(1985) BEDFORD INSURANCE CO. LTD. v. INSTITUTO DE RESSEGUROS DO BRASIL [1983 B. No. 4785] 1983 Oct. 12, 13, 17, 18, 19, 20, Parker J. 24, 25, 26, 27, 31; Nov. 10, 14 Insurance—Contract—Ilegality—Statutory prohibition—Unauthorised insurance business—Insurance contract made in course of unauthorised business—Whether prohibition on making of contract—Whether contract avoided ab initio—Insurance Compan- ies Act 1974 (c. 49), ss. 2(1), 11(1), 83(4) Contract—Illegality—Agency—Agent making illegal contracts in excess of authority without principal's knowledge—Principal subsequently ratifying contracts—Whether principal entitled to rely on contracts 10 establish cause of action Agency—Ratification—Ratification after commencement of contract— Whether within reasonable time—Whether valid Section 2(1) of the Insurance Companies Act 1974 provides: “No person shall carry on in Great Britain [marine insurance business} . . . except—(a) a body corporate . . . authorised tinder section 3. to carry of-OUSHIES af that class; ‘The plaintiffs, a Hong Kong insurance company, authorised G.H. Ltd, as theit agents to write marine insurance risks in the United Kingdom, subject to a financial limitation as to the size of the risks. Neither the plaintiffs nor their agents were at any time authorised under the Insurance Companies Acts of 1974 or 1981 to carry on, in the United Kingdom, marine insurance or biisiness which, by section 83(4) of the Act of 1974, was defined as “the business of effecting and carrying out contracts of surance.” Section Ui(1) of that Act made it an offence for a person to carry on business’in contravention of the Act. In breach of the. fin itation upon their authority and without the plaintiffs’ knowledge or consent, the agents in 1981 and 1982 purported to write a number of marine insurance risks (“the original contracts”) on the plaintiffs’ behalf, and declared them to the defendants under an open cover reinsurance contract to which the plaintiffs were party. The plaintiffs first_hecame aware of the original contracts in February 1983 and purported to_ratify them in or before July 1983, by which time the coiitracts had_taken effect and claims under them had been spade by insureds against the plaintiffs. The plaimits brought action ainst the defendants claiming an ingemmity under the reinsurance in respect of the claims which had been’ made against them under the original contracts. The defendants raised two complete defences, namely, that the original contracts had been made without the actual’ or ostensible authority of the plaintiffs and had not been validly ratified so that there was no insurable interest in the plaintiffs in respect of which they vould recover under the reinsurance; and that, since the ongioal contracts had been made in contravention ‘of the Acts of 1974 and 1981, the plaintiffs could not rely on ostensible authority or967 1QB. Bedford Insce. Co, v. Instituto de Resseguros validly ratify them so as to establish their cause of action under the reinsurance. On the preliminary trial of the complete defences: — Held (1), giving judgment for the defendants, that, on their tme construction, the Acts of 1974 and 1981 imposed an express ectiotion upon both the making and the performance, by way of 1usiness carried on without statutory authorisation, of contracts of, inter alia, marine insurance; that an express prohibition upon the making of contracts avoided ab initio any contract made in contravention of it; and that, accordingly, the original contracts, even if they had been made with the plaintiffs’ authority, would have been avoided ab initio and unenforceable, so that. the plaintiffs could therefore not recover in respect of them under the reinsurance (post, pp. 981H—982c, F, 983c—984a, 985p-<). Archbolds (Freightage) Ltd. v. S. Spanglett Ltd. {1961} 1 Q.B. 374, C.A. and Shaw v. Groom (1970} 2 Q.B. 504, C.A. distinguished. Bloxsome v. Williams (1824) 3 B. & C. 232 not followed. (2) That the prohibition imposed by the Acts of 1974 and 1981 was absolute and the plaintiffs, having authorised agents to make contracts in contravention of it, were themselves guilty of offences under the Acts, even though the original contracts had been made by their agents acting in excess of their authority; that ratification, being the subsequent recognition of an unauthorised agent's authority to make the ratified contract at the time and place at which it had been made, put the ratifier in the same position as if the agent had had actual authority to make the contract; that a plaintiff could not rely upon his own illegal act to establish his cause of action;’and that, accordingly, even if the original contracts had not been avoided ab initio, the plaintiffs could not recover in respect of them under. the reinsurance as they would have had to set up their illegal acts in order to do so (post, pp. 981B-c, E-F, H—982a, 983c—984c, 985c, D-F, 987D-E). Dictum of Denning LJ. in Marles v. Philip Trant & Sons Lid. {1954] 1 Q.B. 29, 38, C.A. applied. (3) That the plaintiffs had failed to establish that the agents had had ostensible authority to .nake the contracts on their behalf; but that the plaintiffs’ ratification had not been made too late and would, had the original contracts not been illegal, have been effective to make the plaintiffs liable under them (post, pp. 986r—9870). Dictum of Fry L.J. in Metropolitan Asylums Board Managers v. Kingham and Sons (1890) 6 T.L.R. 217 not applied. The following cases are referred to in the judgment: Archbolds (Freightage) Ltd. v. S. Spanglett Lid. (1961) 1 Q.B. 374; {1961} 2 W.L.R. 170; (1961] 1 AN E.R. 417, C.A. Bloxsome v. Williams (1824) 3 B. & C. 232 Bolton Partners v. Lambert (1889) 41 Ch.D. 295, C.A. Marles v. Philip Trant & Sons Ltd. [1954] 1 Q.B. 29; [1953] 2 W.L.R. 564; [1953] 1 All E.R. 651, C.A. Metropolitan Asylums Board Managers v. Kingham and Sons (1890) 6 TLR. 217 Shaw v. Groom (1970] 2 Q.B. 504; {1970} 2 W.L.R. 299; [1970] 1 All E.R. 702, C.A. P Tiedemann and Ledermann Fréres, In re [1899] 2 Q.B. 66, D.C. :968 Bedford Insce. Co. v. Instituto de Resseguros (1985), The following additional cases were cited in argument: Ailion v. Spiekermann {1976] Ch. 158; [1976] 2 W.L.R. 556; [1976] 1 All E.R. 497 Anderson Lid. v. Daniel {1924] | K.B. 138, C.A. Attorney-General for Ceylon v. A. D. Silva [1953] A.C. 461; [1953] 2 W.L.R. 1185, P.C. Barker v. Levinson [1951] 1 K.B. 342; [1950] 2 All E.R. 825, D.C. Boston Fruit Co. v. British and Foreign Marine Insurance Co. Lid. (1906) A.C, 336, H.L(E.) Brook v. Hook (1871) L.R. 6 Ex. 89 Cory v. Patton (1874) L.R. 9 Q.B. 577 Freeman & Lockyer v. Buckhurst Park Properties (Mangal) Lid. {1964] 2 Q.B. 480; [1964] 2 W.L.R. 618; (1964] 1 All E.R. 630, C.A. Graham Joint Stock Shipping Co. Lid. v. Merchants Marine Insurance Co. Ltd. (1924 A.C. 294, H-L.(E.) Grant v. Anderson & Co. {1892} 1 Q.B. 108, C.A. Great Atlantic Insurance Co. v. Home Insurance Co. (No. 2) [1981] 2 Lloyd's Rep. 219 Holman v. Johnson (1775) 1 Cowp. 341, Insurance Co. of Africa v. Scor (U.K.) Reinsurance Co. Lid. [1983] 1 Lloyd's Rep. 541 Joseph v. Law Integrity Insurance Co. Lid. [1912] 2 Ch. 581, C.A. London County Commercial Reinsurance Office Lid., In re [1922] 2 Ch. 67 O.7.M. Lid. v. Hydranautics {1981} 2 Lloyd’s Rep. 211 Okura & Co. Lid. v. Forsbacka Jernverks Akiiebolag [1914] 1 K.B. 715, CA. Samuel (P.) and Co. Lid. v. Dumas (1924] A.C. 431, H.L.(E.) Si. John Shipping Corporation v. Joseph Rank Lid. (1957} 1 Q.B, 267; [1956] 3 W.L.R. 870; [1956] 3 All E.R. 683 Simpson v. Bloss (1816) 7 Taunt. 246 Spector v. Ageda [1973] Ch. 30; [1971] 3 W.L.R. 498; [1971] 3 All E.R. 417 Tesco Supermarkets Lid. v. Nattrass (1972| A.C. 153; [1971] 2 W.L.R. 1166; [1971] 2 Al E.R. 127, H.L.(E.) Verschures Creameries Ltd. v. Hull and Netherlands Steamship Co. Lid. [1921] 2 K.B. 608, C.A. Victorian Daylesford Syndicate Ltd. v. Dott {1905} 2 Ch. 624 ACTION 7 The plaintiffs, the Bedford Insurance Co. Ltd., which carried on insurance business in Hong Kong, by their points of claim in two actions consolidated by order of Leggatt J. on 20 January 1983 claimed against the defendants, Instituto de Resseguros do Brasil, (1) a declaration or declarations that the defendants were bound to the plaintiffs under an ‘open cover contract of reinsurance made between the defendants and the Kentfield Insurance Co., endorsed for the benefit of the plaintiffs with effect from 22 January 1981, and renewed for a further 12 months from 25 June 1981 (“the reinsurance”) in relation to a number of vessels declared to the defendants by the plaintiffs under the reinsurance; and/ or (2) orders whereby the plaintiffs might be saved harmless from certain claims made against them in respect of the vessels under a large number of insurance contracts (‘‘the original contracts"); and/or (3) damages.969 1QB. Bedford Insce. Co. v. Instituto de Resseguros The original contracts, the reinsurance and the declarations under jp had been made in 1981 and 1982 without the plaintiffs’ authority or knowledge by London brokers, Gerald Herbert Ltd., through their managing director, Mr. Gerald Herbert, who was also a director of the plaintiffs. Premiums had been collected and claims settled and paid under the original contracts by Gerald Herbert Ltd., also without the plaintiffs’ knowledge or authority. By their re-re-re-amended points of defence and counterclaim, the defendants raised, inter alia, two complete defences, as follow. (1) By memoranda of agreement dated 24 July 1979 and 1 April 1981, the plaintiffs had appointed Gerald Herbert Ltd. as their agents to submit to them for approval and acceptance by them insurance and reinsurance business on a worldwide basis in respect of, inter alia, marine insurance business. Each of the agreements provided, inter alia, that Gerald Herbert Ltd. (i) would submit all marine insurance business to the plaintiffs for approval and acceptance; (ii) would not write marine risks in excess of U.S. $50,000; and (iii) would not wilfully or knowingly offer business to the plaintiffs when to do so would be illegal. None of the risks the subject matter of the action had been submitted to the plaintiffs for approval or acceptance by them, and accordingly the plaintiffs had not underwritten any of the risks declared to the defendants under the reinsurance or, alternatively, the plaintiffs had no insurable interest in them. Further or alternatively each and every risk purportedly accepted by Gerald Herbert Ltd. pursuant to the agreement had been accepted stamped “Participation reserved for Gerald Herbert Ltd. Bedford Insurance Co.,” approval had not been sought or obtained and participation had never been confirmed by the plaintiffs in respect of any of the risks, and as a consequence the risks had never incepted and/or become effective and the plaintiffs had never become bound by them. Further and/or alternatively if Gerald Herbert Ltd. had purported to accept on behalf of the plaintiffs the risks declared to the defendants, Gerald Herbert Ltd. had, in breach of the agreements, purported, inter alia, (i) to accept risks on behalf of the plaintiffs without submitting them for approval and/or acceptance; (ii) to accept risks which were in excess of U.S.$56,000 without the plaintiffs’ actual or ostensible authority; and to write business for the plaintiffs which was illegal by reason of sections 2 and 3 of the Insurance Companies Acts 1974 and 1981, in that neither the plaintiffs nor Gerald Herbert Ltd. were authorised by the Secretary of State to carry on marine insurance business in Great Britain or the United Kingdom. In the premises the original contracts were voidable and/or not underwritten or validly underwritten by the plaintiffs, the plaintiffs were not liable to the purported insureds under them; and accordingly the defendants were not liable to the plaintiffs under the reinsurance cover in respect of those risks. (2) At all material times the plaintiffs were not authorised by the Secretary of State to carry on marine insurance business in Great Britain or the United Kingdom as required by sections 2 and 3 of the Insurance Companies Acts 1974 and 1981, and accordingly each and every risk declared to the defendants under the reinsurance had been written in contravention of one or other of the Acts; in the premises the970 Bedford Insce. Co. v. Instituto de Resseguros (1985) plaintiffs were not entitled (i) to claim in respect of any of those risks, or (ii) to a declaration and/or order against the defendants in respect of any risks whether or not they had been underwritten by the plaintiffs in the United Kingdom. Further or alternatively, if the risks declared to the defendants had been written without the plaintiffs’ authority but later ratified by them, such risks had been written by Gerald Herbert Ltd., who were not authorised by the Secretary of State to carry on marine insurance business, in contravention of the Acts of 1974 and 1981, and by ratifying the writing of such risks the plaintiffs had adopted Gerald Herbert Ltd.'s illegality as their own. Further or alternatively, the reinsurance, as a reinsurance of contracts of insurance which were iNlegal, was itself illegal, void and/or unenforceable at the suit of the plaintiffs. Further or alternatively, the reinsurance, as a reinsurance of contracts of insurance which were illegal, was effected and carried on by or on behalf of the plaintiffs in furtherance of the carrying on of an illegal insurance business and, therefore, was itself illegal, void and/or unenforceable. By their points of reply and defence to counterclaim, the plaintiffs said, with respect to the first complete defence (i) that the risks written by Gerald Herbert Ltd. for the plaintiffs were risks binding upon them by virtue of their ratification or adoption of those risks and/or because the plaintiffs would be estopped or precluded from denying the validity of the risks as against their insureds; (ii) that each of the risks had been confirmed or adopted by the plaintiffs; (iii) that the business written for the plaintiffs by Gerald Herbert Ltd. ‘was not illegal; and (iv) that the plaintiffs could not seek to deny the validity of the risks under the original contracts as against their insureds, or alternatively would be estopped or precluded from denying their validity by virtue of having held out Gerald Herbert Ltd. as their London liaison office with apparent authority to communicate to insureds acceptance or rejection by the plaintiffs of the proposed risks and/or to communicate with the insureds in respect of the premiums. . By their counterclaim, the defendants claimed against the plaintiffs, and against F. E. Wright (U.K.) Ltd. and A. W Knott Becker Scott Ltd. as agents for the plaintiffs, various declarations to the effect that the defendants were not liable to the plaintiffs under the reinsurance in respect of the declared risks and repayment of all claims paid under the reinsurance; or alternatively, if the reinsurance cover and some or all of the declarations were valid and binding on the defendants, various declarations to the effect that the defendants were entitled to receive the premiums due under the reinsurance, and payment of any sums found due in respect of such premiums. By a third party notice, F. E. Wright (U-K.) Ltd. claimed an indemnity from A. W. Knott Becker Scott Ltd. in respect of any premiums which it might be held liable to pay to the defendants. By a fourth party notice, A. W. Knott Becker Scott Ltd. claimed against Gerald Herbert Ltd. and Channel Underwriting Agencies Ltd. () declarations that the third party was entitled to recover from the fourth parties such premiums as the defendants or F. E. Wright (U.K.) Ltd, might be entitled to receive from the third party; (ji) orders foron 1QB. Bedford Insce. Co. v. Instituto de Resseguros payment of any such premiums; and (iii) indemmnities in respect of any liabilities which the third party might be held to owe to F. E. Wright (U.K.) Ltd. or to the defendants. By a notice under R.S.C., Ord. 16, r. 8, F. E. Wright (U.K.) Ltd. claimed declarations against the plaintiffs that the plaintiffs were liable as reinsurers under one of the original contracts, irrespective of whether the defendants were liable to the plaintiffs under the reinsurance in respect of that risk. By a notice under R.S.C., Ord. 16, r.8, the plaintiffs claimed against F. E. Wright (U.K.) Ltd. (i) ¢ declaration that the latter had been in breach of their duty of cure to the plaintiffs and were liable to them in damages; (ii) orders that the plaintiffs be saved harmless from any claims for which F. E. Wright (U.K.) Ltd. ought to be responsible by reason of their breach of duty; and (iii) damages. By further such notices the plaintiffs and Gerald Herbert Ltd. respectively claimed similar relief against A. W. Knott Becker Scott Ltd. By a notice under R.S.C., Ord. 16, r. 8, F. E. Wright (U.K.) Ltd. claimed against A. W. Knott Becker Scott Ltd. an indemnity in respect of any liability which they might be judged to owe to the plaintiffs under their notice, and by a similar notice A. W. Knott Becker Scott Ltd. claimed against F. E. Wright (U.K.) Ltd. an indemnity in respect of any liability which they might be judged to owe to the plaintiffs and/or Gerald Herbert Ltd. under their respective notices. By consent of the parties, the defendants’ two complete defences were tried as preliminary issues. The facts are further stated in the judgment. Simon Tuckey Q.C., Gavin Kealey and Simon Kverndal for the defendants. Although Gerald Herbert Ltd. purported to contract on behalf of the plaintiffs, the plaintiffs had given them no actual authority to write the original contracts and Gerald Herbert Ltd. had no ostensible authority to do so on the plaintiffs’ behalf. It is for the plaintiffs to establish actual or ostensible authority (see Attorney-General fcr Ceylon v. A. D. Silva [1953] A.C. 461), and on the evidence they are unable to do so. [Reference was made to Freeman &. Lockyer v. Buckhurst Park Properties (Mangal) Ltd. {1964] 2 Q.B. 480.] Further, the plaintiffs’ ratification of the writing of the original contracts was not valid for four reasons. First, Gerald Herbert Ltd’s acts were illegal and therefore incapable of being ratified: see Brook v. Hook (1871) L.R. 6 Ex. 89. In re Tiedemann and Ledermann Freres 1899] 2 Q.B. 66 should not be followed. Second, Gerald Herbert Ltd. did not intend to act on behalf of the plaintiffs and their acts were therefore incapable of ratification by the plaintiffs: see Arnould, Law of Marine Insurance and Average, 16th ed. (1981), vol. 1, British Shipping Laws, vol. 9, para. 243, and Boston Fruit Co. v. British and Foreign Marine Insurance Co. Lid. {1906] A.C. 336. Third, the ratification was not made within a reasonable time: see Metropolitan Asylums Board Managers v. Kingham and Sons (1890) 6 T.L.R. 217. Fourth, the ratification had been subject to a condition which has never been fulfilled. [Reference was made to Cory v. Patton972 Bedford Insce. Co. v. Instituto de Resseguros (1985) (1874) L.R. 9 Q.B. 577 and O.7.M. Lid. v. Hydranautics [1981] 2 Lloyd’s Rep 211.] The plaintiffs gave Gerald Herbert Ltd. actual authority (a) to write risks, (b) to reinsure those risks, (c) to recover premiums and settle claims in respect of the risks, and (d) to pay premiums and collect claims under those reinsurances, all in the United Kingdom. Each of those authorised acts was performed in the course of carrying on an insurance business. Since the plaintiffs were not authorised by the Secretary of State under the Insurance Companies Acts 1974 and 1981 to carry on reinsurance business in the United Kingdom, they were therefore carrying on insurance business in contravention of the Acts. Although the original contracts were written and reinsured by Gerald Herbert Ltd. without the plaintiffs’ actual authority, they were effected and carried out in the same manner as the business for which the plaintiffs had given authority. If the plaintiffs are bound by the original contracts or the reinsurance at all, they are so because their authorisation of other business had conferred ostensible authority upon Gerald Herbert Ltd. to enter into those contracts on their behalf, or because they ratified them. If Gerald Herbert Ltd. had ostensible authority the plaintiffs are bound in the same way as if they had given actual authority. If the plaintiffs ratified, they are bound as if they had conferred actual authority ab initio, and the place where they decided to ratify is immaterial. It follows that the original contracts and the reinsurance were effected and carried out in the United Kingdom in a manner actually authorised by the plaintiffs, and/or with actual authority which either they gave (by ratification) or are deemed to have given (by conferring ostensible authority upon Gerald Herbert Ltd.), and that the original contracts and the reinsurance were effected and carried out by the plaintiffs in contravention of the Acts of 1974 and 1981. If Gerald Herbert Ltd. effected or carried out the original contracts or the reinsurance so that they became principal contracting parties, they also were carrying on an insurance business in contravention of the Acts, since they were not authorised by the Secretary of State to carry ‘on such business in the United Kingdom either. The plaintiffs could not ratify or adopt Gerald Herbert Ltd.’s illegal acts (see Brook v. Hook, L.R. 6 Ex. 89), or alternatively if they could they adopted them as their own. By ratification the plaintiffs could not put themselves in any better position than Gerald Herbert Ltd. If no-one was bound by the original contracts or the reinsurance prior to ratification, there was nothing for the plaintiffs to ratify and the ratification was therefore a nullity. As to the effect of illegality, a distinction is to be drawn between contracts to do prohibited acts, and contracts the making of which is itself prohibited by statute: see St. John Shipping Corporation v. Joseph Rank Lid. [1957] 1 Q.B. 267 and Joseph v. Law Integrity Insurance Co. Ltd. (1912] 2 Ch. 581. Contracts the making of which statute prohibits are void ab initio and utterly unenforceable, whereas contracts to do prohibited acts may be enforceable by an innocent party. The purpose ‘of the Acts of 1974 and 1981 was to protect the public by preventing the carrying on of all insurance business by unregistered persons in the973 1QB. Bedford Insce. Co. v. Instituto de Resseguros United Kingdom, and it must therefore have been intended to prohibit such persons making insurance contracts in the United Kingdom. Support for that view is to be derived from section 11 of the Act of 1974, which provides penalties for breaches of the prohibitions imposed by Part I of the Act, which it makes offences: penalties are imposed recurrently for every day insurance business is carried on illegally. Accordingly the original contracts were themselves illegal and void ab initio: see Victorian Daylesford Syndicate Lid. v. Dott [1905] 2 Ch. 624. As a result, although the insureds may have other rights against the plaintiffs and/or Gerald Herbert Ltd., they do not have claims against them under the original contracts: see Anderson Lid. v. Daniel (1924) 1 K.B. 138, 144; Marles v. Philip Trant & Sons Lid. [1954] 1 Q.B. 29; Ailion v. Spiekermann {1976] Ch. 158 and Jn re London County Commercial Reinsurance Office Ltd. [1922] Ch. 67, 80. If the insureds cannot recover under the original contracts, clearly the plaintiffs have no claim against the defendants under the reinsurance. Moreover, if the original contracts were illegal, the reinsurance was also illegal and is unenforceable against the defendants. If the plaintiffs were liable to the insureds under the original contracts, they could not in any event recover against the defendants under the reinsurance because (a) the reinsurance was effected and carried out with the purpose and object of enabling the plaintiffs to perform the illegal original contracts and in furtherance of the illegal business in the United Kingdom, and/or (b) the reinsurance is tainted by the illegal original contracts, and is therefore also illegal and void, and in any event the plaintiffs have to rely on the original contracts in order to establish the defendants’ liability: see Spector v. Ageda [1973] Ch. 30, 41; Simpson v. Bloss (1816) 7 Taunt. 246 and Marles v. Philip Trant & Sons Ltd. [1954] 1 Q.B. 29, 38. The term of the reinsurance requiring the defendants to follow settlements made by the plaintiffs does not oblige them to follow settlements made under contracts which were illegal: see Insurance Co. of Africa v. Scor (U.K.) Reinsurance Co. Ltd. [1983] 1 Lloyd’s Rep. 541. Public policy requires that this be so, for if insurers could recover under a reinsurance contract in respect of claims paid under illegal contracts, there would be no point in any insurer putting his house in ‘order and complying with the Acts. It would be just if the plaintiffs were themselves to bear any loss suffered under the illegal contracts. If either of the complete defences succeed, the defendants do not wish to proceed with the counterclaim. Steven Gee and Mark V. Smith for the plaintiffs and Gerald Herbert Ltd. The plaintiffs had given Gerald Herbert Ltd. actual authority to write a large number of risks on their behalf in London, to collect premiums and settle claims there, to reinsure those risks and pay premiums and collect claims under the reinsurances for them in London. The writing of the original contracts and of the reinsurance here, although unauthorised by the plaintiffs, was within the ordinary ambit of Gerald Herbert Ltd’s authority. The plaintiffs had represented to the insureds under the original contracts that Gerald Herbert Ltd. had their authority, and the court should infer from the documents that the insureds had relied upon that representation and been induced by it to974 Bedford Insce. Co. v. Instituto de Resseguros 198s} enter the original contracts. In those circumstances, the plaintiffs are bound by ostensible authority and are liable to the insureds under the original contracts, even though they were made without actual authority: see Freeman & Lockyer v. Buckhurst Park Properties (Mangal) Ltd. [1964] 2 Q.B. 480. Gerald Herbert Ltd's apparent or ostensible authority could be pleaded by the insureds as an estoppel; the plaintiffs would be precluded from denying their liability to the insureds by their representations as to Gerald Herbert Ltd’s authority. In any event, having claimed under the reinsurance in this action, the plaintiffs would be estopped from denying their liability to the insureds, whether the latter had relied upon the former's representations or not, since they could not approbate and reprobate the same act: see’ Verschures Creameries Ltd. v. Hull and Netherlands Steamship Co. Ltd. [1921] 2 K.B. 608. The original contracts were effective to bind the plaintiffs by estoppel from the moment when they were initialed even though, unbeknown to the insureds, the contracts were subject to ratification: see Cory v. Patton, L.R. 9 Q.B. 577. With regard to illegality, it is necessary to consider six questions. (1) Were the plaintiffs guilty of any criminal offence? (2) If the original contracts were illegal, could they be ratified by the plaintiffs? (3) If the plaintiffs have committed no offence, is there any principal of law which prevents them suing on the original contrasts? (4) Can the insureds under the original contracts sue the pleintiffs under those contracts? (5) If the plaintiffs have broken the law, is there an implied statutory prohibition on the plaintiffs enforcing the reinsurance? (6) Are the plaintiffs debarred from suing the defendants because they need to rely on their own wrong? The plaintiffs committed no offence in respect of any of the original contracts. They are binding on the plaintiffs by estoppel only, and estoppel has no place in the criminal law. The plaintiffs were not themselves carrying on insurance business in the United Kingdom (see Great Atlantic Insurance Co. v. Home Insurance Co. (No. 2) [1981] 2 Lloyd's Rep. 219), and are not to be deemed to have been doing so hecause their agents were: see Grant v. Anderson & Co. [1892] 1 Q.B. 108 and Okura & Co. Lid. v. Forsbacka Jernverks Aktiebolag [1914] 1 K.B. 715. They are not liable for any criminal act of Gerald Herbert Ltd. committed without their actual authority: see Barker v. Levinson [1951] 1 K.B. 342. In Tesco Supermarkets Ltd. v. Nattrass [1972] A.C. 153 it was held that a company was not criminally liable for the default of its servant or agent under the Trade Descriptions Act 1968 unless that default was committed by someone who could be identified with the mind and will of the company so that the acts and thoughts of the defaulter could be attributed to the company. A company thinks and acts through its Board of Directors, and it has not been established here that the thoughts and acts of Gerald Herbert Ltd. could be attributed to the plaintiffs for the purpose of the Insurance Companies Acts. All that the plaintiffs did in the United Kingdom was to hold out Gerald Herbert Ltd. as having authority, and that was not an offence. The ratification of the original contracts took place outside the United975 1Q.8. Bedford Insce. Co. v. Instituto de Resseguros Kingdom, and that did not constitute an offence: see Great Atlantic Insurance Co. v. Home Insurance Co. (No. 2) [1981] 2 Lloyd’s Rep. 219. ‘The decision in England to purport to accept the risks was of no effect; the acceptance was only effected by the ratification in Hong Kong. All the purportings in England were not part of the carrying on of the plaintiffs’ business and were not the plaintiffs’ acts, but they could be ratified by the plaintiffs, since there is nothing in the law of ratification which procluded them from ratifying illegal contracts made in England. In In re Tiedemann and Lederman Freres {1899} 2 Q.B. 66 it was held that a principal who was himself guilty of no fraud could ratify a contract made by an agent without authority and with fraudulent intent; that is different from cases such as Boston Fruit Co. v. British and Foreign Marine Insurance Co. Lid. {1906] A.C. 336, where the would-be ratifier was not within the contemplation of the agent when the contract was made. [Reference was made to the conflicting decisions of the House of Lords in Graham Joint Stock Shipping Co. Ltd. v. Merchants Marine Insurance Co. Ltd. [1924] A.C. 294 and P. Samuel and Co. Lid. v. Dumas {1924] A.C. 431.} The Acts of 1974, and 1981 prohibit the carrying on of insurance business without authorisation from the Secretary of State; there is no express prohibition on the making of insurance contracts without such authorisation. In construing the legislation, it is instructive to consider the provisions of Part II of the Act of 1974. Section 26 prohibits certain insurance transactions, non-compliance is an offence, but the express effect of non-compliance is that prohibited transactions are merely unenforceable. Section 27 expressly makes void certain insurance contracts, but creates no offence. Section 32 creates an offence and expressly declares certain contracts to be void. There are no such provisions in Part I. Section 2 is unlike section 32(5). It prohibits the carrying on of insurance business; that is a step away from prohibiting contracts as section 26 does. There is no express provision in section 2 that contracts made in the course of such business are either void or unenforceable. In Archbolds (Freightage) Lid. v. S. Spanglet Ltd, {1961] 1 Q.B. 374, 388 Devlin L.J. referred to the three-fold effect of illegality. First, if a party to a contract intends to perform it in an illegal fashion, it is unenforceable by the party with that intent; if the intent be common, the contract is not enforceable at all, ‘but it is not void. Secondly, a party cannot recover under a coutract if in order to prove his rights under it he has to rely on his own illegal acts. Thirdly, a contract which is expressly or impliedly prohibited by statute or contrary to public policy is void ab initio. Several factors bear on whether a statute should be construed as making a contract illegal. If the statute provides for penalties which are sufficient to serve the purpose of the prohibition, or if the avoidance of the contract would cause inconvenience or injury to innocent persons with ct of the statute, or if the penal effect of the avoiding the contract and thus enabling the, therwise be his legal obligations, the//stafute should not be construe! as prohibiting the *| LAW LIBRARIES }x} )976 Bedford Insce. Co. y. Instituto de Resseguros (1985) contract so as to render it void (see Archbolds’ case at p. 390; St. John Shipping Corporation v. Joseph Rank Lid. {1957} 1 Q.B. 267, 285, and Shaw v. Groom [1970] 2 Q.B. 504); where the prohibition is designed for the protection of the public the contract is generally illegal and void (see Victorian Daylesford Syndicate Lid. v. Dott [1905] 2 Ch. 624), but an innocent party who knows nothing of an illegal element in a contract, can nevertheless enforce it if the prohibition is designed for his protection: sce Ailion v. Spiekermann [19/6] Ch. 158. Moreover, in Bloxsome v. Williams (1824) 3 B. & C: 232, 233-234, it was held that a party to an expressly prohibited contract who did’ not know of the prohibition when he made the contract could nevertheless sue upon it, and in Anderson Lid. v. Daniel {1924] 1 K.B. 138 it was held that where the policy of the statute was to protect the public by requiring the contract to be accompanied by certain formalities or conditions, although the contract was illegal and could not be sued upon by the party liable to penalties if those formalities or conditions were not complied with, the default of the guilty party did not deprive the innocent party of his civil remedies under the contract. Joseph v. Law Integrity Insurance Co. Lid, [1912] 2 Ch. 581 is distinguishable. In this case, penalties of imprisonment and unlimited fine are provided for breach of the prohibition, and they are sufficient to serve the purpose of the statute, which is to protect members of the public from finding themselves uninsured as the result of the activities of unregistered insurers. That purpose would be thwarted, and innocent insureds injured, if the original contracts were void, whereas the plaintiffs would thereby gain more than they would be likely to lose in penalties. There is no reason to suppose that the insureds knew of the illegality, and the nature of the illegality was comparable with a failure to comply with a statutory condition. In those circumstances, there being no express prohibition on the formation of the original contracts, no such prohibition should be implied; if it were, the innocent insureds even could, on the authority of Bloxsome v. Williams, 3 B. & C. 232 and Anderson Lid. v. Daniel [1924] 1 K.B. 138, sue upon them. Indeed the plaintiffs were seeking to carry out the policy of the Acts, for by ratifying long after action brought, they were secking to protect the insured; the reinsurance ensured that the insureds would get paid, and reinsurance was expressly encouraged by the Acts. Here, therefore, far from requiring the plaintiffs to be prevented from recovering under the reinsurance, public policy indicated that they should be permitted to recover. The plaintiffs are liable to the insureds under the original contracts despite the illegality, and the condition precedent for the defendants’ liability under the reinsurance is therefore satisfied. The defence of illegality arises because the court will not allow a party to enforce a contract if in order to do so he has to rely on his own illegal act: see Simpson v. Bloss, 7 Taunt. 246; Archbolds (Freightage) Lid. v. 8. Spanglett Ltd. {1961} 1 Q.B. 374 and Marles v. Philip Trant & Sons Ltd. [1954] 1 Q.B. 29. The defence is not for the defendant's benefit, but he gets the benefit of it, as it were by accident and contrary to real justice, because the court would not for policy reasons assist the plaintiff: see Holman v. Johnson (1775) 1 Cowp. 341. In this case there G977 108. Bedford Insce. Co, v. Instituto de Resseguros Parker J. is no reason of policy why the courts should not assist the plaintiffs. If a plaintiff could establish his cause of action without relying on his own illegality, the defence of illegality would not be available: see Holman's case; Simpson v. Bloss, 7 Taunt. 246 and St. John Shipping Corporation v. Joseph Rank Lid. {1957} 1 Q.B. 267. In this case, the plaintiffs need only set up the original contracts and the reinsurance; they do not have to show that they were made in London in the course of carrying on insurance business, nor that they were not authorised under the Acts to carry on such business, still less that the Acts prohibited the original contracts. It is for the party setting up illegality (i.e. the defendants) to allege and prove the facts said to give rise to the illegality. ‘Anthony Diamond Q.C. and Stephen Ruttle for F. E. Wright (U.K.) Lid. ‘Adrian Hamilton Q.C. and Victor Lyon for A. W. Knott Becker Scott Ltd. Richard Siberry for Channel Underwriting Agencies Ltd. Cur. adv. vult. 10 November 1983. Panker J. read the following judgment. The plaintiffs in this consolidated action are a Hong Kong insurance company carrying on business there mainly in the motor insurance field. They allege that they are bound by a large number of insurance contracts and are entitled to recover against the defendants pursuant to an open cover reinsurance under which the original risks were declared to the defendants. The original contracts, if contracts they be, the reinsurance cover and the declarations under it were made without the plaintiffs’ authority or knowledge by London brokers, Gerald Herbert Ltd., through their managing director, Mr. Gerald Herbert, or another director, Mr. Anthony Cracknell. Gerald Herbert was also at all material times a’ director of the plaintiffs and had been so from 1977. Also without the authority or knowledge of the plaintiffs, Gerald Herbert Ltd. collected premiums and settled and paid some claims under the original contracts. In addition, again without the plaintiffs’ knowledge or authority, Gerald Herbert Ltd. launched in the plaintiffs’ name and obtained an order for consolidation of, the two actions which constitute the present action. The defendants deny liability and plead a counterclaim against the plaintiffs and the brokers interposed between Gerald Herbert Ltd. and themselves. There are in addition third and fourth party proceedings and claims between various existing parties. In their defence the defendants set up two matters which go to the whole of the claim and which, if successful, would result in the claim being dismissed. These defences do not directly involve other parties. Other partial defences do so. At what appeared to be the conclusion of Mr. Gee’s opening on behalf of the plaintiffs, he invited me to hear the evidence and argument on the two complete defences and give judgment thereon before further considering all the other issues in the case. He was joined in this invitation by Mr. Tuckey for the defendants. All other parties either supported this joint invitation or assumed a position of neutrality. No- one seriously opposed it. Inherent in the proposal were (a) an Q.B. 1985—37978 Parker J. Bedford Insce. Co. v. Instituto de Resseguros 11985) undertaking by the defendants that in the event that the complete defences were rejected no appeal would be pursued until after hearing of and judgment on the remaining issues, the trial of which would proceed immediately, and (b) that, in the event that the complete Uefences or one of them succeeded, trial of the remaining issues be stood over and only be proceeded with in the event that there was an appeal and that appeal had been finally determined in the plaintiffs’ favour. ‘The proposed course would have the immediate cost-saving advantage that other parties could, if they so wished, absent themselves during the course of the hearing on the two complete defences. It would have the further advantage that, in the event that the defences or one of them succeeded and the judgment was either not appealed or unsuccessfully appealed, a very great saving in costs would result, for the remaining issues which were detailed and complex would never have to be heard. Against this was the clear disadvantage that, if the defences succeeded but were successfully appealed, the remaining issues would then have to be tried after a considerable lapse of time and very possibly before another judge. Since, however, all parties appeared to be prepared to face this possible disadvantage with equanimity, I acceded, albeit with some misgivings, io the invitation to try the two complete defences and give judgment thereon before proceeding further with the other issues. This judgment is therefore concerned only with the validity of the two complete defences. These two defences to some extent overlap. The first is that all of the original contracts were made without the actual authority of the plaintiffs—which is admitted, that the plaintiffs have failed to establish ostensible authority and that there was no valid ratification because the ratification relied on was too late or the original contracts were not purported to be made on the plaintiffs’ behalf. Hence there was no insurable interest in the plaintiffs and the plaintiffs cannot recover under the reinsurance ‘The second defence is based on illegality, the illegality alleged being that, if the plaintiffs had authorised the original contracts, they would in making each have been contravening either the Insurance Companies ‘Act 1974 or the Insurance Companies Act 1981 and accordingly (i) they cannot rely on ostensible authority, (ii) they could not validly ratify, (ii) the reinsurance was such an integral part of the original contracts that it too was illegal, and (iv) that since proof of the original contracts is an essential part of the plaintiffs’ cause of action and the same were illegal, the plaintiffs cannot recover under the reinsurance. ‘The foregoing sets out only the main features of the two defences, which contained a number of sub-divisions and alternative contentions within them, but it is sufficient for present purposes. The original contracts and the reinsurance relied on were all effected in 1981 and 1982, but before considering them it is necessary to refer briefly to the previous history of the association between Gerald Herbert Ltd. and the plaintiffs. This began in 1976 to 1977 when Gerald Herbert Ltd. operated under the name of Ukitabel Insurance Agencies Ltd. By April 1977 Mr. Gerald Herbert had become a director of the plaintiffs979 108. Bedford Insce, Co. ¥, Instituto de Ressegures Parker J. and, between then and the end of 1980, with the authority of the plaintiffs, Gerald Herbert Ltd. (i) wrote in London on their behalf a large number of risks, (ii) collected premiums and settled claims thereon in London, (iii) reinsured such risks as to part, and (iv) paid premiums and collected claims under such reinsurances. This is accepted and indeed relied upon by the plaintiffs in support of their contention that they were bound by ostensible authority in respect of later contracts made without actual authority. It is plain that, despite the foregoing, Gerald Herbert Lid. falsely represented to the United Kingdom authorities that they did not write risks on behalf of the plaintiffs but merely referred possible business to them so that they might accept or reject it as they saw fit. It is also plain that Gerald Herbert Ltd. combined with the plaintiffs to mislead the Hong Kong. authorities as to the position between themselves and the plaintiffs. This appears clearly from the documents and is not denied by the plaintiffs. The extent of the business done on the plaintiffs’ behalf with their actual authority is summarised in a document put in by the plaintiffs. In the years 1977 to 1980 both inclusive, over 1,900 risks were written, yielding a net premium income of about U.S. $4,000,000. The plaintiffs also in their pleadings allege that, during his tenure of office as a director of the plaintiffs, Mr. Gerald Herbert was in charge of underwriting carried out for the plaintiffs in London and was allowed and/or encouraged by the plaintiffs to conduct himself as such towards third parties. With the possible addition or substitution of Gerald Herbert Ltd. for Mr. Gerald Herbert, this allegation is fully borne out by the documents. Of the total risks written in the period 1977 to 1980 mentioned above, the same summary reveals that there were some 575 marine risks, yielding a net premium income of about U.S. $825,000. In the years 1981 and 1982, the summary also discloses that the position was as follows: (i) there were a total of 615 risks written with actual authority, of which 215 were marine risks, and (ii) there were a total of 340 risks (being the alleged original contracts) written without actual authority, all of which were marine risks. At this point it is convenient to consider the position of the plaintiffs, of Gerald Herbert Ltd., and of Mr. Gerald Herbert under the Insurance Companies Acts of 1974 and 1981 with regard to the business done in London over the whole period from 197 to 1982 with the actual authority of the plaintiffs. In so doing I shall for the sake of brevity . consider only the position with regard to marine risks. By section 2 of the Act of 1974 it was provided that, with certain specified exceptions, no person should carry on in Great Britain insurance business of a class relevant for the purposes of Part I of that Act. By section 1(1) the relevant classes are listed. They include marine insurance business. The listed classes are defined by section 83, and the definition of marine insurance business is to be found in subsection (4) of that section. As in the case of each of the other classes, the definition begins “the business of effecting and carrying out contracts of insurance.” It is common ground that all the alleged underlying contracts were contracts of marine insurance within the definition.980 Parker J. Bedford Insce. Co. ¥. Instituto de Resseguros 98s} Neither the plaintiffs nor Gerald Herbert Ltd. fell within any of the exceptions. In order to do so each would have required an authorisation from the Secretary of State. Neither of them had or had applied for any such authorisation. By section 11 of the Act of 1974 any person who carries on business in contravention of Part I of the Act is guilty of an offence punishable, on conviction on indictment, with imprisonment for a term not exceeding two years or to an unlimited fine or both, and, on summary conviction, to a fine not exceeding £400. Section 79 provides: “(1) Where an offence under this Act committed by a body corporate is proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of, any director, chief executive, manager, secretary or other similar officer of the hody corporate or any person who was purporting to act in any such capacity, he, as well as the body corporate, shall be guilty of that offence and liable to be proceeded against and punished accordingly. (2) For the purposes of this section a person shall be deemed to be a director of a body corporate if he is a person in accordance with whose directions or instructions the directors of the body corporate or any of them act.” The Act of 198i, which came into force on January 1982, repealed inter alia sections | to 11 and section 83 of the Act of 1974 but replaced them with provisions which so far as immediately material have the same effect as the provisions already mentioned It is clear that, through Gerald Herbert Ltd. and/or Mr. Gerald Herbert, and with the consent and connivance of Mr. Gerald Herbert their director, the plaintiffs were throughout the years 1977 to 1982 carrying on insurance business in London in contravention first of the Act of 1974 and later of the Act of 1981. The plaintiffs and, by virtue of section 79 of the Act of 1974, Mr. Gerald Herbert were thus throughout the period from i973 guilty of offences under first one and then the other Act. Gerald Herbert Ltd. aided and abetted those offences for it is clear from the documents that they knew full well that what they were doing was iliegal and deliberately set out to create a false impression. What then of the business done without the actual authority of the plaintiffs, assuming for the moment that, apart from any effect of the two Acts, it was done purportedly on behalf of the plaintiffs so as to be capable of binding them by the application of ostensible authority or, if not binding for this reason, capable of being validly ratified? This business, all of which was done in London, although done without actual authority was business of a kind which Gerald Herbert Ltd. and/ or Mr. Gerald Herbert were authorised to do. The lack of authority lay therefore not in a complete absence of authority but in exceeding the actual authority conferred by the plaintiffs. The true position was that the plaintiffs’ agents, Gerald Herbert Ltd., and/or their director, in the ‘course of carrying on the plaintiffs’ insurance business, by the plaintiffs’ authority in contravention of the Acts, exceeded the limitations put upon their authority. For the plaintiffs Mr. Gee, who also represents Gerald Herbert Ltd., contends that there is in the case of the original contracts no offence byH 981 1QB. Bedford Insce. Co. v. Instituto de Resseguros Parker J. the plaintiffs for the original contracts would be binding by estoppel only and although, as against the insured they might be estopped from denying civil liability, estoppel has no place in the criminal law. The plaintiffs had, he contended, done no more in London than hold out Gerald Herbert Ltd. as having authority, and that is not the offence. So far as ratification is concerned, he contends that the act of ratification took place outside the United Kingdom and that thus there is again no offence. Both of these contentions are, in my judgment, unsustainable. It is clear on the terms of the Acts that the offence created by the Acts is an absolute one, that if the prohibited act is done the offence is committed and that it can be no defence to say that the act was committed by an agent in excess of his authority. I accept entirely that, if an agent had no authority at all, different considerations might or would apply; but where, as here, the plaintiffs through an authorised agent carry on business in contravention of the Acts it can be no answer that the agent exceeded a particular limitation, e,g., a monetary limit on his authority, in the course of carrying on that business. As to ratification, it is submitted that if there was neither ostensible nor actual authority (which is the only case where ratification can arise) the plaintiffs had done nothing in the United Kingdom at all. They had merely ratified outside the United Kingdom and thus no offence was committed. It is of course incorrect to say that the plaintiffs had, on this assumption, done nothing in the United Kingdom at all. They were at all times carrying on insurance business, including marine insurance business, in contravention of the Acts. They had not, however, in relation to the making of the particular contracts, on the assumption made, done anything in the United Kingdom at all. In my judgment, however, this does not matter. A ratification relates back and is a subsequent recognition of authority at the time, so much so that if, after the making of 4 purported contract without authority, the other party seeks to withdraw, his withdrawal is ineffective as against a subsequent ratification: see Bolton Partners v. Lambert (1889) 41 Ch.D. 295 and In re Tiedemann and Ledermann Freres [1899] 2 Q.B. 66. What was ratified therefore was, in each case, a contract made in London, and once ratified it was effective as of the date when it purported to have been made. Apart from the question of illegality, I venture to doubt whether anyone would suggest otherwise. Whether the fact that the contracts sought to be ratified were made in contravention of the Acts prevents them being ratified at all I shall consider hereafter. T turn now to consider what would have been the consequences had all the underlying contracts been authorised by the plaintiffs. In such circumstances, could the plaintiffs recover under the reinsurance, or would they be prevented from doing so? Consideration of this question involves first the construction of the two Acts to determine their effect. I take first the Act of 1974. The express prohibition is upon the carrying on of insurance business of a relevant class, but, as I have already mentioned, the definition in the case of each class begins, “the effecting and carrying out of contracts of insurance.” What therefore is prohibited is the carrying on of the982 Parker J. Bedford Insce. Co. v. Institute de Resseguros 1985} business of effecting and performing contracts of insurance of various descriptions in the absence of an authorisation. It is thus both the contracts themselves and the performance of them at which the statute is directed. Moreover, section 11, which creates the offence of carrying on business in contravention of the Act, contains in subsection (4) a saving provision of some importance. It provides: “A body corporate or unincorporated body of persons shall not be taken to carry on insurance business in contravention of this Part of this Act by reason only of carrying on’ business for the purpose of discharging liabilities lawfully assumed by it before 27 July 1967." There is here a clear indication that the mere paying of claims, unless saved under the proviso, was intended to be prohibited whether or not the contracts of insurance under which the claims were made were themselves made in contravention of the Ac? so long, of course, as the payments are made by a person carrying on insurance business in the United Kingdom. Section 84 of the Act of 1974 contains a series of provisions designed to protect insurers from being held to have carried on business in a particular relevant class. Subsection (2) is in the following terms: “For the purposes of this Act, a person shall not be taken to carry on marine, aviation and transport insurance business by reason only of the incidental inclusion, in a contract of insurance whose principal object is to insure a person against risks of a kind such that the business of effecting and carrying out contracts of insurance against them constitutes insurance business of some other class, of [a] provision whereby he assumes a liability of a kind whose assumption by itself in a contract of insurance would make that contract such a one as is mentioned in section 83(4) above. This, and the similar provisions with regard to insurance business of other classes, indicates that if, for example, a person were lawfully carrying on business of some class other than marine business pursuant to an authorisation for that class, it would be sufficient to constitute a contravention of the Act if he were then to enter into a single contract of marine insurance. Although the prohibition is upon carrying on business in contravention of Part I of the Act, it appears to me clear that what is aimed at and what is prohibited is both the making and performance of any contract of insurance of a relevant class by way of business. Thus a company opening business premises for the purpose of carrying on insurance business would commit an offence when in the course of that business and without authorisation from the Secretary of State it entered into the very first contract of insurance of a relevant class. The parties to a contract within the prohibition are not, however, treated alike. It is the insurer carrying on business who commits a criminal offence, not the insured. Since, however, the performance of the contract is within the prohibition, it would appear that the insured, however innocent, was intended to acquire no enforceable right under a prohibited contract for it would be an offence for the insurer to pay him, and if, by the time of payment, the insured were aware of the illegality, he wouid aid and abet the commission of that offence.Qa H 983 1.8. Bedford Insce. Co. v. Instituto de Resseguros Packer J. So far as the Act of 1981 is concerned, I need in this context refer only to section 11. That section enables the Secretary of State to direct that a company authorised to carry on insurance business shall cease to be authorised to effect contracts of insurance, and section 11(4) provides: “A direction under this section shall not prevent a company from effecting a contract of insurance in pursuance of a term of a subsisting contract of insurance.” Here also is a clear indication that it is the contract itself which is prohibited. Reverting again to the Act of 1974, there is no provision in Part I as to the effect of entering into a transaction prohibited thereby. This is to be contrasted with Part II. There, (i) in section 26(8) there is an express provision that that section shall not be construed as making any transaction prohibited by that section unenforceable as between the parties notwithstanding that non-compliance with the section is a criminal offence; (ii) section 27 renders certain contracts void; and (iii) section 32(5) renders certain transactions void against the liquidator or any creditor of the company concerned. I gain little or no assistance from such provisions. The Acts of both 1974 and 1981 are plainly for the purpose of protecting the public in the form of actual or potential insured from the operations of an unauthorised person. Any suggestion that the innocent insured was intended to acquire rights under a contract with an unauthorised person appears to me to be plainly negatived by the fact that, albeit he is not guilty of the principal offence, the principal offence covers the performance of contracts and the discharge of liabilities as well as the effecting of the contracts, and by the further fact that the offence created is plainly an absolute one. What then is the result of the foregoing? A considerable number of authorities were cited by both sides. The textbooks appear mostly to agree that the law relating to illegality is in a somewhat confused and unsatisfactory state. In my view, however, much, if not all, of the confusion arises from attempts to apply dicta from cases where the contract itself was perfectly lawful but actual performance was not, from seeking to equate cases concerning the question whether breach of some statutory duty gives a civil remedy with cases concerned with the question whether the statute bars a civil remedy, and from occasional failures to specify, when referring to a contract as being illegal, whether it was intended to say whether it was also void ab initio or merely unenforceable ab initio or whether it was illegal in itself or merely illegal because it was intended by one or both parties to be performed in an illegal manner. Be that as it may, certain things are clear. In Archbolds (Freightage) Ltd. v. S. Spanglett Ltd. [1961] 1 Q.B. 374 Devlin L.J. summarised the possible effects of illegality. In respect to two of them he said, at p. 388: \ “Another effect of illegality is to prevent a plaintiff from recovering under a contract if . . . he has to rely upon his own illegal act; . . . The third effect of illegality is to avoid the contract ab initio and