Public policy
37The defendant did not plead a defence that any such contract as was asserted by the plaintiff was void, illegal or unenforceable on grounds of public policy. However, in my opinion, where a court forms the view that a contract may be void, illegal or unenforceable on public policy grounds, it is bound to address the issue, even if the parties prefer to ignore it [cf Hyde Park Residence Ltd v Yelland [2001] Ch 143, 160 [44]]. In this case, the attention of the parties was drawn to the matter and submissions on it invited; and although not adopted by the defendant, senior counsel for the plaintiff in response made oral and written submissions and referred to some relevant authorities on the issue [see Outline of Closing Submissions on behalf of the Plaintiff, para 56 and fn 55].
38One of the heads of public policy under which contracts have traditionally and conventionally been held void and illegal is that they are sexually immoral and/or prejudicial to the status of marriage. In Girardy v Richardson (1793) 1 Esp Cas 13, 170 ER 275, Lord Kenyon CJ held that where the wife of the plaintiff - who managed the business of his house in letting the lodgings - let rooms to the defendant who was a "woman of the town", knowing of the defendant's mode of life, the contract for use and occupation of the rooms upon which the plaintiff sued was " contra bonos mores " and could not found an action. The classic case is Pearce v Brooks (1866) LR 1 Exch 213, in which the plaintiffs let on hire to the defendant, a prostitute, a new horse-drawn vehicle, with knowledge that it was to be used in the course of her trade. The contract was held illegal on the ground of sexual immorality. In Upfill v Wright [1911] 1 KB 506, the plaintiff by his agent let a flat to the defendant for a term of three years, the agent knowing that the defendant was the mistress of a certain man, and assuming that the rent would be provided by that man on account of her being a "kept woman". The court held that as the flat was let for an immoral purpose, the plaintiff was not entitled to recover the rent.
39In more modern times, the House of Lords in Fender v St. John-Mildmay [1938] AC 1 held that a promise made by a spouse, after a decree nisi for the dissolution of the marriage had been pronounced, to marry a third person after the decree became absolute, was not void as being against public policy. But Lord Wright explained (at 42) (emphasis added):
The law will not enforce an immoral promise, such as a promise between a man and woman to live together without being married, or to pay a sum of money or to give some other consideration in return for immoral association . But nothing of the sort was suggested in this case. On the contrary, the promise, if carried out, would have regularized an immoral association. English law recognises the right of divorced people to marry though their former consorts are alive. The law has furthermore sacrificed a rigid idea of morality to the idea of making reparation by enforcing obligations under seal by a man to pay money to a woman in respect of past immoral cohabitation, though it might have been said that to enforce such obligations tended to encourage immorality.
40Later, his Lordship said (at 49):
Of course if the promise is given in consideration of future immoral relations it is illegal and void on that ground , but I cannot see any implied general tendency to immorality in such a promise. If the guilty parties are living together in immoral relations, the promise points to moral relations being established by marriage in the near future, when the decree is made absolute. If the parties are acting morally, I cannot see why the promise after decree nisi should lead them into immorality.
41Lord Thankerton said (at 26):
There remains the question of immorality, and it is in this regard that I find a vital distinction between a promise to marry on the contingency of a dies incertus , and a promise to marry on the decree nisi, already in existence, being made absolute . The general tendency of the latter, I should assume, will be to promote patience until the expiry of a period, which, in the vast number of cases, is practically mechanical in its operation.
42Changes in social mores have resulted in a more liberal attitude to contracts providing for or relating to extramarital cohabitation, such that a contract is no longer to be regarded as contrary to public policy merely because the parties are living together in a de facto relationship [Carter Peden and Tolhurst, Contract Law in Australia, 5 th ed, [25-32]]. But the old rule has not been completely obliterated. The question is, what is its remaining content?
43In Queensland, in Andrews v Parker [1973] Qd R 93, the parties lived together in a de facto relationship. Subsequently, the man agreed to transfer title in his house to the woman subject to terms including that she reconvey the title if she returned to her husband. In due course she did, and asked the plaintiff to leave the house, offering to pay $4,000. The man left but the woman failed to pay. Stable J held that the original agreement to transfer the house was not contrary to public policy as it did not bring about a state of extramarital cohabitation , because one already existed. His Honour said that the court was not to judge the actions of the parties in the light of the 19 th century cases, and was bound to apply the public policy of the day and to consider contemporary moral standards. An important point, however, is that the contract did not bring about a state of extramarital cohabitation: it already existed.
44In England, in Horrocks v Forray [1976] 1 WLR 230, the defendant - the mistress of a man - bore him a daughter, whom the man thereafter wholly maintained and supported providing living accommodation, clothing, holidays and day-to-day expenses. He subsequently bought a house and told the solicitor that it was for the defendant and her daughter, whom he installed in it, though not conveying it to her. Upon his death in a motor vehicle accident, by his will all his estate devolved on his wife; neither she nor his executors had known of his association with the defendant nor of the purchase of the house. The executors brought an action for possession of the premises on the ground that the defendant's licence terminated on the man's death. She contended that she had a contractual licence to live there for life or while her daughter was of school age. The Court of Appeal upheld the County Court judge's decision that the circumstance that the man intended to provide some security for the defendant was insufficient to bring into existence a binding contract in the nature of a licence, and in all the circumstances there was no evidence justifying the inference that she had a contractual licence. This result was reached without reliance on public policy considerations, but Scarman LJ said (at 239):
When an illegitimate child has been born, there is certainly nothing contrary to public policy in the parents coming to an agreement, which they intend to be binding in law, for the maintenance of the child and the mother. Parents of an illegitimate child have obligations towards the child. So far from its being contrary to public policy that those obligations should be regulated by contract, I would have thought it was in the public interest that they should be so.
45The Supreme Court of California, in Marvin v Marvin 18 Cal. 3d 660; 557 P. 2d 106, 134 Cal. Rptr. 815 (1976) - in which a woman sued her estranged de facto husband on an oral contract said to provide that she should be entitled to half the property that had been acquired in his name during the period of their cohabitation, and to support payments - rejected a submission that a contract between non-marital partners was unenforceable if it involved or was made in contemplation of an illicit relationship, holding (at 669, 112, 821) that the cases in that state disclosed a narrower and more precise test, namely that a contract between non-marital partners was unenforceable only to the extent that it explicitly rested upon the immoral and illicit consideration of meretricious sexual services. After reviewing the authorities and the changes in social mores, the majority opinion (Tobriner J; Wright CJ, McComb, Mosk, Sullivan and Richardson JJ concurring; Clark J concurring and dissenting) concluded (at 684, 122, 831) (emphasis added):
We conclude that the judicial barriers that may stand in the way of a policy based upon the fulfilment of the reasonable expectations of the parties to a nonmarital relationship should be removed. As we have explained, the courts now hold that express agreements will be enforced unless they rest on an unlawful meretricious consideration.
46The New South Wales Court of Appeal held, in Seidler v Schallhofer [1982] 2 NSWLR 80, that an agreement which provided for the continuation of a de facto relationship for a specified period and thereafter for marriage or separation was not void as being contrary to public policy, because the "immorality" of the relationship was already in existence when the agreement was executed, so that the agreement merely formalised what was to happen to the financial aspects of the relationship once the cohabitation came to an end. Further, it was said that the concept of public policy had changed - as appeared from, amongst other factors, Commonwealth and State legislation which ameliorated the consequences of extramarital associations - at least to the extent of allowing such an agreement to be enforced. Hope JA, as he then was - with whom Reynolds JA (at 95) agreed - said (at 88-90) (emphasis added):
Going then to the area of sexual morality, there is no doubt that a contract to provide meretricious sexual services is and has long been regarded as contrary to public policy and illegal . The Supreme Court of California, in a decision which has had far reaching consequences in the United States, has held that this is as far as the law goes in this regard: Marvin v Marvin (1976) 18 Cal 3d 660; 134 Cal Rptr 815. However the present agreement did not involve meretricious sexual services, but a sexual relationship as part only of a wider relationship . In past generations agreements for, or tending to encourage, cohabitation, outside marriage, between a man and a woman in the future have commonly, although, as Fender v St John-Mildmay shows, not always, been held to be void as against public policy. On the assumption which for present purposes I make that in the past "... some definite and governing principle which the community as a whole ... adopted either formally by law or tacitly by its general course of corporate life ...": Wilkinson v Osborne (1915) 21 CLR 89, at p 97, per Isaacs J would have operated to invalidate an agreement providing for cohabitation for the period and purpose that the subject agreement does, can it be said that public policy
has now changed in a way to allow such an agreement to be enforced. As a preliminary question it must be asked to what can regard be had to see whether or to what extent public policy has changed?
...
Put another way, and relating the question to the present case, what has to be decided is whether an agreement of the kind entered into between the parties should still be considered so contrary to the ideas prevailing in this community as to the conditions necessary for its welfare: Re Jacob Morris (Deceased) (1943) 43 SR (NSW) 352, at p 355; 60 WN 201, that the court should refuse to enforce it as contrary to public policy.
...
The conclusion to which all this material, including the legislation, leads is that the ideas prevailing in this community as to the conditions necessary for its welfare have changed, at least to some extent, in so far as they relate to extra-marital cohabitation. It may be that they have changed to the extent that the living together of a man and woman, without marriage, will not generally be regarded as infringing the acceptable standards required by the community . It is however not necessary to decide this question; it is only necessary to consider whether an agreement for, or tending to promote, the continuation of a cohabitation, already commenced, for a limited period in order to end it by marriage or separation is not contrary to those ideas.
47In Nichols v Nichols (Supreme Court of New South Wales, Needham J, 12 December 1986, unreported) the plaintiff who lived principally with his wife and family had a sexual relationship with the defendant, whom he supported including by paying her rent; they had children, whom he also supported. He purchased a flat and installed the defendant and their sons in it, where he spent at least one night per week. His Honour said:
The defendant raised three special defences. The first was estoppel. In my opinion, there is no substance in this defence. She did not alter her position to her detriment. The next defence was that enforcement of the agreement claimed by the plaintiff should be refused on the ground that the agreement was for immoral purposes.
The defendant referred to Upfill v Wright [1911] 1 KB 506. Much water has run under that particular bridge since 1911 - see Seidler v Schallhofer [1982] 2 NSWLR 80, Andrews v Parker [1973] Qd R 93, Tanner v Tanner [1975] 1 WLR 1346, Horrocks v Forray [1976] 1 WLR 230.
The court's refusal to enforce rights, which would otherwise be enforceable, based on the rule ex turpi causa non oritur actio , was justified by Diplock LJ in Hardy v Motor Insurers' Bureau [1964] 2 QB 745 at p 767, in the following terms:- "All that the rule means is that the courts will not enforce a right which would otherwise be enforceable if the right arises out of an act committed by the person asserting the right ... which is regarded by the court as sufficiently anti-social to justify the court's refusing to enforce that right."
The principle is not limited to rights arising under contracts. But Diplock LJ added a further statement of principle (at pp 767-8):- "The court's refusal to assert a right, even against the person who has committed the anti-social act, will depend not only on the nature of the anti-social act but also on the right asserted. The court has to weigh the gravity of the anti-social act and the extent to which it will be encouraged by enforcing the right sought to be asserted against the social harm which will be caused if the right is not enforced."
Stable J, in Andrews v Parker (above) applied that principle to the facts before him, as did Jacobs J in Money v Money (No 2) [1966] 1 NSWR 348, at p 351.
I think the principle is applicable here, even if it were to be held that the agreement between the parties was unlawful because it was based on an immoral consideration. As the plaintiff submitted, there must be considerable doubt, in the present social circumstances, whether an agreement such as the present would be struck down as being anti-social. It is further to be doubted whether, in this case, the right asserted by the plaintiff "arises out of an act committed by the person asserting the right." The right arises, rather, out of the defendant's termination of the relationship and her subsequent assertion of her legal title to the exclusion of the plaintiff.
But whether the right asserted by the plaintiff be said to arise out of an anti-social act (and Scarman LJ in Horrocks v Forray above, at p 239, did not seem to think the arrangement in that case for maintenance of a mistress and her child was anti-social), I think refusal to grant some relief to the plaintiff would create greater social harm than if such relief were granted.
48It is now provided by statute that notwithstanding any rule of public policy to the contrary, two persons who are not married may enter into a domestic relationship agreement or termination agreement which is enforceable in accordance with the law of contract [(NSW) Property (Relationships) Act 1984, s 45, s 46]. But as the relationship between Mr Pratt and Ms Ashton did not contemplate cohabitation, it was not a domestic relationship within the Act.
49In the more recent cases to which reference has been made, there are two notable features that have saved the relevant contract from illegality on the grounds of immorality: the first is that the contract did not bring about a state of extramarital cohabitation, but made provision in respect of one that already existed; and the second is that it did not involve meretricious sexual services, but a sexual relationship as part only of a wider relationship that included cohabitation and aspects of mutual support. As Hope JA pointed out in Seidler v Schallhofer (at 87), the effect of what Lord Wright said in Fender was that the agreement was not illegal as tending to encourage sexual immorality because the immorality already existed, and although the effect of the promise would be to continue it, the purpose of the promise was to bring it to an end after the divorce decree became absolute.
50So far as I can tell, no case stands contrary to the proposition that it is still the law that a contract to provide meretricious sexual services is contrary to public policy and illegal. Seidler v Schallhofer said as much in 1982, as did Marvin v Marvin in 1976 in California. While social mores have no doubt continued to change, as authority stands such a contract remains contrary to public policy and illegal. This view of the law is confirmed by Markulin v Drew (New South Wales Supreme Court, Young J, 12 August 1993, unreported), which bears considerable similarity to the present case. The plaintiff (woman) alleged a contract whereby she was "to see the deceased every three months as well as telephoning him occasionally, and the deceased would pay her $40,000 clear per year, purchase her a 'top' car and a beautiful home anywhere in Sydney she'd like to live, as well as providing a large sum of money which would be sufficient for the plaintiff to live on for the rest of her life without working for a living". Illegality (for promoting sexual immorality) was pleaded as a defence. Young J (as his Honour then was) reviewed the authorities, and, adopting the statement in Treitel on Contracts, 8 th ed, 390-392, that "a distinction is now drawn between contracts with purely meretricious purposes and those which are intended to regulate stable extra marital relationships", accepted that neither in England nor Australia did the law now refuse to enforce as illegal contracts which involved cohabitation between people who are not married to each other - even if one or both of them is married to someone else - but also observed that the former rule had not been completely deprived of content. His Honour explained:
Accordingly the distinction that Treitel is making is between a man and a woman who are sharing a life together though not married including sexual relations on the one hand and a man and a woman who are living independent lives but the man is rewarding the woman for sexual services which she provides from time to time. Indeed, in this modern age it may be that it is the woman who is rewarding the man for sexual services he provides from time to time.
It should be remembered, however, that traditionally there were in fact three classes of cases: (i) a contract of cohabitation; (ii) a contract by a man with a woman to provide occasional sexual services; and (iii) an agreement with a common prostitute. Cases such as Bainham v Manning (1691) 23 ER 756 suggest that while relief would not be given to a man against a bond he had given to a common strumpet or prostitute, equity would not countenance a transaction whereby a man had given a bond to a housekeeper to secure a sum of money to her if she provided "secret services", presuming attending on her master for sex if required. Accordingly, "meretricious" probably means not a contract with a prostitute, but a contract treating a woman as if she were a prostitute.
51His Honour concluded that, if the contract were as pleaded:
One can only assume that sexual services were to be provided by the plaintiff and not take the view that she later merely gave sex as an optional extra. On this basis the contract was meretricious within the rule. ... Accordingly, the defence of illegality would succeed.
52The arrangements between Ms Ashton and Mr Pratt involved none of the saving graces which enabled a different result to be reached in the cases to which I have referred. Those arrangements were not made to facilitate continuation of an existing cohabitation, but to establish the "mistress relationship". The evidence does not reveal a relationship, or consideration, beyond "meretricious sexual services". In my view, on the current state of the authorities, the arrangements were contrary to public policy and illegal in the relevant sense. Had they otherwise constituted a contract, it would have been void as contrary to public policy.