Finance:Res inter alios acta

Res inter alios acta, aliis nec nocet nec prodest (Latin for "a thing done between some does not harm or benefit others") is a law doctrine which holds that a contract cannot adversely affect the rights of one who is not a party to the contract.

"Res inter alios" has a common meaning: "A matter between others is not our business."

Civil and criminal law

The doctrine of res inter alios acta is a principle of fundamental justice, and therefore applies to Western law generally. This is because the doctrine includes (but is not limited to) acts done by others without the knowledge or consent of the person being accused or prejudiced.

For example, consider a situation where a person "A" commits a crime a decade after divorcing their fornmer spouse "B". As long as "B" had no knowledge of the crime, "B" cannot be prejudiced or punished for it in (say) "B's" subsequent divorce with "C". In that instance, the doctrine protects against "B's" divorce being tainted by "C" bringing "A's" crime into evidence.

More broadly,the doctrine of res inter alios acta stands for the proposition that civil judgments are not admissible in subsequent proceedings involving different parties. For example, the doctrine may apply to the barring of prior judicial rulings or their finding from subsequent cases. This is a nuanced area of law, and its application may vary from country to country.

Canada is an example of such nuance. In the case of British Columbia (Attorney General) v. Malik, 2011 SCC 18 (CanLII), [2011] 1 SCR 657, the Supreme Court of Canada considered whether Mr. Malik should be civilly sued by the State in relation to the Air India bombings case, even though he was acquitted of the bombings in a criminal trial.

In pursuing the civil case, the State convinced a Provincial Supreme Court judge to issue an interlocutory order authorizing the search of business and residential properties of the Malik family for evidence that they helped conceal Mr. Malik’s assets. Evidently, the search found what appeared to be evidence of concealed assets, because the State then sued Mr. Malik for debt, breach of contract, conspiracy, and fraud.

The reason the State sued Mr. Malik was because Mr. Malik had used a Rowbotham application (i.e. free legal representation, equivalent to a "Legal Aid lawyer" or "Public Defender") to pay for his legal costs of the criminal trial in which he was acquitted. The State felt it could do so because a Rowbotham application is financially "means-tested", i.e. free defense is only granted to those who cannot afford their own lawyer, and that it argued Mr. Malik had lied about his finances in order to qualify for it.

The issue was that Mr. Malik had claimed he was a multimillionaire for bail purposes (i.e. when it was to his advantage to appear rich so as to be given bail). But then, once out on bail, he'd applied for legal representation using a Rowbotham application (i.e. when it was to his advantage to appear poor), and there he'd claimed his assets were $0. The State decided to sue Mr. Malik to recoup the more than $5.2 million of public funds used in his defense.

Mr. Malik's defense sought to utilize the doctrine of res inter alios acta to assert that the criminal proceeding couldn't be used in a civil suit to recoup the legal costs. This was because Mr. Malik been aquitted in the criminal proceeding, thus, it was a legal fact he wasn't responsible for the crime. Mr. Malik argued that due to his acquittal, the Judge erred in ordering the search of his residential and business properties which discovered his hidden assets - specifically, as the doctrine of res inter alios acta precluded its issuance by the Judge.

Mr. Malik relied upon the doctrine of res inter alios acta as it applies to excluding different matters (rather than persons, as was the case the initial example of "A" "B" and "C"). In other words, Mr. Malik argued that even though the civil suit involved the same parties (i.e. Mr. Malik and the State), it was about a fundamentally different matter: i.e. about his Rowbotham application, and not about the Air India bombing or its victims.

As such, Mr. Malik argued that the search order was effectively a punishment (i.e. an adverse effect) of the Air India Bombings crimes, in which it was legally proven he played no part, in other words, a violation of the doctrine of res inter alios acta.

Ultimately, the case went to the highest court in Canada, a.k.a. the Supreme Court of Canada.

The Supreme Court of Canada ruled that the doctrine of res inter alios acta did not protect Mr. Malik - however, there were a number of caveats and limitations to that lack of protection. The SCC ruled that res inter alios acta does not prevent "a judgment of a prior civil or criminal case" from being used in another case as evidence, but only in the following limiting circumstances:

a) only if it was considered relevant to the issues in the other case (i.e. if its probative value outweighed its prejudicial effect);

b) the judgement can only be used as evidence in interlocutory proceedings (i.e. not in a trial proper);

c) the judgement can only be used as proof of its findings and conclusions (i.e. not used as evidence of presumptive guilt in the civil case);

d) provided the parties are the same or were themselves participants in the prior proceedings; and

e) provided the two cases were about similar or related issues.

Even then, the SCC held that the following limitations applied to that evidence (the prior judgement):

a) The weight to be given to the earlier decision will rest not only on the identity of the participants, the similarity of the issues, the nature of the earlier proceedings and the opportunity given to the prejudiced party to contest it but on all the varying circumstances of the particular case.

b) The issue of admissibility is separate and distinct from whether, once admitted, the prior decision is conclusive and binding

c) The prejudiced party or parties will have an opportunity before the reviewing judge to lead evidence to contradict the earlier findings or lessen their weight unless precluded from doing so by the doctrines of res judicata, issue estoppels or abuse of process.

In other words:

a) The Judge in the civil suit still had to decide how much weight or relevance the Air India Bombings case and its findings had to the issue of legal fees and finances.

b) The Judge couldn't use the fact of (e.g.) guilt or innocence in the criminal case to infer guilt or innocence in the civil suit.

c) And, the Judge had to give Mr. Malik an opportunity to defend himself by contradicting the earlier findings or rulings (which was an aquittal, so that was not particularly useful to Mr. Malik in this instance).

Contract Law

Many UK cases cite insurance contracts as being res inter alios acta. It seems to be in line with the "privity of contract" doctrine.

Case law: George E. Taylor & Co. v. Percy Trentham (1980)

Taylor were nominated subcontractors to Trentham. They also had a contract with the employer (collateral contract) whereby they warranted due performance of the subcontract works so that the main contractors should not become entitled to an extension of time. The employer paid Trentham only £7,526 against an interim certificate of £22,101. The amount withheld was the balance payable to the subcontractors after deduction of the main contractor's claim against them for delay. It was held that the employer was not entitled to withhold the money as the contract between the employer and the subcontractor was res inter alios acta.