Chapter 1,2,3-CIMA

DEFINITION OF LAW

Law, as it is, is the command of the Sovereign. It means, 1) law has its source in sovereign authority, (2) law is accom­panied by sanctions, and (3) the command to be law should compel a course of conduct. Being a command the law must flow from a determinate person or group of persons with the threat of displeasure if it is not obeyed. Sovereignty is, however, only a part of the state. So, in ultimate sense, law emanates from the state. Thus the term Law is used to denote rules of conduct organised society have to follow certain common rules, otherwise peaceful living is impossible. It is the function of the State to enforce these rules.

Holland

According to Holland, Law is, “a rule of external human
action enforced by the sovereign political authority”. From this
definition it follows that there are three essential characteristics
of law.

1. Law is a rule relating to the actions of human beings.

2. Law attempts to regulate the external actions of human beings.

3. Law is enforced by the State

Anson : Rules regarding  human conduct necessary for peaceful living as well as  for  progress and  development. Anson observes as follows: ‘ The object of Law is Order, and the result of Order is that men are enabled to look ahead with some sort of security as to the future. Although human action cannot be reduced to the uniformities of nature, men have yet endeavoured to reproduce by Law something approaching to this uniformity.

1. Statutes of the Indian Legislatures: The legislature is the main source of law in modern times. In India, the Central and the State legislatures possess law making powers and have exercised their powers extensively. The greater
part of Indian commercial law is statutory.

English Mercantile Law: Many rules of English Mercantile Law have been Incorpo­rated into Indian Law through statutes and judicial decisions. English Mercantile Law is a mixture of diverse elements. It contains rules originating from the following sources:

3. Judicial Decisions or Precedents    .

Judges interpret and explain statutes. Rules of equity and good conscience are incorporated into law through judicial decisions. Whenever the law is silent on a point, the judge has to decide the case according to his idea of what is equitable. Prior to 1947, die Judicial Committee of the Privy Council of Great Britain was the final court of appeal for Indian cases and its decisions were binding on Indian courts. After, independence, the Supreme Court of India is the final court of appeal. But decisions of the superior English courts like the Courts of Appeal, Privy Council, and the House of Lords, are frequently referred to as precedents which might be followed in interpreting Indian statutes and as rules of equity and good conscience.

COMMERCIAL LAW :

Definition: The laws of a country relate to many subjects, e.g, inheritance and transfer of property, relationship between persons, crimes and their punishment, as well as matters relating to industry, trade and commerce. The term Commercial Law or Mercantile Law is used to include only the last of the aforesaid subjects, viz., rules relating to industry, trade and commerce.

Scope: The scope of commercial law is large. It includes the laws relating to contract, partnership, negotiable instruments, sale of goods, companies etc.

It must be noted that there is no fixed line of division between commercial law and other branches of law, nor is there any conflict or contradiction between them. The law of contract, which is a very important part of commercial law, is applicable not only to merchants and bankers but also to other persons. When a merchant files a suit in a court of law the procedure is not materially different from that of other suits. When a trader commits an offence he is punishable under the criminal law exactly in the same way as any other person. The subjects studied under the heading of commercial law do not form a comprehensive code dealing with all aspects of mercantile activity. Commercial law deals with only those parts of law which are of special importance to the mercantile community. The same laws are applicable to other citizens under appropriate circumstances.

Sources of the commercial law of India: The commercial law of India is based upon statutes of the Indian legislature, English mercantile law and Indian mercantile usages, modified and adapted by judicial decisions. We are stating below the sources from which the rules of commercial law of India have been derived.

4. Custom and Usage

A customary rule is binding where it is ancient, reasonable, and not opposed to any statutory rule. A custom becomes legally recognised when it is accepted by a court and incorporated in a judicial decision

Chapter 1

.

THE NATURE AND SOURCES OF ENGLISH LAW

This chapter covers the following topics

1. The nature of law
2. Sources of English law
3. Historical sources of law
4. Legal sources of law
5. Subsidiary sources of law
6. Judicial precedent
7. Avoidance of a binding precedent
8. Interpretation of statutes

I.THE NATURE OFLAW

1.1The laws of any country are those rules which the nation through its law-enforcing machinery makes compulsory by imposing penalties and other sanctions against law-breaking. The body of law is not static but changes and develops. In this process it reflects the values and institutions of each era. Until Parliament was reformed in the nineteenth century, the main purpose and effect of English law was to define and safeguard rights of property and to uphold public order. Since that time there has been an increasing flow of new laws designed to deal with social problems and to develop the national economy. Many old laws have been repealed; for instance, a broken promise of marriage was formerly actionable by the jilted woman as a breach of contract, but this is no longer so. Any study of English law as it now is (for the time being) requires a brief explanation of the process of historical development which has made it what it is.

1.2.As we shall see, English law, like most other legal systems, makes~2 fundamental distinction between civil and criminal taw.

1.3 But although English law has many features which are common to other national legal systems, it also has some distinctive features of its own. It differs from the law of many Western European countries (and also Scotland) in having absorbed only a small amount of Roman law, which is a major heritage of Western civilization. Secondly, English law is case-law made by decisions of the courts to a much greater extent than the law of many other countries. The countries of the Commonwealth and also the United States of America have absorbed much of the English legal tradition into their own law.

2.SOUIRCES OF ENGLISH LAW

2.1.The term ‘sources of law’ is used in several different senses.

(a) Historical sources – generally regarded as common law and equity.

(b)Legal sources – the means by which the law is currently brought into existence.

There are four legal sources:

(i)judicial precedent,

(ii) legislation,

(iii) EC law, and

(iv) custom.

(c)Subsidiary sources – not currently responsible for the direct creation of law. They include, for example, Law Merchant, Roman Law and Canon Law.

2.2 The important elements will now be explained in greater detail.

3.HISTORICAL SOURCES OF LAW]

3.1.English law’s historical sources are those procedures, rules and ways of thinking which have given rise to today’s current sources of law. Hence a legal problem today may be decided on the rules of the legal sources, but these in themselves (particularly judicial precedent) have been derived from the historical sources of common law and equity.

Common law

3.2.At the time of the Norman Conquest in 1066 there was no system of law common to the whole country. Rules of local custom were applied by local manorial courts. To improve the system, the King sent royal commissioners on tour (circuit) of different parts of the realm to deal with crimes and civil disputes. These commissioners, who often heard their cases with the assistance of a local jury, at first applied the local customary law of the neighborhood. On their return from circuit the commissioners sat in the royal courts at Westminster to try cases there. In time the commissioners in their judicial capacity developed rules of law, selected from the differing local customs which they had encountered, as a common law (ius commune) which they applied uniformly in all trials {before the King’s courts) throughout the kingdom.

3.3To commence an action before any of these courts, the plaintiff obtained from the main royal office, the Chancery, an order (writ) issued under the King’s authority and addressed to the Sheriff of the county in which the defendant resided, by which the Sheriff was required to ensure that the defendant appeared for the trial. The writs specified the ground of complaint and gave a brief summary of the facts on which the plaintiff required judgment. After some earlier uncertainty it was established that writs might only be issued in one of the established forms, which are grounds of action. If there was no appropriate writ it was not possible to have a new one in order to bring a grievance before the royal courts. This principle was slightly relaxed in 1285 to permit, the issue of new writs, if they were similar to established forms. But the common law system, based on the availability of standard writs, was still very rigid and hence an inadequate means of providing justice.

3.4The procedure of common law courts was also unsatisfactory. A plaintiff might lose his case owing to a minor technicality of wording or be frustrated by specious defenses, deliberate delay or corruption, or find himself unable to enforce a judgment given in his favour because there was no suitable common law remedy.

Equity

3.5Citizens who could not obtain redress for grievances in the King’s common law courts petitioned the King to obtain relief by direct royal intervention. These petitions came before the King in Council and by custom were referred to the principal civil minister – the Chancellor, who was usually a cleric. In dealing with each petition his concern was to establish the truth of the matter and then to impose a just solution without undue regar2i for technicalities or procedural points. The Chancellor enforced his authority by summoning the parties to attend for interrogation; the penalty for failure to comply could be imprisonment or confiscation of property. Thus royal power was made available to make the law more effective.

3.6.Because the principles on which the Chancellor decided points were based on fair dealing between two individuals as equals, it became known as equity.

3.7.the system of equity, developed and administered by the Court of Chancery, was not a complete alternative to the common law. It was a method of adding to and improving on the common law; it provided a gloss on the law. This interaction of equity and common law produced three major changes.

(a)New rights: equity recognised and protected rights for which the common law gave no safeguards. If, for example, A transferred property to the legal ownership of B to pay the income of the property to C (in modern law B is a trustee for C) the common law simply recognised that B was the owner of the property at common law and gave no recognition to B’s obligations to C. Equity recognised that B was the owner of the property at common la w but insisted, as a matter of justice and good conscience, that B must comply with the terms of’ the trust imposed by A (the settlor) and pay the income to C (the beneficiary).

(b)better procedure: as explained above, equity could be more effective than common law in bringing a disputed matter to a decision.

(c)Better remedies the standard common law remedy for the successful plaintiff was the award of monetary compensation, damages, for his loss. Equity was able to order the defendant to do what he has agreed to do (specific performance) to abstain from wrongdoing (injunction), to alter a document so that it reflects the parties’ true intentions (rectification) or to restore the pre-contract status quo (rescission).

3.8.the  development of equity was based on a number of ‘equitable maxims’, or principles. These are still applied today if an equitable remedy is sought. The following are examples.

(a)he who comes to equity must come with clean hands. To be fairly treated, the plaintiff must have acted fairly himself.

(b)Equality is equity. The law attempts to play fair and redress the balance; hence what is available. to one person must be available to another.

(c)He who seeks equity must do equity. Similar to (a) above, this means that a person wanting equitable relief must be prepared to act fairly in future himself.

(d)Equity looks at the intent, not the form. However a person may try to pretend that he is doing something in the correct form, equity will look at what he is actually trying to achieve.

Common law and equity. later developments

3.9In theory, equity accepted common law rights but insisted that they should be exercised in a just fashion. The practical effect was nonetheless that a decision of the Court of Chancery often reversed or conflicted with common law rules. At one stage, the Court of Chancery went so far as to issue orders by which litigants were forbidden to bring an action at common law to enforce strict common law rights. The rivalry between Chancery and common law courts was resolved in 1615 by a decision of the King (in the Earl of Oxford‘s Case) that where common law and equity conflict, equity must prevail.

3.10 Equity was not in its origins a consistent code of law: it was simply disconnected intervention in legal disputes. Each Chancellor (and the Chancery judges acting under his authority) applied a personal and sometimes arbitrary standard of what he considered fair. Equity, it was said, varied with the length of the individual Chancellor’s foot. From the sixteenth century onwards, however, the Chancellor and his deputies were usually recruited from the legal profession trained in common law. (Sir Thomas More, appointed Chancellor by Henry VIII, was the first of these). Under common taw influence, equity become a consistent body of doctrine and at least as technical as the common law.

3.11 Thus the common law, administered in royal courts, was supplemented and sometimes overruled by principles of equity administered in the Court of Chancery. A plaintiff who began proceedings in one set of courts might after years of expensive litigation find that for some technical reason, he could not obtain the desired result but must abandon his case and begin again in the other courts. This dual court system was ended by the Judicature Acts 1873 – 1875 which amalgamated the English courts. It is now possible to rely on any principle of common law or equity in any court of law in which the principle is relevant. In case of conflict equity still prevails over common law.

3.12 Although the courts have been amalgamated, common law and equity remain distinct. Where common law applies it tends to be automatic in its effect. Equity recognizes the common law, as it always did; it sometimes offers an alternative solution but the court has discretion as to whether or not it will grant an equitable remedy in lieu of a common law one.

3.13 If, for example, breach of contract is proved, the plaintiff will a: least get common law damages as compensation for his loss automatically; in certain circumstances the court may, at its discretion, provide an alternative remedy of equity. It may, for instance, order the defendant to perform the contract rather than allow him to buy his way out of his contractual obligations by paying damages. The discretionary nature of equitable remedies means that a person who wins an action will not necessarily get the remedy he wants.

Case: Miller v Jackson 1977

The Court of Appeal held that a cricket club had committed both negligence and nuisance by allowing cricket balls to be struck out of the ground into M’s adjoining premises. However, the court refused to grant the injunction that M had sought. They awarded damages instead on the grounds that the interest of the public in being able to play and watch cricket on a ground where it had been played for over 70 years should prevail over the hardship of a few individual householders who had only recently purchased their homes.

4.LEGAL SOURCES OF LAW

4.1The development of common law and equity have led to one of the main legal sources of law – judicial precedent – and informs much of the other main source – the passing of statutes. Judicial precedent

4.2Both common law and equity are the product of decisions in the courts. They are judge-made law but based on a principle of consistency. Once a matter of principle has been decided (by one of the higher courts) it becomes a precedent. In any later case to which that principle is relevant the same principle should (subject to’ certain exceptions) be applied. This doctrine of consistency, following precedent, is expressed in the ‘maxim stare decisis - ‘to stand by a decision’.

4.3 Judicial precedent is based on three elements.

(a)There must be adequate and reliable reports of earlier decisions.

(b)there must be rules for extracting from each earlier decision on a particular set of facts the legal principle to be applied in reaching a decision on a different set of facts.

(c)Precedents must be classified into those which are binding and those which are merely persuasive.

4.4Point (a) – reporting of cases – is discussed immediately below. The points concerning legal reasoning and how binding precedents should be interpreted are clarified later in this chapter.

4.5Until the mid-nineteenth century law reports – reports of decided cases – were notes made by practising lawyers. Later on, reports were published without official authorisation by professional law reporters. In modern times there are major series of law reports on general law published weekly and then bound as annual volumes. In addition there are other special’ series of reports, e.g. of tax cases, commercial cases, industrial relations cases etc. At E hearing in court, the barrister who cites a case as a precedent upon which he relies will read aloud from the reports the passage from the reported judgement.

4.6 Every case has a title, usually (in a civil case) in the form Brown v Smith ie. Brown (plaintiff) versus (against) Smith (defendant). But if Smith loses and goes to appeal the order may then be reversed as Smith (appellant) v Brown (respondent). Some cases are cited (for technical reasons of procedure) by reference to the subject matter. eg. Re Enterprises Limited (company case) Re Black’s Settlement (a trust case) (`re’ means `about’); or in shipping cases the name of the ship, e.g. The Wagon Mound. In a full citation the title of the case is followed by abbreviated particulars of the volume of the law reports in which the case is reported, e.g. Best v Samuel Fox & Co Ltd (1952) 2 All ER 394 (The report is at p 394 of Vol. 2 of the All England Reports for 1952). The same case may be reported in more than one series of law reports and sometimes under different names.

4.7 As regards content. -

• (a)each report begins with a summary (head note) of the points o£ law established by the case and a list of the earlier cases cited as precedents at the hearing;

• (b)the verbatim text of the judgement (or judgments if more than one) follows as given in court but with any minor corrections which the judge decides to make at the proof stage.

It is only decisions of the higher courts – the High Court, Court of Appeal and Judicial Committee of the House of Lords – which are included in the general law reports. Only the important cases (in the effect on the law) are included in the law reports (though certain libraries hold a copy of the judgements in unreported cases also).

4.8 Students are often perplexed as to how much they are expected to memories of cases referred to in textbooks, teaching manuals etc. The important aspect of a leading case is what it was about, – its essential facts and the point of law which it illustrates or establishes. It is always useful to preface the mention of a case (in a written answer) by citing the name of the case. But if you cannot remember the name you can say `In a decided case…’.

Statute law

4.9Statute law is made by Parliament (or in exercise of law-making powers delegated by Parliament). Until the United Kingdom entered the European Community in 1973 the UK Parliament was completely sovereign – its law-making powers were unfettered. In that respect there was a marked contrast with the position in some other countries, eg. USA, where there is a written constitution and it is possible to challenge in the courts (as unconstitutional) legislation made by the statutory law-making body.

4.10 Parliamentary sovereignty means that:

• (a)Parliament is able to make the law as it sees fit. It may repeal earlier statutes, overrule case-law developed in the courts or make new law on subjects which have not been regulated by law before.

• (b) No Parliament can legislate so as to prevent a future Parliament changing the law Case: Vauxhall Estates v Liverpool Corporation 1932

If compensation for compulsory purchase were assessed under an Act of 1919 the plaint would receive £ 2,370, whereas if it were assessed under an Act of 1925 they would c receive £ 1,133. The Act of 1919 provided that any Act inconsistent with it would have effect.

Held: this provision did not apply to subsequent Acts because Parliament cannot binc successors. In addition the 1925 Act by implication repealed the 1919 Act so far as it inconsistent with it. The plaintiffs therefore received £ 1,133.

• (c)The courts are bound to apply the relevant statute law however distasteful to them it r be. But the judges have to interpret statute law (as we shall see in Chapter 3) and t may find a meaning in a statutory rule which those members of parliament who promoted statute did not intend.

4.11 In practice, Parliament usually follows certain conventions which limit its freedom. It does usually enact statutes which alter the law with retrospective effect or deprive citizen5 their property without compensation. In addition to making new law and altering existing 1 Parliament may make the law clearer by passing a codifying statute (such as the Sale of Go Act 1979) to put case-law on a statutory basis, or a consolidating statute to incorporate original statute and its successive amendments into a single statute (such as the Companies 1985).

Parliamentary procedure

4.12 A proposal for legislation is originally aired in public in a Government Green Paper. Al comments are received a White Paper is produced, which sets out the intended aim of legislation. It is then put forward in draft form as a Bill, and may be introduced into either House of Commons or the House of Lords. When the Bill has passed through one House it n then go through the same stages in the other House (see paragraph 4.15). When it has pas through both Houses it is submitted for the Royal Assent which in practice is given on Queen’s behalf by a committee of the Lord Chancellor and two other peers. It then becomes an , of Parliament (or statute) but it does not (if the Act itself so provides) come into operate until a commencement date is notified by statutory instrument (see 4.19 below).

4.13 Most Bills are Public Bills of general application, whether introduced by the government or t private member. A Private Bill has a restricted application: for example, a local authority n promote a Private Bill to give it special powers within its own area. Private Bills undergo different form of examination at the committee stage.

4.14 If the House of Commons and the House of Lords disagree over the same Bill, the House of Lords may delay the passing of the Bill for a maximum of one year (only one month if it is a financial measure, such as the annual Finance Act).

4.15 In each House the successive stages of dealing with the Bill are as follows.

• (a)First reading – publication and introduction into the agenda: no debate.

• (b) Second reading – debate on the general merits of the Bill: no amendments at this stage.

• (c)Committee stage – the Bill is examined by a Standing Committee of about 20 members, representing the main parties and including some members at least who specialise in the relevant subject. The Bill is examined section by section and may be amended. If the Bill is very important all or part of the Committee Stage may be taken by the House as a whole sitting as a committee.
• (d)Report stage – the Bill as amended in committee is reported to the full House for approval. If the government has undertaken in committee to reconsider various points it often puts forward its final amendments at this stage.

• (e)Third reading – this is the final approval stage at which only verbal amendments may be made.

• Delegated legislation

4.16 To save time in Parliament it is usual to set out the main principles in the body of the Act as numbered sections and to relegate the details to schedules (at the end of the Act) which need not be debated though they are visible and take effect as part of the Act. But even with this device there is a great deal which cannot conveniently be included in the Act. It may for example be necessary, after the Act has been passed, for the government to consult interested parties and then produce regulations, having the force Of the law, to implement the Act or to C ix commencement dates to bring the Act into operation or to prescribe printed forms for use in connection with it. To provide for these and other matters a modern Act usually contains a section by which power is given to a minister, or public body such as a local authority, to make .           subordinate or delegated legislation for specified purposes only.

4.17 This procedure is unavoidable and essential for various reasons.

(a)Parliament has not time to examine these matters of detail.

(b) Much of the content of delegated legislation is technical and is better worked out in consultation with professional, commercial or industrial groups outside Parliament.

(c)If new or altered regulations are required later, they can be issued without referring back to Parliament, and in much shorter time than is needed to pass an amending Act.

4.18 The disadvantages of delegated legislation are that Parliament loses control of the law-making process and a huge mass of detailed law appears piecemeal each year. It is difficult for persons who may be affected by it to keep abreast of the changes. Yet ignorance of the law is not accepted as an excuse for infringing it.

4.19 Delegated legislation appears in various forms. Ministerial powers are exercised by statutory instrument (including emergency powers of the Crown exercised by Orders in Council). Local authorities are given statutory powers to make bye-laws subject to ministerial approval.

4.20 Parliament does exercise some control over delegated legislation by restricting and defining the power to make rules and by keeping the making of new delegated legislation under review as follows:

• some statutory instruments do not take effect until approved by affirmative resolution of parliament;

• most other statutory instruments must be laid before parliament for 40 days before they take effect. During that period members may propose a negative resolution to veto a statutory instrument to which they object.

4.21 There are standing Scrutiny Committees of both Houses whose duty it is to examine statutory instruments with a view to raising objections if necessary, usually on the grounds that the instrument is obscure, expensive or retrospective.

4.22 As explained above, the power to make delegated legislation is defined by the Act which confers the power. A statutory instrument may be challenged in the courts on the grounds that it is ultra vires – exceeds the prescribed limits or has been made without due compliance with the correct procedure. If the objection is valid the court declares the statutory instrument to be void.

4.23 Both statutes and delegated legislation under it are expressed in general terms. It is not possible to provide in the Act for each eventuality of human endeavor which falls within its remit. It therefore often falls to judges to interpret Acts. The legal reasoning used to do this is covered later in this chapter.

EC law

4.24. On becoming a member of the European Community in 1973, the United Kingdom adhered to the Treaty of Rome (and the related treaties on coal, steel and atomic energy) and agreed to conform to EC law which is concerned with free trade in manufactured goods, agricultural support price policies, transport, company law and many other economic matters..

4.25. New EC law is created in the following ways:

(a)Regulations e.g. to implement Article 85 of the Treaty of Rome, may be issued. These are ^.self-executing’ – they have the force of law in every EC state without need of national legislation. In this sense regulations are described as `directly applicable’. If they confer rights and impose obligations on individuals, regulations are also said to have ‘direct effect’.

(b) Decisions of an administrative nature are made by the EC Commission in Brussels mainly to implement the common agricultural policy. Such decisions are immediately binding on the persons to whom they are addressed.

(c)Directives are issued to the governments of the EC member states requiring them within a specified period (usually two years) to alter the national laws of the state so tha, they conform to the directive. Thus the Financial Services Act 1986 gave force to Directives 79,81 and 82 on company securities and the Companies Act 1989 gave force to the Eighth Directive.

4.26 Until a directive is given effect by a UK statute it does not usually affect legal rights and obligations of individuals. In exceptional situations the wording of a directive may be cited in legal proceedings, but generally statutory interpretation is a matter for the UK courts (see Chapter 3).

Case: Van Duyn v Home Office 1974

Article 48 of the Treaty of Rome requires that nationals of EC member states should be free to take up employment anywhere in the EC area, subject to any restrictions imposed on grounds of public policy. An EC directive required that any such restriction of `public policy’ should be limited to matters arising from personal conduct of the individual. The plaintiff challenged the decision of the Home Office to deny her entry to the UK entirely on the grounds of her membership of an organization (Scientology).

Held: a directive, like a regulation, could be `directly applicable’ (if its wording was appropriate). But the plaintiff’s membership of an organization was `personal conduct’ and so the decision to exclude her was consistent with the directive.

4.27 Directives are the most significant and important means of importing continental law into the UK legal system since the EC has a wide-ranging Programme of assimilating the laws of member states to a common EC model. Recommendations and opinions may also be issued but these are merely persuasive and not binding.

4.28 Apart from the European Court, the principal institutions of, the EC are the Council of Ministers, the Commission (the top layer of the Brussels bureaucracy) and the European Parliament. Proposals for EC legislation are initiated by the Commission, usually in the form of draft directives. These drafts are referred to member states for comments. In the United Kingdom it is the normal practice for a committee of Parliament to examine each draft and for the appropriate ministry to consult trade associations etc which would be affected by the proposals if implemented. These preliminary consultations between the commission and the member states may continue over a period of years and result in extensive alteration of the draft directive to meet national objections. The directives are also debated in the preparatory stage by the European Parliament to which every member state elects a number of representatives. The final stage is the consideration of a directive. by the Council of Ministers. If the Council unanimously approves, it authorises the issue of the directive and the member states must then alter their law accordingly.

4.29 It is true that membership of the EC restricts the sovereignty of the UK Parliament (among other GC national legislatures). But the directives to which Parliament must ultimately conform are issued as a result of negotiation and often agreement between the UK government and the other government of the EC. The UK government in turn is dependent on the support of a majority of N. embers of Parliament to retain office. To that extent, Parliament has indirect influence on the EC law-making process. It is certainly true to say, however, that since 1973 the EC has had considerable impact on the law, and this is set to increase.

Custom .

4.30 In early mediaeval times the courts created law by enforcing selected customs. Custom is now of little importance as a source of law, but it is still classified as a legal source of law.

4.31 In determining what are the implied terms of a contract, the court may take account of local or trade customs which the parties intended should be part of their contract.

Case: Hutton v Warren 1836

The parties were landlord and tenant of a farm. The landlord gave notice to the tenant to quit. Disputes arose as to the tenant’s obligation to continue to cultivate the farm until the notice expired and.as to his entitlement to allowances for work done and seed supplied.

Held: these matters were to be resolved according to local custom which had been incorporated in the contract.

4.32 In disputes over claims to customary rights, such as to use the land of another or to remove things from it, the alleged custom may be established subject to the following conditions.

(a) It must have existed since’ time immemorial’, in theory since 1189 AD. It usually suffices to show that the custom has existed without interruption from as far back as records (if any) exist.

(b) It must have been enjoyed openly as of right. If it has only been enjoyed secretly, by force, or with permission of the landowner, it is not a custom which amounts to a right.

(c)The custom must be reasonable, certain in its terms, consistent with other custom or law and exercised within a definite locality.

5.SUBSIDIARY SOURCES OF LAW

5.1The main sources of law as set out above are judicial precedent (derived from common law and equity) and parliamentary and EC legislation. However, a number of subsidiary sources have had some influence on the law’s development, and are still recognizable today.

Law merchant

5..2 In mediaeval times, traders (who were often foreigners) submitted their disputes to courts at main ports, fairs and markets which applied mercantile custom. The law of negotiable instruments was brought to England as a commercial practice recognised by bankers and traders in Northern Italy, Germany and elsewhere in late mediaeval times. The work of these courts was absorbed (with the Law Merchant) into common taw in the seventeenth century. But a separate Court of Admiralty existed – to deal with shipping matters – down to modern times and still exists as a special court within the Queen’s Bench Division of the High Court.

Roman law

5.3Although it is the basis of most continental systems of law, Roman law is of little importance  __ as a source of English law. Its influence was mainly felt in the ecclesiastical courts and in the rules relating to the requirements of a valid will. A soldier’s privileged will (a verbal will) is an example of a current law which has Roman origins. Ecclesiastical law

5.4Like the courts of the Law Merchant, the ecclesiastical courts were independent of the common law courts. They mainly dealt with offences against morality, such as adultery and slander. They also had jurisdiction over the law of succession. They kept this jurisdiction until 1857 when the Divorce Court and the Probate Court were established.

Codes of practice

5.5In recent years some statutes have provided for codes of practice to be drawn up to supplement the law. These codes are usually prepared by an appropriate body as a guide to recommended practice, for example codes on picketing at a factory gate in the course of an industrial dispute or dealings between traders and their consumer customers. Such codes are not law and it is not unlawful to disregard them. But in any legal proceedings the court may take account of compliance with or disregard of a code of practice in deciding whether, for instance, a person has behaved ‘reasonably’ (if that is a legal obligation imposed on him in general terms – as it is, for instance, in the unfair dismissal rules of employment law).

6.JUDICIAL PRECEDENT

6.1The principal legal sources of law, judicial precedent and statute, both comprise a vast amount of detailed judgements and rules. In order to apply these to the particular facts of a case, certain principles of legal reasoning have been evolved in order to ensure that the law’s objectives of consistency and fairness are maintained.

6.2Judges must inevitably create law. Sometimes an Act of Parliament will deliberately vest a wide discretion in the judiciary. In other cases there may be no statutory provision and no existing precedent relevant to the particular dispute. Even so,(the doctrine of judicial precedent is

based on the view that it is not the function of a judge to make law, but to decide cases in accordance with existing rules The Latin for this idea is stare decisis – to stand by a decision.

6.3The doctrine of judicial precedent is designed to provide consistency in the law. In order that this should be done in a coherent manner, three things must be considered when examining a precedent before it can be applied to a case:

• the ratio decidendi. which may be binding, must be identified;

• the material facts must be the same; and

• (c)the preceding court must have had a superior (or in some cases, equal) status to the later court.

ratio decidendi and obiter dicta

6.4A judgement will start with a description of the facts of the case and probably a review o: earlier precedents and possible alternative theories. The judge will then make statements of law applicable to the legal problems raised by the material facts. Provided these statements are the basis for the decision, they are known as the ratio decidendi of the case The ratio decidendi (which literally means `reason for deciding’) is the vital element which binds future judges.)f s judge’s statements of legal principle do not form the basis of the decision (e.g. a dissenting (minority) judgement) or if his statements are not based on the existing material facts, but on hypothetical facts, they are known as obiter dicta statements – something said `by the way’. A later court may respect such statements, but it is not bound to follow them. They are only of persuasive authority.

Case: Rondel v Worsley 1969 .

The House of Lords stated an opinion that a barrister could be held liable for negligence when not acting as an advocate, and that a solicitor would be immune from action when acting as an advocate. Since the case actually concerned the liability’ of a barrister when acting as an advocate these opinions were obiter dicta.

6.5 It is not always easy. to identify. the ratio decidendi. The same judgement may appear to contain contradictory views of the law in different passages. In decisions of appeal courts, where there are three or even rive separate judgements, the members of the court may reach the same conclusion but give different reasons. Most of all, the ratio will often be intermingled with obiter statements. To assist the process of legal reasoning, many judges indicate in their speeches which comments are ratio and which obiter.

Distinguishing the facts

6.6 Although there may arguably be a finite number of legal principles to consider when deciding a case; there are necessarily an infinite variety of facts which may be presented. Apart from identifying the ratio decidendi of an earlier case, it is also necessary to consider how far the facts of the previous and the latest case are similar. Facts are never identical. If the differences appear significant the court may ‘distinguish’ the earlier case on the facts and thereby avoid following it as a precedent.

Status of the court

6.7 Not every decision made in every court is binding as a judicial precedent. The court’s status has a significant effect on whether its decisions are binding, persuasive or disregarded.

(a)The Judicial Committee of the House of Lords stands at the apex of the judicial system. Its decisions are binding on all other English courts. The House of Lords generally regards itself as bound by is own earlier decisions but since a Practice Statement in 1966 it reserves the right to depart from its own precedents in exceptional cases.

(b) The Court of Appeal’s decisions are binding on all English courts (except the House of Lords). It is bound by its own previous majority and unanimous decisions, by those of its predecessors and by those of the House of Lords: Young v Bristol Aero plane Co 1944.

(c)A single High Court judge is bound by decisions of higher courts but not by a decision o another High Court judge sitting alone (though he would treat it as strong persuasiv authority). When two or more High Court judges sit together as a Divisional Court, thei decisions are binding on any other Divisional Court (and on a single High Court judge sitting alone).

(d)Lower courts (crown courts, county courts, magistrates courts) do not make precedents (their decisions are not usually reported) and they are bound by decisions of the higher courts.

6.8Apart from binding precedents as described above, reported decisions of any court (even if lower in status) may be treated as persuasive precedents – they may be, but need not be followed in a later case. Reported decisions of the Judicial Committee of the Privy Council (which is technically a court of appeal from certain Commonwealth countries), of higher courts of Commonwealth countries which have a common law legal tradition and of courts of the United States of America may be cited as persuasive precedents. With persuasive precedents much depends on the personal reputation of the judge whose earlier decision is cited.

6.9A court of higher status is not only free to disregard the decision of a court of lower status. It may also deprive it of authority and expressly overrule it. Remember that this does not reverse the previous decision; overruling a decision does not affect its outcome as regards the defendant and plaintiff in that earlier decision.

6.10 If, in a case before the House of Lords, there is a dispute about a point of European Community law it must be referred to the European Court for a ruling. English courts are also required to take account of principles laid down by the European Court in so far as these are relevant. The European court does not, however, create or follow precedents as such, and the provisions of EEC directives should not be used to interpret UK legislation.

6.11 A case in the High Court may be taken on appeal to the Court of Appeal. If the latter reverses the former decision, that first decision cannot be a precedent, and the reversed decision becomes a precedent. However, if the original decision had been reached by following precedent, then reversing that decision overrules the precedent which formed the ratio. Overruling a precedent does not affect the parties in that original precedent’s case, but the parties in the reversed decision are affected by the new decision.

7.AVOIDANCE OF A BINDING PRECEDENT

7.1Even if a precedent appears to be binding, there are a number of grounds on which a court may decline to fellow it:

(a)by distinguishing the facts (see paragraph 6.6);

(b)by declaring the ratio decidendi obscure, particularly when an Appeal Court decision by three or five judges gives as many ratio decidendi;

(c)by declaring the previous decision made per incuriam -without taking account of some essential point of law, such as an important precedent;

(d)by declaring -it to be in conflict with s fundamental principle of law;

(e)by declaring an earlier precedent to be too wide - for example, the duty of care to the parties found in Donoghue v Slevenson 1932, has since been considerably refined; or

(f)because the earlier decision has been subsequently overruled by another court or by statute (see paragraph 6.11).

The advantages and disadvantages of precedent

7.2 Many of the strengths of judicial precedent as the cornerstone of English Law ‘also indicate some of its weaknesses. Generally the arguments revolve around the principles of consistency, clarity, flexibility and detail.          .

7.3Consistency - the whole point of following binding precedent is that the law is decided fairly and predictably. In theory therefore it should be possible to avoid litigation because the result is a foregone conclusion. However, judges are often forced to make illogical distinctions to avoid an unfair result, which combined with the wealth of reported cases serves to complicate the law.

7.4 Clarity - following only the reasoning in ratio statements should lead to statements of principle for general application. In practice, however, the same judgement may be found to contain propositions which appear inconsistent with each other or with the precedent which the court purports to follow.

7.5 Flexibility - the real strength of the system lies in its ability to change with changing circumstances in society since it arises directly out of the actions of society. The counter­argument is that the doctrine limits judges’ discretion and they may be unable to avoid deciding

in line with a precedent which produces an unfair result. Often this may only be resolved by passing 2 statute to correct the law’s failings.

7.6 Detail - precedent state how the law applies to facts, and it should be flexible enough to allow for details’to be different, so that the law is all-encompassing. As had been noted above, however, judges often distinguish on fac(rto avoid a precedent. The wealth of detail is also a drawback in that produces a vast body of reports which must be taken into account; again, though, statute can help by codifying rules developed in case-law – this, for instance, was the source of the Sale of Goods Act^-I979.

7.7 The most famous (adverse) description of case-law is that made by Jeremy Bentham, when he called it ‘dog’s law’. Precedent follows the event, just as beating a dog follows the dog disobeying his master – before the dog transgressed, the offence did not exist. It can be answered, however, that it is in the nature of society that a thing_. can only be prevented when it is seen to be harmful, and that this is only usually seen when harm has already been done.

8.INTERPRETATION OF STATUTES

8.1 Statutes, including delegated legislation, are expressed in general terms. For example, a Finance Act may impose a new tax on transactions described as a category, it does not expressly impose a tax of specified amount on the particular transaction of a particular person. If a dispute arises as to whether or how a statute applies to particular acts or events, the courts must interpret the statute, determine what it means and decide whether or not it applies to a given case_

8.2n the interpretation of a statute the court is concerned with what the statute itself provides. It is never required to take account of what may have been said in parliamentary discussion, even by a government spokesman explaining the intended effect of the Bill. No opinion of an

individual member is to be accepted as the collective intention of Parliament. For the same reason the report of a committee or commission recommending legislation is not to !+e used as 2 guide to the interpretation of a statute.

8.3Unless the statute contains express words to the contrary it is presumed that the following `canons of statutory interpretation’ apply.

(a)A statute does not alter the existing law nor repeal other statutes.

(b) If a statute deprives a person of his property, say by nationalization, he is to be compensated for its value.

(c)A statute does not have retrospective effect to a date earlier than its becoming law.

(d) A statute does not bind the Crown.

(e)Any point on which the statute leaves a gap or omission is outside the scope of the i statute.

In practice a statute usually deals expressly with these matters (other than (e)) to remove any possible doubt.

8.4Since judges are called upon to interpret statutes, a system has been developed to guide them. This consists of statutory assistance and a set of general principles.

8.5 Statutory assistance consists of.

(a)the Interpretation Act 1978, which defines certain terms frequently found in legislation; (b)   interpretation sections to Acts – particularly long, complicated and wide-ranging ActU often contain self-explanations; for instance, s207 of the Financial Services Act 1986 defines `authorized persons’ and `recognised investment exchanges’ for its purposes;

(c)preambles or long titles to Acts often direct the judge as to its intentions and objects; private Acts must have a preamble, public ones recently have just contained long titles. But preambles may only be used to resolve an ambiguity – they may not be used when the enacted words are already clear. Attorney-General y Ernest dugustus (Prince) of Hanover 1957;

(d) side notes -statutes often have summary notes in the margin -these maybe used to give a general interpretation of the clauses to which they are attached.

8.6.In interpreting the words of a statute the courts have the following well-established general principles.

• (a)The literal rule: words should be given their ordinary grammatical sense. Normally a word should be construed in the same literal sense wherever it appears throughout the statute. The courts will use standard dictionaries to aid them in their interpretation.

• (b) The golden rule: a statute should be construed to avoid a manifest absurdity or contradiction within itself.

Case: Re Sigsworth 1935

The golden rule was applied to prevent a murderer from inheriting on the intestacy of his victim ^-although he was, as her son, her only heir on a literal interpretation of the Administration of Estates Act 1925.

• (c)The contextual rule: a word should be construed in its context – it is permissible to look at the statute as a whole to discover the meaning of a word, in it. .

• (d)The mischief rule: if the words used are ambiguous and the statute discloses (say, in its preamble as explained above) the purpose of the statute, the court will adopt the meaning which is likely to give effect to the purpose or reform which the statute is intended to achieve (this is to take account of the mischief or weakness which the statute is explicitly intended to remedy).

Case: Gardiner v Seven oaks RDC 1950

The purpose of an Act was to provide for the safe storage of inflammable cinematograph film wherever it might be stored on `premises’. A notice was served on G who stored film in a . .              cave, requiring him to comply with the safety rules. G argued that ‘premises’ did not include a cave and so the Act had no application to his case.

Held: the purpose of the Act was to protect the safety of persons working in all places where film was stored. Insofar as film was stored in a cave, the word `premises’ included the cave.

• (e)The eiusdem generis rule: statutes often list a number of specific things and end the list with more general words. In that case the general words are to be limited in their meaning ;o other things of the same kind (Latin: eiusdem generis) as the specific items which precede them.                .

Case: Evans r Cross 1938

E was charged with driving his car in such a way as to ‘ignore a traffic sign’. He had undoubtedly crossed to the wrong side of a white line painted down the middle of the road. `Traffic sign’ was defined in the Act as ‘all signals, warning signposts, direction posts, signs or other devices’. Unless, therefore, a white line was an `other device, E had not ignored a ‘traffic sign’ and had not committed the offence charged.

Held: ‘other device’ must be limited in its meaning to a category of signs in the list which preceded it. Thus restricted it did not include a painted line which was quite ‘       different from that category.

• (f)Expressio unius est exclusio alterius: to express one thing is by implication to exclude anything else. For example, a statutory rule on ‘sheep’ does not include goats.

• (g)In pari materia: if the statute forms part of a series which deals with similar subject matter, the court may look to the interpretation of previous statutes on the assumption that, Parliament intended the same thing.

8.7The courts have been paying more attention to what Parliament intended in recent times. This is partly an extension of the mischief rule. In October 1988, for example, the Attorney-General issued a statement interpreting the word ‘obtain’ in the Company Securities (Insider Dealing) ~ Act 1985. This was in order that the courts should apply the law for the purpose for which it was enacted by Parliament. A more purposive approach is also being taken because so many international and EEC regulations come to be interpreted by the courts.

8.8It is open to the UK courts to decide that a British statute should be interpreted according to British court rules – the interpretation of EC directives need not be taken into account Duke vGEC Reliance Systems Ltd 1988.

9. SUMMARY

9.1This chapter provides an introduction and a background to the more specific material in the later chapters. It is largely historical but it has practical relevance to the current state of the law. It is particularly important to bear in mind the distinction between legal and equitable parts of law – we will see later on (particularly in contract law) that the different principles can lead to very significantly different results.

9.2A question on the source of the law has quite often been set, and it is worth your while to ensure that you have grasped both the differences between historical, legal and subsidiary sources and the ways in which they interact.

9.3Both statute and case-law must be applied to the facts of cases on a day-to-day basis by the court system and the legal personnel in it. In this chapter we have seen that legal reasoning is systematised by having certain rules for the interpretation of both cases and statutes. The aim of legal reasoning is to achieve a just result by a coherent and consistent process of reasoning.

Chapter 2

THE STRUCTURE OF THE LEGAL SYSTEM

This chapter covers the following topics

1.                    Introduction to the legal system

2.                    Forms of liability

3.                    The structure of the legal system

4.                    The courts

5.                    Administrative tribunals 6. Arbitration

6.                    Court personnel

7.                    The legal profession

INTRODUCTION TO THE LEGAL SYSTEM

1.1For most people outside the legal profession, the legal system is something of a closed book, surrounded by the mystery created by archaic language and costumes. In fact, for the most part it consists of practical and down-to-earth sets of procedures designed to provide resolutions to – ordinary problems.

1.2.Publicity tends to focus on the higher courts and, in particular, on criminal proceedings. 98% of the cases heard by the courts take place in magistrates’ courts, however, and a vast number of civil cases are heard.

1.3In order to understand the court system therefore it is necessary to understand the two different sorts of case.

2.FORMS OF LIABILITY

2.1The distinction between criminal and civil liability is central to the legal system and to the way in which the court system is structured.

Crime

2.2A crime is conduct prohibited by the law. The State is the prosecutor in a criminal case because it is the community as a whole which suffers as a result of the law being broken. Persons guilty of crime are punished by fines, imprisonment etc.

2.3Usually criminal’ Proceedings are started by the State, although in rare cases they may be brought by a private person. The police or the Director of Public Prosecutions take the initial decision to prosecute, but this is then reviewed by the Crown Prosecution Service, which will subsequently conduct the case. Although most crimes have a victim – be it someone who has been mugged or a company which has been defrauded – the victim does not have a say in whether a prosecution is brought. In addition, the victim does not benefit from a conviction, since fines are payable W the State.

2.4 In a criminal trial, the burden of proof to convict the accused rests with the State (the prosecution). which must prove its case beyond reasonable doubt.

Civil proceedings

2.5 Civil law exists to regulate disputes over the rights and obligations of persons dealing with each other. The State has no role in a dispute over, for instance, breach of contract. It is up to the persons involved to settle the matter in the courts if they so wish. The general purpose of such a course of action.is to impose a settlement on matters, sometimes by financial compensation in the form of damages, sometimes by injunctions or other orders. There is no concept of Punishment^.

2.6In civil Proceedings, the case must be proven on the balance of probability. Terminology is different from that in criminal cases; the plaintiff sues the defendant, and the burden of proof may shift between the two.

2.7 The main area of civil liability contained in your syllabus is contract, although there are elements of tort. Both are forms of relationship between persons.

(_a)A contract is a legally binding agreement, breach of which infringes one person’s legal right given by the contract to have it performed.

(b)A tort is a wrong committed by one person against another, infringing his general rights given to him by the law. Hence for there to be liability there need not have been any pre-existing personal relationship before the tort was committed.

Distinction between criminal and civil cases .

2.8 It is important to bear in mind that it is not an act or event which creates the distinction, but the legal consequences of it.

2.9For instance, a broken leg caused to a pedestrian by a drunken driver is a single event which _m, _y give rise to a criminal case (Prosecution by the State for the offence of driving with excess alcohol), and a civil case (the pedestrian sues for compensation for pain and suffering caused by the wrong).

he two sorts of proceedings are usually easily distinguished by the fact that the courts, the procedures and the terminology are different.               .

THE STRUCTURE OF THE LEGAL SYSTEM

The courts have to be organised to accommodate the working of the legal system. There are four main functional aspects of the court system which underlie its structure.

(a)Civil and criminal law differ so much in substance and procedure that they are best administered in separate courts.

(b) Local courts allow the vast bulk of small legal proceedings to be decentralized. But important civil cases, in which large sums of money are at stake, begin in the High Court in London.

(c)Although the courts form a single system (as a result of the Judicature Acts 1873-75), there is some specialization both within the High Court (split into three divisions) and in other courts with separate functions.

(d) There is a system of review by appeals to higher courts.

3.2The Judicature Acts are consolidated by the Supreme Court Act 1981, which states that the Court of Appeal, the High Court and the Crown Court comprise the Supreme Court. Before hunching into a description of all the courts of law, the diagrams on page 25 should give you an overall view of the system. You need to learn the system of appeals for both civil and criminal cases. Note that in criminal cases the Crown Court is at once a court of first instance and a court of appeal.

(a)A court of first instance is where the case is originally heard in full.

(b) The appeal court is the court to which an appeal is made against the ruling or the sentence. ‘

3.4If the appeal court finds in favour of the appellant the original decision is reversed. This is different from ‘overruling’ which, as we saw in Chapter l, happens when a higher court finds a lower court’s precedent to be wrong. Although the precedent is overruled and hence not followed again, the overruling has no effect on the actual outcome of the original case.

3.5.The system of appeals is very important and you should make sure that you are clear which higher courts hear which type of appeal from which lower courts.

.

THE COURTS

4.1As can be seen, some courts deal only with civil cases and some only with criminal. Most, however, can deal with both. But a court is a court by virtue of its constitution, not of its situation – the Old Bailey, for instance, is a court-room, but a judge and jury who visit the scene of an alleged crime are a court.

magistrates’ courts

4.2 Magistrates’ courts deal with criminal cases as follows.

(a)They try summarily (without a jury) all minor offences and may try offences triable summarily or on indictment with a jury, if the accused consents and the magistrates’ court considers that the case is suitable for trial in that court.

(b)They conduct committal proceedings, which are preliminary investigations of the prosecution case, when the offence is triable only on indictment (by a crown court), or if it is an offence triable either way which (see (a) above) it is decided should not be tried

summarily. If the magistrates are satisfied they commit the defendant for trial in a crown court.

4.3.The maximum penalties which magistrates may impose on a defendant convicted summarily of a criminal offence is 6 months’ imprisonment or a fine of up to f 2,000. The magistrate also has discretion to order the defendant to compensate his victim, up to £ 2,000. If in a summary trial the magistrates consider that their sentencing powers are inadequate they may convict and commit the defendant to a crown court for sentence. They may also make compensation, restitution, supervision and probation orders.

4.4.A defendant convicted on a criminal charge has a general right for a rehearing by a crown court. Either the defendant or the prosecution may appeal on a point of law only by way of ‘case stated’ to a divisional court of the Queen’s Bench Division.

4.5.A ‘case stated’ appeal is based on the idea not that magistrates (or the Crown Court) have wrongly decided the facts but that they have wrongly interpreted the law. The magistrate produces written reasons for the way in which he decided the case. These, together with the facts, are considered by the Divisional Court to ensure that the law was correctly applied. If not then the case may be sent back to the lower court with instructions as to how it should be decided.

4.6Magistrates’ civil jurisdiction includes domestic proceedings for separation or maintenance, affiliation orders, custody of children, various types of licensing and enforcement of local authority rates. On domestic matters, appeals are to a divisional court of the family division of the High Court.

country courts

County courts have civil jurisdiction only but deal with almost every kind of civil case arising within the local areas for which the courts are established. The main financial limits of county court jurisdiction are:

(a)contract and tort claims up to £ 5,000, unless the parties agree to waive the limit (no limit in the case of defamation);

(b) equitable matters concerning trusts, mortgages and partnership dissolution up to f 30,000, again unless the parties waive the limit;

(c)disputes concerning land where the ratable value is less than £ 5,000, although there is unlimited jurisdiction where the Rent Acts are concerned, or where the partiers agree;

(d) undefended matrimonial cases;

(e)probate matters (disputes concerning the grant of authority to personal representatives etc) where the estate of the deceased is less than f 30,000;

(f)miscellaneous matter conferred by various statutes, for example the Consumer Credit Act 1974;

(g) some bankruptcy, company winding-up and admiralty cases.

4.8To assist litigants who decide to-conduct their case in person the county court registrar may,if the amount involved does not exceed 1500 or if the parties agree, refer a case to an arbitrator to hear and decide informally in a Small Claims Court. The arbitrator is usually the registrar himself but may be another person chosen by the parties. The arbitrator’s award is recorded as a county court judgement. This is a cheaper and quicker way of settling small claims in an informal atmosphere, and is often used in consumer cases, motor accident and personal injury claims, employment, tenancy, travel and debt disputes

4.9From the county court there is a right of appeal direct to the civil division of the Court of Appeal. A litigant who institutes proceedings in the High Court when his claim is within the limits of the county court jurisdiction may, if he succeeds, be refused costs altogether or be awarded costs only on the lower county court scale.

4.10The practical importance of the county courts is that they deal with the majority of the country’s civil litigation. Over one and a half million actions are commenced each year (about one million are for debt), although only about 596 result in trials since most actions are discontinued or settled out of court before the trial stage is reached.

Crown court

4.11 The crown court is theoretically a single court forming part of the Supreme Court, but in fact it comprises local courts in large towns (and also the Central Criminal Court (the 0Id Bailey) in the City of Londor). It tries all indictable (serious criminal) offences with :a jury and heats appeals and deals with committals for sentencing from magistrates’ courts. Lt also deals with s few types of civil cases being appeals from the magistrates’ court on matters of affiliation, betting, gaming and licensing. From the crown court there is a right o^-f appeal on criminal matters to the criminal division of the Court of Appeal. An appeal by way of ‘case stated’ on a point of law may also be made to a Divisional Court of QBD.

4.12 There are four classes of offence triable in the Crown Court

(a)Class I Offences: the most serious offences such as murder, treason etc. A High Court judge must preside.

(b)Class 2 offences: serious offences such as rape, manslaughter etc. usually presided over by a ‘High Court judge.

(c)Class 3 offences: less serious offences which must be tried on indictment (not summarily). Examples are robbery and grievous bodily harm. A High Court judge, circuit judge or recorder may preside.

(d)Class 4 offences: offences which may be tried on indictment or summarily, such as burglary and reckless driving.

Usually a circuit judge or recorder presides, though a High Court judge may do so.

The High Court

4.13 The High Court is organised into three divisions – Queen’s Bench, Chancery and Family. Except where other special courts have exclusive jurisdiction, the High Court can deal with any civil matter.

4.14 In hearing a case for the first time (at first instance) a High Court judge sits alone. A divisional court of two or more High Court judges sits to hear appeals from magistrates (and from crown courts in respect of civil matters tried in those courts). It also exercises the supervisory jurisdiction of the Queen’s Bench Division.

Queen’s Bench Division

4.15 The Queen’s Bench Division (QBD) deals mainly with common law matters such as actions based on contract or tort. It includes a separate Admiralty Court (as successor to the Court of Admiralty) to deal with shipping matters such as charter parties, salvage, collisions at sea etc. It is the largest of the three divisions, having 50 judges.

4.16 There is also within the Queen’s Bench Division an important Commercial Court which specialises in commercial cases, e.g. insurance claims. The Commercial court offers a rather simpler trial procedure to meet business needs. Judges of the Commercial Court may also sit as arbitrators.

4.17 A Divisional Court of QBD has a supervisory role over other courts. it may issue a writ of habeas corpus, which is an order for the release of a person wrongfully detained, and also prerogative orders against inferior courts, tribunals and other bodies such as local authorities, insofar as they have a duty to exercise a discretion fairly. There are three types of prerogative order.

(a)Mandamus which requires the court or other body to carry out a public duty. For example, a . tribunal may be ordered to hear an appeal which it has wrongly refused to do or a local authority may be ordered to produce its accounts for inspection by a ratepayer.

(b)Prohibition which prevents a court or tribunal from exceeding its jurisdiction (before it has done so).

(c)Certiorari, ^-ordering a court or tribunal which has taken action to submit the record of its proceedings to the High Court for review. The High Court may then quash the decision but cannot substitute its own decision (as it can under ordinary appeal procedure). The exact scope of this power of review is not clearly defined. It is exercised when an inferior court has acted illegally, exceeded its jurisdiction or reached its decision contrary to the principles of natural justice – without giving the person concerned the right to know of and reply to the case against him. Essentially, it is a review of what has been done after it has been done.

Chancery division

4.18 This division deals with traditional equity matters such as:

(a) trusts and mortgages;

(b) revenue matters;

(c)bankruptcy (though outside London this is a county court subject);

(d) disputed wills and administration of estates of deceased persons;

(e) partnership and company matters.

There is a separate Companies Court within the Division which deals with liquidations and other company proceedings.

Family division

4.19 This division deals with matrimonial cases (though most undefended divorce cases are heard in county courts), family property cases, and proceedings relating to children (ward ship, guardianship, adoption, legitimacy etc). It has long been suggested that the family division should be merged with the county court matrimonial jurisdiction to create a separate family court.          .

Restrictive practices court

4.20 This is not part of the High Court but is co-ordinate in status with it – appeals from it go to the Court of Appeal. It investigates the merits (if any) of agreements registered under the Restrictive Trade Practices Act 1976 and agreements falling under the Resale Prices Act 1976. these functions it is required to have regard to EC law. It is also concerned with proceedings to prohibit practices deemed prejudicial to consumers under the Fair Trading Act 1973. Employment appeal tribunal, (EAT)         . .

421 In spite of its name, this is a court of equal status with the High Court. It hears appeals from industrial tribunals mainly on employment matters (claims for unfair dismissal, redundancy ?ay, sex discrimination etc). From the EAT there is a right of appeal to the Court of Appeal.

Court of appeal

4..22 The Civil division of the Court of Appeal can hear appeals from the High Court, county courts the Restrictive Practices Court, the Employment Appeal Tribunal and various other special tribunals such as the Lands Tribunal. It does not conduct a complete re-hearing but reviews th record of the evidence in the lower court and the legal arguments put before it. It may uphold or reverse the earlier decision o: order a new trial. A majority decision is sufficient, and a judge who disagrees gives an express dissenting judgement.

4.23 The Criminal division of the Court of Appeal hears appeals from crown courts. It may also be invited to review a criminal case by the Home Secretary or to consider a point of law at the request of the Attorney General. Its powers and procedures are very similar to those of the civil division.

Judicial committee of the House of Lords

4.24 Apart from the limited jurisdiction of the European Court, the Judicial Committee of the House ot Lords is the highest court of appeal of the English, Scottish and Northern Irish legal system. It hears appeals from both the civil and the criminal divisions of the Court of Appeal (and in certain circumstances direct from the High Court).

Judicial committee of the Privy Council (JCPC)

4.25 Some countries of the Commonwealth (though not many) still retain a right of appeal from their national court to the Queen’s Privy Council. The Judicial Committee (with a slightly different representative membership) is in effect the same body as the corresponding Committee of the House of Lords. It also deals with appeals from the English ecclesiastical courts.

The European Court of Justice

4.26 The court operates under the treaties of the European Communities (European Community, European Coal and Steel Community and European Atomic Energy Community).

4.27 The jurisdiction of the European Court falls under two main heads:

(a)legal matters arising from the acts or omissions of member states, such as failure of a ~ member state to fulfill its treaty obligations;

(b) rulings on legal issues affecting persons which arise from EC law,

4.28. When an issue in category (b) comes before the Judicial Committee of the House of Lords, which is the final court of appeal in the UK, the Judicial Committee is obliged to refer it to the European Court for a ruling. Any lower court may also do so. Any such reference is merely to establish what is the meaning of the relevant part of EC law. Thereafter the English court (duly instructed as to the meaning) must apply the rule to the case before it. This system has already begun to affect the development of English law. Over a period of years it may make a considerable impact.

5.ADMINISTRATIVE TRIBUNALS

5.IAdministrative tribunals are specialised courts established by statute to deal with dispute; between government agencies and individuals or between two individuals in a simpler and less formal way than is possible in a court of law. Some of the more important ones are listed below

(a)Social security tribunals: an individual who is refused a social security benefit may have his claim referred to a local tribunal consisting of a chairman (usually a lawyer) and two members from panels representative of employers and of employees. Either party may appeal from the decision of the tribunal to a National Insurance Commissioner who is a barrister or solicitor of at least ten years’ standing. On a point of law there is a further right ol appeal to the High Court.

(b)Land Tribunal: this tribunal deals with disputes over the value of property e.g. for rating purposes or compulsory acquisition.. It is usually composed of two members, an experience lawyer and a qualified valuation expert.

(c) Rent tribunals: these assess rents of certain furnished dwellings. County courts asses: rents of unfurnished dwellings.

(d)ACAS: the Advisory, Conciliation and Arbitration Service has various functions including conciliation in disputes between employer and employee before such disputes go to an industrial tribunal.

(e)Industrial tribunals: have membership similar to that of social security tribunals. They deal mainly with claims for compensation for unfair dismissal, redundancy pay, equal pay and sex discrimination. There is a right of appeal to the Employment Appeal Tribunal (EAT).

(f)Administrative enquiries: some statutes, such as the town and country planning legislation, provides that objectors may put their case at a public enquiry conducted by an inspector (a professionally qualified expert) appointed by a minister. The inspector makes a report at the minister who takes the final decision.

5.2Administrative tribunals are a quicker and less expensive method of resolving a dispute than a court action. But they may make mistakes of law or fail to convince interested parties that a fair and impartial hearing has been given to their case.

5.3The working of this system of administrative tribunals u supervised by a Council on Tribunals In many instances, especially industrial tribunals, there is of course a statutory right to appeal from a tribunal to a higher court on points of law. The High Court may also make prerogative orders to prevent or remedy errors and injustices. At the appeal stage (but not usually in the proceedings before the lower tribunal) the applicant may be able to obtain legal aid which is the professional services of legal advisers and advocates provided at public expense.

Domestic tribunals

5.4Within some professions, trade associations and trade unions, there are domestic tribunals which deal with charges of professional misconduct or breach of membership obligations. Some of these domestic tribunals are established by statute, for example the Solicitors’ Disciplinary Tribunal and the disciplinary panel of the General Medical Council. Others are created merely by contract between the members of the relevant body who, on becoming members, agree to submit to a code of rules, including disciplinary procedures. This is the position in, for example, trade unions. I a domestic tribunal is established by law there is often a statutory right of appeal. The High Court may make prerogative orders to remedy misconduct of a domestic tribunal where there is n other relief available.

ARBITRATION

6.1 A dispute may be referred to arbitration:

(a)by agreement out of court;

(b) by statute;

(c) by order of a court.

5.2It is common practice to include in commercial contracts (and also in partnership agreements) a clause providing that any dispute is to be settled by arbitration under the Arbitration Act 1950 (as amended by the 1975, 1979 and 1988 Acts). The main advantage of this procedure is privacy since the public and the press have no right to attend a hearing before an arbitrator. It is also possible to appoint as arbitrator an expert in the matter in dispute and to simplify the rules of evidence and procedure. Arbitration is not usually quicker or less expensive than an action, say, in the Commercial Court.

6.3If either party institutes proceedings in a court in breach of the agreement for arbitration, the other party may apply to the court to suspend the proceedings while the arbitration takes its course. The court will usually do so.

6.dThe parties may name their arbitrators or provide that some other person, say the President of the Law Society, shall appoint him. It is usual to appoint only one arbitrator; if two are appointed they jointly appoint a third as umpire. The High Court has power to appoint an arbitrator. Judges of the Commercial Court may accept appointment as arbitrators in commercial matters if their other duties permit.

6.5Unless otherwise agreed, a hearing before an arbitrator follows the same essential procedure as in a court of law. The Arbitration Act 1979 introduced a more restricted right of appeal to the High Court from the award of an arbitrator. There may be an appeal on a preliminary point of law only if both parties consent or if the High Court gives leave to appeal (on being satisfied that the rights of the parties could be substantially affected by the result). There is a further restricted right of appeal from the High Court to the Court of Appeal. But the parties may agree in writing to exclude all right of appeal from the arbitrator’s award so that it becomes final. The right to appeal against an award Made in arbitration is restricted, but the arbitrator is required in certain cases to state reasons for his awards.

6.6The award of an arbitrator may be enforced in the same manner as a judgement of the High Court.

6.7 In addition to voluntary arbitration as described above, compulsory arbitration may be enforced in the following circumstances:

(a)certain statutes provide for arbitration on disputes arising from the provisions of the statute:

(b)the High Court may order that a case of a technical nature shall be tried (or investigated with report back to the court) by an Official Referee or other arbitrator. This procedure is used when prolonged examination of accounts or technical documents is necessary;

(c)a county court may order that a small claim (not exceeding f 500) shall be referred to arbitration, under the small claims court procedure (see paragraph 4.8).

7.COURT PERSONNEL

7.1Each court and tribunal has personnel who carryout its function. It should be remembered that a court is created by the law; it is not a -particular building or room and so may be convened by the fact that, for instance, 2 magistrates and a clerk to the justice are there and state that it is so. Below is a summary of the constitution of each court. ..

7.2 magistrates’ court

- Lay magistrates (the majority) are not legally qualified and sit^, part-time. They are appointed on the Lord Chancellor’s advice a :d 2:e assisted by a salaried, legally-qualified clerk, who must be a solicitor or barrister of at least five years’ standing.

- Stipendiary magistrates sit in large towns and ore salaried. They must be solicitors or barristers of at least seven years’ standing.

- Lay magistrates sit two or ‘three to a court; stipendiary ones sit alone.

7.3 Country courts

- A circuit: judge presides, being a barrister of at least ten years’ standing. A recorder, a part-time appointment in the Crown Court, is a solicitor or barrister of at least ten years’ standing, and may be appointed as a circuit judge if he has three years experience as a; recorder.

- A registrar, who must 5e a solicitor or barrister of at !ea~t seven years’ standing, assists the judge.

- The circuit judge normally sits alone, although in a limited number of civil cases (fraud, libel, slander) there may be a jury of eight persons.

- The registrar may hear small claims, or any other with the consent of the parties.

7.4Crown court

- A circuit judge, a recorder or a High Court judge may sit in the Crown Court. Sometimes lay magistrates also sit.

- Serious ‘Class I’ offences, such as murder and treason, may only be heard by a High Court judge in the Crown Court.

- All indictable offences will be heard by a judge with a jury of 12 persons.

7.5The High Court

- Staffed by no more than 85 ‘puisne’ (pronounced `puny’) judges, who must be barristers of at least ten years’ standing.

- QBD has 50 judges and is presided over by the Lord Chief Justice. – Chancery has 12 judges and is presided over by the Lord Chancellor. – Family division has 16 judges and its President presides.

- At least two judges must sit in each divisional court. but a single judge may hear a case at first instance.

7.6 Restrictive Practices Court

- Usually a High court judge and two lay assessors from a panel appointed on the Lord Chancellor’s recommendation sit.

7.7Employment Appeal tribunal

- Again, a High Court judge and two lay assessors.

7.8 Court of Appeal

- There are 28 Lord Justices of Appeal, promoted from the High Court. – Three judges normally sit together.

- In the Criminal Division, the Lord Chief Justice presides. Both he and judges of the High Court may be selected to sit along with the 18 Civil Division judges.

- A majority decision is sufficient and dissenting judgements are expressed.

7.9 House of Lords

- Judges are usually promoted from the Appeal Court to be members of the House of Lords. They are known as Lords of Appeal in Ordinary, or Law Lords.      .

- Five judges normally sit together, though there may only be three. – Majority decisions hold and dissenting judgements are made.

I

7.10 European Court of

- Ten judges appointed for six year periods on recommendation of member           ‘

Justice      states from distinguished judges and legal experts.

- Assisted by four Advocates-General who submit reasoned argument on the issues before it.

- Gives a single judgement and dissenting opinions are not expressed.

8: THE LEGAL PROFESSION

8.1The legal profession is divided into two mutually exclusive groups – barristers and solicitors. The two groups hive some shared arrangements for basic training but before qualifying, the recruit must take his advanced training in one or the other branch exclusively. It is not possible to be a member of both, though individuals may transfer from one to the other. Solicitors

8.2 Solicitors are the general practitioners of the legal profession and provide many services to their clients which do not involve them in court proceedings. Generally solicitors may only appear as advocates for their clients before magistrates and county courts. In all other court proceedings the solicitor prepares the case and retains one or more counsel (barristers) to appear in court as advocates for his client.

8:3 Solicitors are technically officers of the Supreme Court (see paragraph 3.2). Their individual conduct and collective affairs are subject to regulation (partly on a statutory basis) by the Law Society. It is common for solicitors to practice as partners of a firm. But they may not carry on business through companies.

8.4 There is no legal obligation to employ a solicitor when seeking a legal remedy. People may and often do present’ their own case in any court, do their own conveyancing, draft their own wills and conduct their own divorce etc, provided they have the common sense to understand and apply the basic procedures involved.

Barristers

8.5 Barristers are members of one of the four Inns of Court – Inner Temple, Middle Temple, Gray’s Inn and Lincoln’s Inn – and obtain their admission to the bar (to practice in the courts) after taking examinations set by the Council of Legal Education and satisfying certain other conditions. They are required to complete a year’s pupilage in professional training in the chamber of a practising barrister (in London or a provincial city). Although groups of barristers shire the occupation of chambers (and the services of a clerk of chambers and his assistants), they are not allowed to enter into partnership..

8.6 Barristers are specialists in advocacy in court. But much of their working time is spent in chambers conducting conferences with their instructing solicitors and their clients on the affairs of the latter. There is also a great deal of paperwork, for example drafting legal documents and advisory `opinions’. Barristers are consultants who deal with lay clients only through solicitors.     .

8.7They are not immune from action as a result of pre-trial acts or omissions, but they may not be sued for negligence as a result of their conduct of a case in court (Rondel v Worsley 1969). The main reason is that if a barrister could be sued for negligence, it would amount to a re-trial of the original case. This would open the door to every dissatisfied litigant and lead to many pointless actions.

8.8 Barristers are divided into junior and senior grades. The latter are Queen’s Counsel and confine themselves to the more important part of the work. When a QC appears in court he is usually supported by a `junior’ counsel who does a great deal of the work behind the scenes but not so much in court. Appointments of judges to the High Court are almost entirely made from the ranks of QCs (though many remain as barristers until they retire and many junior counsel never `take silk’ – a QC is distinguished by his silk gown).

8.9 The recruitment of judges from among members of the Bar creates a close bond of understanding between the judges and the advocates who appear before them. The QCs who appear before a High Court judge may have been his juniors when he was a QC ten years before.

8.10 The rigid division of professional organisation and status between barristers and solⁱcitors is a heritage from _‘the past. Some countries, such as USA, which have an English common law tradition, do not reproduce this division of the legal profession into two exclusive branches. The UK Royal Commission on Legal Services which reported in 1979 did not recommend any change but Green Papers issued in 1989 make it likely that barristers will see an erosion of their monopoly on advocacy in court! The argument for fusion Ls that the present rigid division of function is a restrictive practice which is undesirable in itself and which adds to the expense of litigation since, in some cases, a solicitor could deal adequately with. the work at every stage including advocacy in court. The arguments for retaining the present division are:

(a)it recognises and provides rules for the inevitable division between general legal practice (of solicitors) and specialist advice and advocacy (by barristers);

(b)court work (especially in the higher courts) requires much experience – a non-specialist solicitor could easily get out of his depth in court;

(c)it is `better that a barrister, as a specialist adviser, should not be too closely involved in his client’s affairs. He needs to take a detached view – in the-client’s interest. Legal executives

8.11 Finally, mention should be made of the legal executives (formerly called `managing clerks’) who are employed by firms of solicitors to do professional work. Some may be qualified as members of the Institute of Legal Executives, though_. this is not obligatory. A legal executive is usually a specialist in one type of work only, such as litigation, conveyancing or trust administration.

9. SUMMARY

9.1 There is a lot of detail to be learnt about the structure of the courts. The ‘functional aspects’ shown at paragraph 3.1 may assist you to see the structure as a whole before grappling with the detail.

9.2 You should grasp the following main practical aspects.

(a)What type of case each court deals with – its ‘jurisdiction’.

(b)In which court a litigant with a particular cause of action would commence his proceedings to obtain a remedy. Remember that, generally speaking, the victim of a crime has no control over any subsequent legal proceedings (criminal prosecution). The state, through the Crown Prosecution Service, has the duty of prosecuting persons charged with criminal offences; private prosecutions when permitted at all are relatively infrequent – partly because of the expense.

(c)If either party is dissatisfied with the decision given by the court which tries his case, he usually has a right of appeal to a higher court, Note that appeals from county and crown courts are usually direct to the civil or criminal side of the Court of Appeal respectively and not to the High Court.

{d}Arbitration on major disputes, where the amount at issue is large, is generally permitted only if both parties agree. But on small matters it is much more common as an alternative to formal civil proceedings in court. One of the practical considerations in favour of arbitration is that the hearing before an arbitrator is private. This can be valuable if either party anticipate.: that publicity, for example in a case’ alleging professional incompetence, could be damaging to him even if the case against is dismissed.

Chapter 3

LEGAL PERSONALITY

This chapter covers the following topics

1.The concept of legal personality

2.The individual

Natural persons

4.Limited companies

5.Other unincorporated associations

6.Trade unions

7.The Crown

1.THE CONCEPT OF LEGAL PERSONALITY

1.1A person possesses legal rights and is subject to lo-gal obligations. The term ‘person’ is used to mean both individual human beings (natural persons) and other bodies.

1.2 The importance of a `person’ is that the law attaches rights to a person and imposes legal obligations on him. The owner of property or a party to a contract is necessarily a person. All living individuals are persons. In addition corporate bodies such as the Public Trustee (a separate office filled by a single individual but distinct from him in legal terms), a registered company or a local authority is a person with rights and. obligations. Corporations are artificial persons created by law,

1.3Some types of person have only Iii-nited legal capacity. A company, unlike an individual, cannot marry or make a will. The legal capacity to enter into contracts is limited in the case of companies, minors (individuals under the age of eighteen) and individuals who are insane (as set out in Chapter I3).

2.THE INDIVIDUAL

2.1As stated above, all individuals are natural persons in the eyes of the law, although some have limited capacity. Three terms related to the individual need explaining in their legal context – • domicile, nationality and residence.

Domicile

2.2Every person has a domicile (but only one domicile at any one time). His domicile is the country which he regards as his permanent home. The significance of domicile is that it connects the person concerned with the law of the country in which he has his domicile. If a nation state is divided into constituent parts with their own systems of law (for instance, England and Wales have one legal system and Scotland has another), domicile relates to a territorial legal system of one part of the country. “Thus an Englishman may be domiciled in England with the result that English law is applied to him in connection with such matters as wills or divorce. Domicile is also an element of tax law which may determine the extent of a person’s liability to certain taxes. Corporations have a domicile in the country in which they are legally incorporated, and this may not be changed.

Nationality

2.3In English law a person’s nationality is important mainly to determine his relationship with the state. A person may have dual nationality or none – he may be a stateless person. Nationality may (under English law) determine the rights to vote, to be issued with a British passport for travel abroad, and to enter and reside in the UK.

Residence

2.4 Residence is important for tax purposes and also determines such matters as the right to De entered on the electoral roll (of the constituency in which the person resides). Residence requires some degree of continuity (though much less titan domicile). It has been held that students at a university are resident (for electoral purposes) in the university town. Tax law has a number of special rules to determine whether a person is `resident’ and/or ‘ordinarily resident’ in the UK.

3.NATURAL PERSONS

3.1The rules of domicile, nationality and residence may affect the legal rights of an individual His status may also depend on other factors such as age, matrimony, mental capacity etc.

3.2 Marriage is a form of contract which alters the status of the parties. They have a legal obligation to cohabit (unless judicially separated); the marriage can only be ended (in the lifetime of the spouses) by order of a court; the husband has a duty to maintain his wife and minor child-en (if he is destitute and the wife has means, she must maintain him). On death of husband or wife, the law recognises certain actual or potential claim, of the survivor tr part of the estate of the deceased. Since 1973, a wife does not, on marriage, acquire a domicile of dependence from her husband.

3.3Parents share basic powers of guardianship in relation to a minor child. In many respects the rules relating to an illegitimate child – one whose parents were not married to each other at his birth – have been assimilated to those of a legitimate child. There are also legal rules and procedures for legitimation and adoption.

Minors

3.4Minors (under the age of 18) are a special case of natural person. The position of minors is follows.

(a) They cannot vote at general or local elections.

(b) They usually take the nationality and domicile of their father.

(c) They can marry when they are 16, but they must have the consent of their parents.

(d) In criminal law:

(i)they cannot he held liable if under 10 years of age (being deemed incapable criminal intent);

(ii)they can be prosecuted, if between 10 and 14 years of age, only if it can be prove that they knew their acts were wrongful,

(e)They cannot own a legal estate in land.

(f)They cannot make a valid will, except in very re-tricted circumstances (privileged wills)’

(g) They have limited contractual-capacity. (This is discussed in Chapter 13.)

(h)There is no formal exemption of minors from liability in tort, but their age may be taken into account, especially if they are so young that adult standards would be inappropriate,

(i)There are many other rules concerning, for example, driving, employment, films, drinking and school attendance.

Mental incapacity

3.5A person is presumed to be sane until the contrary is proved – that he either did net know what he was doing or did not know that it was wrong. Insanity is mainly significant as a defense o mitigating factor in trials on criminal charges. It may also restrict capacity to enter into binding contract: see Chapter 13.

4.LIMITED COMPANIES

4.1 A corporation is a legal entity separate from the natural persons connected with it, for exampl as members. Corporations are classified as:

(a)corporations sole: an official position which is filled by one person who is replaced fro time to time; for example the Public Trustee and the Treasury Solicitor are corporatio sole;

(b)chartered corporations: these _.are usually charitable associations and bodies such as t ACCA, CIMA and ICAEW.

(c)statutory corporations^-. the Companies Act 1985 provides for the registration of unlimited companies, companies limited by guarantee and companies limited by shares. The latter by far the most numerous and paragraphs 4.5 to 4.18 (below) are devoted to them. .

(c)Transferability of shares - the shares of a public company are freely transferable (in the case of listed companies, on the Stock Exchange). A private company will, in contrast, wish to remain under the control of the `family’ or `partners’ concerned. Its articles will therefore contain a clause restricting the right to transfer shares. The restriction may be:

(i)             an absolute power vested in the directors to refuse to register a transfer, and/or

(ii)            a right of pre-emption (first refusal) granted to existing members when another member wishes to transfer his shares.

(d)Minimum share capital - a public company must have a minimum allotted share capital of £ 50,000. A private company has no minimum share capital.

(e)Company name - the name of a public company must end with the words `Public Limited Company’ which may be abbreviated to `plc’. A private company’s name must end with ‘limited’. This may be abbreviated to `Ltd’.

(f)The memorandum - a public company’s memorandum must state that `The company is to be a public company’.

(g) Payment for shares - there are a number of differences in the rules relating to the consideration given in return for shares. For example, if a public company issues shares in return for the transfer of a non-cash asset, that asset must be independently valued to ensure that the company is receiving an asset of a value at least as great as the value of shares issued in return. In a private company there is no requirement to obtain a report on the value of non-cash consideration received as payment for shares.

(h)Dividends - there are detailed rules which differentiate between the ability of public and private companies to distribute their profits as dividends.

(i) Other differences - there are numerous other differences concerning, for example, directors, the secretary, commencement of business and accounts.

The memorandum and articles

4.8On the creation of a company, the promoters must file certain documents with the Registrar of Companies. These include the Articles of Association and the Memorandum of Association. The Articles contain details of how the company will be run from day to day, for example the duties

of directors, the rights of each class of shares, and procedure at meetings. The Memorandum lays down the constitution of the company, for example its name, authorised capital and objects.

4.9he objects clause of the memorandum is important because it can limit the contractual capacity of the company, since it specifies what the company may do. The main reason for such a clause is to let investors in the company (the members) know the purposes for which their money is to be used. Any act or contract of the company which is outside the objects is ultra vires (beyond its powers); however, since the enactment of the Companies Act 1989, which amended the Companies Act 1985 s35, the validity of an act done by a company cannot be questioned on the ground that the company lacks capacity. Furthermore, a third party acting in good faith can assume that the power of the directors to bind the company.is free of any limitation under its constitution.

maintenance of capital

4.10 The acceptance of limited liability leads to a need to protect the share capital contributed by the members since the members cannot be required to contribute funds to enable the company to pay its debts once they have paid for their shares in full. The capital therefore represents a guarantee fund for creditors. It is protected in two basic ways.

(a)There are provisions designed to prevent the capital being’ watered down’ as it comes in to the company. For example, independent valuation of non-cash assets received by public companies and limitation of commission payable to underwriters.

(b)There are rules designed to prevent the capital going out of a company once it has been received. For example:

(i)dividends may only be paid out of profits and not out of capital;

(ii)a company may only purchase its own shares if strict safeguards are observed.

4.11Creditors are also protected by many other rules not connected with the maintenance of capital. For example, the rule that `plc’ or `Ltd’ must be the last word of the name warns creditors that they do not have access to the private wealth of the members to pay their debts. Company securities

4.12 There are two basic types of company security. shares and debentures. The main difference between them are that

(a)a shareholder is a member of the company. He therefore has an interest in the company. Ownership of a share gives a person rights in and obligations to a company. It does not however, constitute part ownership of the assets of the company since the company, as a separate legal entity, owns its own assets. A debenture holder is a person who has lent money to a company. His status is that of a creditor. He therefore has a claim against the company rather than an interest in it;

(b)since debentures are not capital’, none of the rules of capital maintenance apply to them. For example, a company may purchase its own debentures without restriction since this merely amounts to early repayment of a loan.

Company officers

4.13 Directors are the persons to whom management of a company is entrusted. Together with the secretary and the managers they are the officers of the company.

4.14 Directors may be appointed and removed by a simple majority vote of the members. Since they are in a position of trust where they control large sums of other people’s money and in a position whereby it is relatively easy to abuse this trust, directors are subject to a wide variety statutory and non-statutory rules which try to ensure that directors do not abuse the position.

4.15 There are two general principles as regards directors’ powers.

(a)Powers of management are given to directors as a board to exercise by collective decision at board meetings. Hence an individual director (other than a managing director) has no apparent authority as agent of the company, though he may be given actual authority by delegation from the board.

(b)The collective powers of the directors are such (no more and no less) as are given to them by the articles of association.

4.16 The articles of association of most companies confer on the directors general power to do anything which the company is competent to do (anything which is not ultra vires the company) unless:         -

(a) the Companies Act 1985 requires that the transaction shall be sanctioned in general – meeting; the Act, for example, requires that an alteration of the articles of association shall be made by special resolution passed in general meeting;

(b) the articles of association reserve the decision to the company in general meeting;

(c)the company in general meeting gives directions by passing a special resolution.

4.17 An outsider acting in good faith may assume that a company has complied with its own internal procedure for giving authority to its directors. This is sometimes called the’ indoor management rule’. The facts of this case illustrate how the rule works.

Case: Royal British Bank r Turquand 1856             .               -

The articles of association authorised the directors to borrow only such sums as might be sanctioned by resolution passed in general meeting. A resolution was passed but it did not specify any amount ie it merely authorised the directors to borrow. It was therefore valueless. Acting on this authority the directors borrowed £ 2,000 from the Royal British Bank. Later the bank sued the liquidator of the company (Turquand) to enforce payment. The issue was whether the directors had made a binding contract with the bank although they lacked actual authority for it.    -

Held: under the principle of constructive notice of the articles the bank was aware that the directors could only borrow such amounts as were authorised in general meeting. But the bank was entitled to assume that internal procedure (which it had no means of investigating since most ordinary resolutions are not sent to the Registrar) had been correctly implemented.30rt that basis the directors appeared to Lave authority and the company was bound by the loan contract

4.18 The Articles of the company  will usually auihorise the directors to appoint one of their number as managing director-on such terms as they think fit. He will usually be given a service contract for a fixed period of years. M rights and duties will depend on the terms of this contract, but he is normaIIy given the power to act as the “company’s agent

5. OTHER UNNCORPORATED ASSOCIATIONS

5.1Besides partnerships and companies, persons may form other sorts of aggregates (usually non­profit-making) which are known as unincorporated associations. These may be sports or social clubs, amateur dramatics societies, trade associations etc. But they have no separate, independent personality and hence title to property remains with the members.

5.2As there is no legal personality, any person who enters into a contract `on behalf of’ such an ‘ association is personally liable on that contract – although all the members may ratify it afterwards.

5.3 No member may buy goods on credit or borrow unless he has the consent of all the members. This is essentially because it is the members’ credit which is pledged, not the club’s. To operate a bank account for instance a bank will usually be given a mandate signed by the club’s secretary and chairman, stating that –

(a)a meeting of members agreed to open an accounts^- and

(b) certain members were authorised to operate the account.  .

5.4Members have rights over the association’s property when it is dissolved, but not when it is actually functioning. The rules, which form a contract between members. normally give them other rights (such as voting) which they may enforce in the courts.

5.5 If a person wishes to sue an association, it is usually impractical to sue all the members, since there may be thousands of them. There are two alternatives in such a case.

(a)Only those members who are liable are sued.    .

(b) A representative action is taken against some members. If it is successful, these latter pay out and are then indemnified by the association or by other members if there are ‘ insufficient funds.

6.TRADE UNIONS

6.1Trade unions enjoy a special status governed by the Trade Union and Labour Relations Acts 1974­76. They are not corporate bodies but they may make contracts on their own behalf and can sue or be sued in their own name. Their property is vested in trustees (their members having no interest in it). Judgements may be enforceable against union property but not against that of its members. Unions have special immunity in that no action in tort may be against the union, its officials, trustees or members in respect of any act done in contemplation or furtherance of any industrial’ I dispute or any other act provided it was not done by way of negligence, nuisance – or breach of statutory duty which resulted in personal injury.

6.2 In recent years trade union immunity has been eroded by statutory provisions providing that in certain circumstances they will be liable in tort where they have failed to hold a secret ballot before embarking on industrial action, or where they have undertaken some form of secondary industrial action.

.

THE CROWN

7..1The entire executive branch of government, ministers and civil service departments (but not local authorities or nationalized industries) is described as `The Crown’. This is because, in theory, the Queen is the head of the government and ministers and civil servants act in her name. The Queen is also by historical tradition the source of judicial authority. It followed that the courts, which derived their powers from the monarch, could not try cases in which complaint was made against the royal government. Hence the maxim’ the King can do no wrong’ and is not subject to the jurisdiction of the courts. That is still the legal position of the Queen personally.

7.2By the Crown Proceedings Act 1947, the immunity of government from action in the courts was terminated. The Crown, or government departments, may now be sued in contract and in tort. But personnel of the armed forces cannot sue t}ie Crown for breach of contracts of employment. The Crown may refuse to produce documents in its possession which are required as evidence by a court in a civil action (but the court may inspect the documents privately and, if it sees fit, overrule the official objection which is based on grounds of public interest in preserving the confidentiality of official papers).               ‘

8. SUMMARY

8.1For the purpose of your examination paper it is necessary to grasp the contrasting nature of companies and partnerships as business organisations, with particular reference to contracts made by agents on behalf of each category.

8.2A company has a defined contractual capacity. It usually delegates to its board of directors authority to make on its behalf whatever contracts the company itself is competent to make. The ~ board of directors may in turn delegate to a managing director power to make business contracts.

the ENGLISH LEGAL SYSTEM – ILLUSTRATTVE QUESTIONS

1.Outline the sources from which a judge may draw the legal rules to apply in deciding a case.

2.What is meant by,

(a) European Community Law; and

(b) a code of practice?

Explain in both cases the extent to which these are sources of English law.

3.(a)Explain the difference between civil law and criminal law.

(b)Whilst driving in the course of employment you cause damage to another vehicle and it is alleged that you are to blame. What legal proceedings may arise from the incident ?which courts would these proceedings take place? What is the possible outcome of these proceedings?

4.Explain which court or tribunal would settle the following matters. Indicate in each instance any provisions existing for an appeal.

(a)A claim for damages of f 10,000 for negligence.

(b) A prosecution for failure to fence dangerous machinery.

(c)A claim for compensation for unfair dismissal.

(d)An action to recover a debt of £ 100.

5.Many industrial and commercial disputes are today settled by administrative tribunals.

(a)What is an administrative tribunal?

(b) Why are tribunals established?

(c) How are tribunals controlled?

THE ENGLISH LEGAL SYSTEM

Suggested SOLUTIONS

I .In presenting his ^,case.. to the courts a barrister specifies the rules of statute or case-law on which he relies. He usually reads the section of an Act of Parliament or a passage from a judgement in an earlier case if he relies on it as part of his argument. He also develops his points by legal argument. The judge listens to both sides and then explains (in a judgement) the reasons for his conclusions.

If the dispute before the court depends on a statute (or delegated legislation made under powers given by an Act of Parliament) the judge has to consider in the light of the arguments and any previous decisions (precedents) put to him by counsel what those statutory words mean. A statute usually contains an interpretation section which sets out what certain defined expressions used in the statute are intended to mean. For example, the Companies Act 1985 s741 states that ‘director’ includes any person occupying the position of director, by whatever name called. There is also a general Interpretation Act 1978 which provides, for example, that a singular word (such as `person•) also includes its, Plural (Persons).

There are a number of general principles of interpretation of statutes which the court may have to apply. The most basic and important of these rules is that usually any word should be given its ordinary meaning as found in a dictionary in preference to a less obvious meaning (but an interpretation section(one of the statute can override that). There are subsidiary rules of interpretation such as the golden rule (make sense of it if possible), the contextual rule, the mischief rule etc.

If the point at issue is related to delegated legislation the court may be asked to decide whether the ‘statutory instrument’ is invalid because it has been made in excess of (ultra vires) the delegated, power to make it.

Secondly, the counsel, in presenting their case to the court, are likely to cite ‘precedents’, which are earlier decisions on the same issue given in a previous case. The judge will decide whether these are 99enuine precedents to which he should turn for guidance.

When an earlier case is cited as a precedent it is necessary to extract from it the ‘reasons given for the decision in that case (called the ratio decidendi). Only that reason can be a precedent. The court will also consider whether the facts of the earlier case are so like those of the present case; as to make the earlier decision a relevant precedent.

The court will also consider whether a relevant precedent is binding or only persuasive. A decision of a superior court such as the House of Lords or the Court of Appeal is binding on a High Court judge. “The Court of Appeal is also bound by earlier decisions of that court. If it is not a binding precer3ent the court will give it due attention as a persuasive precedent but need not follow it. It som4,etimex happens that decisions of foreign, e.g. Commonwealth or US, courts are persuasive only.

Finally, if there is a ruling of the European Court on the point at issue, an English court would usually follow it.

2.(a)The United kingdom has been since 1 January 19?3 s member of the European Community and a party to t the Treaty of ^-Rome by which the European Community was established in 1957 and to related *treaties under which the European Coal and Steel Community and the European Atomic Energy Community were established.

These three treaties were merged in 1965 and, operate as binding obligations^, on member states The treaties give powers to the Council of Ministers to issue regulations and directives member states. Regulations are ‘self-executing’^, they are immediately effective as law binding persons within (or, even trading within) the teritory”of the Communities. The prohibition^- of respective practices in^-trade in manufactured 4bods’is’effected by regulations (issued mainly under Article  85 of the Treaty of Rome).An infringement of these regulations which apply to trade between member states, is punishable by fine i by EC authorities in Brussels even though no national, i.e. UK, law has been enacted t _th_em di_rect _effect as taw. The UK did of course Pass its own European communities Act 1972 to bring treaties and regulations, then existing or yet to be made, into operation i territory.

The  general Programme of harmonization of law throughout the Community is c forward by the issue of directives which state in general terms the principles to which national law of each member state should conform. The governments of member state propose legislation, framed with due regard to their system of law, to bring their la conformity with the EC directive.

The council and the Commission of the Community may make decisions on particular which are binding on those to whom they are addressed. They may also issue and recommendations and opinions. The principles expressed in directives may also be rel in proceedings before national courts. Van Duyn+ v Home Office 1974.

In legal proceedings before national courts a party may raise the question whether local law conforms to a relevant provision of the EC law. The court may then s opinion from the. European Court on the issue raised and will then apply the ruling proceedings before. A number of such cases have related to local taw requiring equal pay  for men and women engaged on similar work- One such case was MaCarthy v Smith 1980 a woman employ successfully.challenged.the UK Equal Pay Act 1970 since the Act permit a comparison with the wage paid to her male predecessor in the same j

(b)Codes of Practice, such as the Highway Code and various codes issued by ACAS, do n immediate effect as law. But if a court finds that a person did not conform to a practice it will take that fact into account in deciding the legal position of the

at fault, e.g. whether he behaved `reasonably’ or was driving `recklessly’ which a issues.

3. (a)Civil law exists to enable a person, i.e. individuals or corporate bodies such as com to obtain redress or protection if their legal rights are infringed or threaten proceedings are brought against the person alleged to be at fault. The usual re

successful civil action is the award of damages as compensation or a court instructing the defendant to do or to abstain from doing something, e.g. a newspaper ordered not to publish a libelous statement or to pay damages if it has already d The action is brought in a civil court under civil procedure as a case between persons to do justice between them. The rules of evidence are less stringent criminal cases.   .

A crime is an act prohibited by law in the interests of society, even though its immediate  effect (e.g. in a case of manslaughter) is injury to a particular person. The state, t the director of public prosecutions or the police, institutes a criminal prosecution the object of obtaining a conviction and a suitable punishment by imprisonment o Criminal proceedings are brought in courts which have criminal jurisdiction, u magistrates court or (for serious offences) a crown court. The accused person is pr to be innocent until the prosecution proves by evidence beyond reasonable doubt t guilty. If the prosecution cannot prove his guilt he is entitled to be acquitted.

(b)On the facts given, the driver at fault may have been guilty of a driving offense crime, such as careless driving. The police to whom the incident should be reported investigate and if the facts indicate a driving offence, will prosecute, Probably in the  local magistrates court. If the driver is found guilty he is likely to be fined driving licence will be endorsed with a record of the conviction. The magistrates have power to award compensation (up to £ 1,000) to avoid duplication of legal proceedings. But if the accused person has already been found liable in a civil court to pay damages that decision is in no way conclusive as to his guilt on a criminal charge for which a different standard of proof is required.

The owner of the damaged vehicle (or if it is insured his insurers after compensating him) may sue the driver at fault in civil proceedings to recover damages. Unless the claim exceeds £ 5,000 the action would be brought in a county court Any compensation awarded in criminal proceedings would of course go to reduce the civil damages which might be awarded. The claim would be based on tort, i.e. negligence (want of due care) by the driver at fault.

Since the accident occurred while the driver was acting as an employee the action could be brought against his employer under, the principle of vicarious liability. The employer or his insurers would be able to pay the damages even though the driver perhaps could not do so.

4.(a)An action for negligence is a civil proceeding based on the law of tort. The limit of county court jurisdiction in tort is 15,000. Hence the action would be heard in the High Court. The Queen’s Bench Division is the appropriate section of the High Court for an action based on common law principles.

From the High Court either party may appeal to the Court of Appeal (Civil Division). From the Court of Appeal there is a further right of appeal (but only with leave of the Court of Appeal or the House of Lords) to the Judicial Committee of the House of Lords. If the case depends on the existing precedent of the Court of Appeal a litigant may obtain leave to appeal direct from the High Court to the House of Lords (the `leapfrog’ procedure) as the Court of Appeal must follow its own precedents. The House of Lords can overrule such precedents…­

(b)This is a criminal prosecution which would usually take place in a magistrate’s court. From that court the accused, if convicted, may appeal to the Crown Court. If, however, objection is made to the magistrate’s decision (to convict or to acquit) on a point of law, either party can ask the magistrate to state their findings in a written case stated and appeal to a Divisional Court to decide whether the point of law was correctly decided.

If the offence were very serious the prosecution could invite the magistrates to consider its case as committal proceedings with a view to a trial of the case before the Crown Court.

(c)A claim for compensation for unfair dismissal is made before an industrial tribunal which consists of a legally qualified chairman and two other members chosen from a panel nominated by employers associations and by trade unions respectively. From an industrial tribunal either party may appeal to the Employment Appeal Tribunal which has a High Court judge as chairman and two other members representing employers and employees respectively. From the EAT, there is a further right of appeal to the Court of Appeal (Civil Division) and thence finally to the Judicial Committee of the House of Lords.

(d)This is a civil action for debt. Both the Queen’s Bench Division of the High Court and the County Court of the district in which !he debtor resides or carries on business have jurisdiction to hear the case. The creditor would always sue in the County Court for a debt of £ 100. If he commenced a High Court action he would probably not be awarded costs or full costs. From a County Court there is a right of appeal to the Court of Appeal (Civil Division) and thence to the House of Lords.

As the debt is less than £ 500 the County Court registrar could hear the case as an arbitrator sitting in a `small claims’ court. As a general rule, no costs are recoverable except the cost of issuing the summons (as an inducement against using legal advocates in such cases).

5.(a)Administrative tribunals serve mainly to decide disputes between private persons and public           . officials or local authorities over decisions taken by the latter in administering the law. There are also tribunals which exist to decide disputes between private persons arising out of legal codes, such as the employment protection law. Administrative tribunals differ from ordinary courts in the narrow and specialised range of their activity which is related to detailed rules and particular claims rather than broad questions of law. Their procedure is informal.

As examples, an individual whose claim for some social security benefit has been refused may apply to a social security (strictly a national insurance) tribunal which will hear evidence of the facts and decide whether under the relevant rules the applicant is properly entitled to the payment which he claims. Such a tribunal consists of a legally qualified chairman and two other members. There is a right of appeal (for either party) to a National Insurance Commissioner.

The Lands Tribunal deals with disputes over the value of land, eg for local authority rates or compulsory purchase.

Rent tribunals fix fair rents of certain tenanted dwellings. Industrial tribunals are very busy these days in hearing complaints of unfair dismissal by employers, claims for redundancy pay etc.

(b)he reason for establishing these tribunals is that they can deal quickly and informally with claims which require a knowledge of law and practice, sometimes very complicated, in a particular area. The members of the tribunal rely to some extent on their general knowledge of past practice in the relevant matters. For example, an industrial tribunal which hears a complaint by an employee that he was unfairly selected for dismissal as redundant will know what is general industrial practice in redundancy situations. It does not need to hear as much evidence as a court might require in reaching its decision.

Since there is a general informality in hearings before tribunals the claimant is more willing to state his case in person or to bring a friend to do it for him. Employers sometimes retain lawyers to present their case but an employee will usually ask his trade union to represent him (unless he appears in person).

(c)The absence of legal procedures in tribunal hearings may result in errors especially on legal points. In some cases there is an established appeal procedure. From an industrial tribunal, for example, there is an appeal to the Employment Appeal Tribunal, with the possibility of further appeal to the higher appeal courts.

The Queen’s Bench Division of the High Court can be asked to review the proceedings of a tribunal (and possibly to quash the decision) by application for a prerogative order of certiorari.

There is also a standing Council on Tribunals with the task of keeping the general working of tribunals under review.

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