Court
Courts have made pronouncements on the factors which affect the cost of
adjusting from one rule to another. One factor consists of how similar are the
facts of the case with the precedent to the facts of the case before the court.
The greater the similarity, the less willing is the court to change a common law
rule, because the higher are the adjustment costs. To explain, in Case 1 the
court made Law 1 which applied to Facts 1. In Case 2 the court is
contemplating making Law 2 to apply to Facts 2. If the court makes a new
rule, Law 2, society has to adjust to follow Law 2 and not Law 1 which it
displaced. This creates adjustment costs. Therefore, the more that Facts 1 are
similar to Facts 2, the more likely it is that people previously covered by Law 1
will now be covered by Law 2. Hence, the higher will be the adjustment costs.
Second, adjustment costs are higher when people have planned their activities,
especially their business and professional affairs, in consequence of the earlier
decision. Costs are higher in these circumstances because any change to the
rule in the decision will entail their having to make and implement new plans to
adjust to the new rule.
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Obviously, the more widely and frequently a rule has
affected people the more likely it is embedded in business and commercial
practice. Consequently a court will be less likely to change it because the
adjustment costs would be very high.
This reasoning lies behind the maxim communis error facit ius.
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Literally the
maxim says that a widely accepted or shared error makes law. Logically it
should apply when two requirements are satisfied. One is that the rule works,
even though it is not the best rule. The other is that the adjustment costs of
changing the rule would be so large as to outweigh the benefits ensuing from
the change.
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John v FCT (1989) 89 ATC 4101 at 4112, 4119-4120
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This maxim alerts us to a way of proceeding that we may not otherwise
have noticed, rather than pressing on us an inviolable rule. In fact judicial
response is mixed. In Bowman v Secular Society
[1917] AC 406 Lord Sumner said
that a decision of antiquity should not be overruled “however little reason might
incline your Lordships to concur in them”. There is also support for the maxim in
Bourne v Keane
[1919] AC 815. In other cases the maxim has not been accepted.
Thus the High Court of Australia did not apply it in several cases – for example
Babaniaris v Lutony Fashions
(1987) 71 ALR 225 (where there was a long standing
interpretation of a statute that was manifestly incorrect and the court overruled
the errant case) and Buckley v Bennett Design & Constructions (1978) 19 ALR 257. In
O’Connell v Reg
(1844) 11 Cl & Fin 155 Lord Denman described the process of a
wrong rule being accepted as an “incantation which becomes magical by mere
repetition”.
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Wallis v Smith (1882) 21 Ch D 243 at 265, Geelong Harbour Trust Commissioners
v Gibbs Bright (1974) 129 CLR 576 at 582, 583-585
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