Estoppel in the face of a statute: public policy

In Kok Hoong v Leong Cheong Kweng Mines Ltd ([1964] A.C. 993, PC) K entered into an agreement to hire machinery to LCKM. A few months later, K obtained a default judgment in respect of rent arrears. K later brought a second action to recover further arrears. This time, LKCM argued that the arrangements were void and unenforceable as a result of a failure to comply with Malaya’s Moneylenders and Bills of Sale Ordinances. K responded that LCKM was estopped by the 1954 judgment from pleading the failure to comply with these Ordinances.

The Privy Council (on appeal from the Supreme Court of Malaya) held that while it was possible for a default judgment to form the basis of an estoppel, it was necessary to look carefully at the basis of the judgment and to consider what was  in substance the ratio of and fundamental to the decision (1012 per Viscount Radcliffe). There was no estoppel here.

In any event, it would be against public policy to allow an estoppel to take effect in the face of the Moneylenders Ordinance and the Bills of Sale Ordinance.

The Privy Council considered the general proposition that an estoppel cannot be set up in the face of a statute. It acknowledged that there can be estoppel in respect of some statutes (such as the Statute of Frauds). The test as to whether this would infringe public policy was stated as follows:

‘[A] more direct test to apply in any case such as the present, where the laws of moneylending or monetary security are involved, is to ask whether the law that confronts the estoppel can be seen to represent a social policy to which the court must give effect in the interests of the public generally or some section of the public, despite any rules of evidence as between themselves that the parties may have created by their conduct or otherwise.’ (1016 per Viscount Radcliffe)

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