferior Court are on a matter of law set aside (i.e. are either reversed or overruled) by a superior Court, the inferior Court must henceforth follow the judgment of, i.e. the principle laid down by the superior Court, and that a final Court of Appeal, such as is in England the House of Lords, is bound by its own judgments, i.e. must apply the principle laid down by itself for the decision of a particular case to all similar cases, until and unless the principle itself is declared to be no longer law by the Legislature, i.e. in England by an Act of Parliament.

Now these two ideas,—namely, that Courts must act as judges, not as arbitrators, and that the duty of a Court is to follow precedents,—though to a limited extent admitted in all civilised countries, have obtained more complete acceptance in England than in any continental, and perhaps in any other existing, State. For English Courts, and it may be said the English Legislature, have now for a length of time accepted not only these two fundamental ideas, but all the consequences that follow from them; and the best way to understand the nature of these fundamental ideas, and the way in which they actually produce judicial legislation, is to examine one or two examples of the steps by which English Courts have even in recent times created rules which, as they really have the force of law and are made by the Courts, may rightly be termed judge-made law.

Not many years have passed since A brought an action against X and Y, directors of a company, for damage caused to him by a fraudulent misrepresentation published by them in a prospectus of the company. The statement published was false. X and Y, however, thought the statement to be true, but their belief in its truth was due to their own gross negligence in omitting to examine whether it was true or not. The following question of principle then called for decision: Could gross negligence be treated as equivalent to fraud? The uncertainty of the law may be seen in the disagreement of eminent judges. A judge of the Chancery Division held that negligence was not the same thing as fraud—that carelessness, in other words, was not mendacity (Peek v. Derry (1887), 37 Ch. D. 541). The Court of Appeal reversed his decision, and held that gross negligence was under the circumstances equivalent to fraud (ibid. at p. 563). But the House of Lords reversed the judgment of the Court of Appeal, and held with the Court of first instance that carelessness is not the same thing as deceit (Derry v. Peek (1889), 14 App. Cas. 337). And this principle, which the House of Lords could not itself depart from, became in 1889 part of the law of England, and was loyally and fully accepted by the very judges of the Court of Appeal who had held a different view of the law. It is, further, at this very moment a rule of English law, except in so far as it has been modified, as regards directors of companies, by the Directors’ Liability Act, 1890, 53 & 54 Vict. c. 64. This case is worth careful study. We here see every step in the formation of judge-made law. That X and Y had acted with blamable carelessness was clear; but a judge had nothing to do with this point: his duty was to determine whether on principle their negligence rendered them guilty of fraud. As a matter of fact, we must say that, where good judges differed, the question of principle was doubtful. The Court of first instance laid down one law, the Court of Appeal another, and the House of Lords, agreeing with the Court of first instance, at last established a rule to which every Court, including the House of Lords itself, was bound to adhere, i.e. which became the law of the land, and this law was finally modified by the only power which can change every law—namely, the Imperial Parliament.

Just about fifty years ago the Court of Queen’s Bench decided what was then assuredly a doubtful point, that where X induced N to break N’s contract with A, the latter had a right to recover damages from X (Lumley v. Gye (1853), 2 E. & B. 216). The validity of this rule, and certainly its extent, remained open to doubt. Some twenty-eight years later it was affirmed and somewhat extended by Bowen v. Hall (1881), 6 Q.B.D. (C.A.) 333. It has of recent years been distinctly affirmed both by the Court of Appeal (Temperton v. Russell [1893], 1 Q.B. (C.A.), 715), and by the House of Lords (Quinn v. Leathem [1901], A.C. 495).

Fifty years ago, again, it was doubtful whether, if X had entered into a contract with A, and before the time for performing the contract had arrived, informed A that he would not perform it, A had a right then and there to sue X for breach of contract (Hochster v. Delatour (1853), 2 E. & B. 678). Eminent judges were here again in some doubt. The law was in truth uncertain. But later decisions (Frost v. Knight (1872), L.R. 7 Ex. 111 (Ex. Ch.); Mersey Steel & Iron Co. v. Naylor (1884), 9 App. Cas. 434) have affirmed the principle of Hochester v. Delatour; the Courts or the judges have then in reality made it a law.

It would be difficult to find a better instance of judge-made law than the rule laid down by the House of Lords itself, that the House is bound by its own decisions (London Street Tramways Co. v. London County Council [1898], A.C. 375; R. v. Millis (1844), 10 Cl. & F. 534; Beamish v. Beamish (1861), 9 H.L.C. 274). Some competent critics, indeed, have argued that this rule or law has only of recent years been firmly established. If this view be correct (which may be doubtful) it only makes the establishment of the rule with which we are dealing all the more striking as an example of legislative authority exerted by the final Court of Appeal. The rule, however, is in any case one towards which the decisions of the House of Lords and the dicta of eminent lawyers have pointed. It is in strict conformity with the respect for precedent which is the parent of judge-made law. It is in any case now part of the law of the land, and therefore forms an impressive instance of a law indirectly though surely enacted by the final Court of Appeal. These illustrations of such judicial law-making may suffice. It would be easy to multiply them; they sufficiently, however, prove the conclusion on which it is here necessary to insist—that the legislative action of the judges is the necessary consequence of ideas which underlie our whole judicial system.